With the food delivery sector taking a hit amid the COVID-19 pandemic, Zomato has announced that it will be laying off roughly 13% of its workforce, apart from instituting pay cuts for the entire organisation, and other cost reduction measures.
Zomato CEO Deepinder Goyal said in a note to employees that with the restaurant industry taking a massive hit due to COVID-19, several restaurants have shut down permanently, and he expects the number to shrink by 25-40% over the next 6-12 months.
As a result of this, several aspects of the business have changed, and as Zomato tightens operations, there would not be enough work for all employees, Goyal added.
By way of support for those being laid off, Zomato has offered four primary measures — financial support, insurance, outplacement services and equity. By way of financial support, laid off employees will receive 50% of their salary for the next six months. During this period, employees can spend almost the entirety of their time looking for other jobs except for their handover period of 1-2 weeks. Zomato recruitment teams will assist these former employees to look for jobs, promises the company.
For contract employees hired through agencies, Zomato said it would be giving them two months of severance pay, as opposed to their obligation of 15 days.
“All our employees who no longer have any work at Zomato, will continue to be with us at 50% salary for the next 6 months,” the company has promised.
Persons being laid off will be allowed to retain laptops and mobile phones provided by the company and health insurance will be continued for the six month period.
Since laid off employees will continue to be with Zomato for another 6 months with reduced pay, all previously allocated Employee Stock Options (ESOPs) will continue to vest during this period.
Zomato has around 5,000 employees across the globe and around 650 people are expected to be laid off.
Deepinder Goyal says that many employees have volunteered for a 100% pay cut for at least 6 months.
“That is something I wouldn’t expect to happen at many other companies. In spite of so many people’s effort, we continue to be short of our salary reduction target,” he says.
The company has proposed pay reduction from June for the entire organisation. Lower cuts are being proposed for people with lower salaries, and higher cuts (up to 50%) for people with higher salaries.
Those who have volunteered for pay cuts will not have any further reduction in pay and everyone will be eligible for Employee Stock Option Plan (ESOP) grants.
In his blog, Goyal added that real estate was the company’s highest expense, besides employee salaries, with over 150 offices across the world. The company will be cutting on this, and expects to move to a partial or full work from home for many teams. This would vary across teams, who would either be working from home or on the field at all times, part time work from home, or full time presence from office.
The hospitality industry has been the worst hit due to the COVID-19 pandemic with restaurants, hotels having to suspend dine-in. According to the National Restaurant Association of India, the restaurant industry employs over 70 lakh people with an annual turnover of Rs 4 lakh crore.
Despite several restaurants still offering delivery, fears of spread of COVID-19 has also drastically reduced order numbers for Zomto and rival Swiggy.
Swiggy too, laid off hundreds of employees from its cloud kitchens, and is reportedly shutting down 50% of these kitchens. Swiggy has said that it is also looking at renegotiating contracts with landlords and relocating kitchens.
Goyal ended his note saying, “To everyone who is impacted, I assure you that we have already explored every possible option of retaining your roles, or creating new roles for you. Also, short term cost is not a decision driver here; this will however, end up making Zomato leaner, and improve our chances of success in the long term.”