Paytm Management Summoned By Labour Commissioner Over Alleged Layoffs

The Regional Labour Commissioner of Bengaluru has reportedly summoned fintech major Paytm’s parent entity One97 Communications over alleged forced termination of employees.

As per Moneycontrol’s report, the notice was issued by Regional Labour Commissioner (Central) under the Office of the Deputy Chief Labour Commissioner (Central), Ministry of Labour and Employment.

However, sources told Inc42 that the notice was not a summon, but just an invitation to discuss the matter.

“We are here to address and resolve any issues expressed by those affected and are actively listening to their feedback. Rest assured, we will continue collaborating with all stakeholders to ensure the best for our employees,” a Paytm spokesperson said. 

At the heart of the issue is Paytm’s recent restructuring exercise under which at least 500 employees across the company’s payment gateway, devices, credit and travel verticals have been impacted. 

In June, multiple former Paytm employees moved the Ministry of Labour and Employment, alleging “unlawful termination” without compensation.

They reportedly knocked on the ministry’s doors seeking reinstatement of their employment, alleging unfair and unethical termination by the Paytm management. 

“There is a clause in the offer letter which mentions that in case any dispute arises between the employer and the employee, it has to be resolved via a third-party arbitration committee and be settled amicably. We cannot take them (Paytm) to the courts directly and will have (to) first settle this via the committee,” an ex-employee said. 

Earlier, multiple former employees told Inc42 that the company’s HR team has looked to persuade employees to resign voluntarily or face disciplinary action towards the end of May 2024. Further, they also claimed that the company is withholding their joining and retention bonuses of the employees. 

“The decision to transition some employees has been a difficult one for all parties involved, and was made only after careful consideration of all available options. As an organisation committed to providing the best for our teams, we have strived to provide the best possible support to our transitioning employees and ensure fairness and transparency throughout the process,” the spokesperson added.

Driving these mass sackings is Paytm’s bid to include more artificial intelligence-led automation for multiple of its functions. In December 2023, the company sacked hundreds of employees citing the increasing usage of AI. 

Announcing their financial report for the fourth quarter of financial year 2023-24 (Q4 FY24), Paytm’s CEO and founder Vijay Shekhar Sharma said that AI implementation will result in significant cost efficiencies. “Our ongoing experiments and learnings in AI promise to revolutionise customer and merchant care for the financial industry, while also unlocking new avenues for revenue generation and cost savings,” Sharma told shareholders back then. 

In the backdrop is the fintech major’s growing losses on account of the Reserve Bank of India’s (RBI’s) regulatory action against Paytm Payments Bank (PPBL). In the quarter, Paytm’s net loss widened over 3X on an year-on-year basis to INR 550.5 Cr from INR 167.5 Cr reported in the year-ago period. Revenue from operations decreased by 2.9% YoY to INR 2,267.10 Cr, compared to INR 2,334 Cr in Q4 FY23.