#StartupsVsCovid19: Startups Choose Layoffs To Keep Businesses Running

After major disruption to operations, the impact of coronavirus has now started to hit the jobs market. It is not unexpected but many have advised that it be the last resort for companies to cut employee costs to save runway for the expected disruption over the next quarters.

Looks like the times for last resort has come. The data from a crowdsourced list on hiring, freezing hiring and laying off managed by Big.Jobs showed that VC-funded startups are the ones doing most of the layoffs. The data shows that 32% of the 640 companies which are VC-funded are letting go of workers.

Talking to Inc42, Big.Jobs founder and CEO Himanshu Geed said that the trend mostly affected non-tech jobs while tech jobs have been less affected. In non-tech jobs, roles revolving around Sales, Customer Success and Business Development have been affected the most. The company is collecting data from employees that are sharing details about the company’s plan of action amid the pandemic.

Layoffs Hit Tech Startups

While over 130 companies appear to have laid off employees, there are a few confirmations from the company’s end. Talking to Inc42, Capillary employees confirmed that the company has laid off 4-5 employees from each team for business continuing amid crisis.

The employees said that the company has laid off people from separate offices. In Bengaluru office, the firings were announced on Friday. The company has offered severance packages ranging from 1 to 3 months of salary depending on experiences within the company.

The employees further told us that Capillary has also offered to help laid-off staff get new jobs by connecting them to placement companies. Inc42 queries to Capillary on the matter remain unanswered till the time of publication.

Shuttl’s Terminated Employees Face Challenges

Further, employees of Shuttl also told us that the company has laid off employees across teams, one of the being on-ground operations team. The company had directed employees to resign, and those who didn’t have been terminated. To resigning employees, the company has assured a month’s pay while terminated employees will have to wait for full and final payment.

The employees further told us that the challenge here is that any severance settlements can’t be done without submitting company assets and completed exit formalities, which can only happen after lockdown is lifted. An employee had tweeted to Haryana chief minister seeking help for being asked to resign, as a result, the company terminated him. Further, the employee told that the CMO has advised him to hold on till lockdown is lifted as they will be able to help only after that.

Further, Shuttl has claimed that it has laid off 40 employees.

Fareportal Sacks 300

Employees of US-based Fareportal in Gurugram were asked to resign recently. An employee told Inc42 that Fareportal sacked around 300 employees due to the “devastating effect” the coronavirus pandemic had on the tourism industry. The company has told them the employees will receive March’s salary along with 15 days basic salary in the FNF.

Among other startups, online insurance firm Acko has reportedly laid off around 50 employees across customer service, operation sales, and marketing teams. Earlier, it was also reported that OTAs like MakeMyTrip, TravelTriangle, Cleartrip and hospitality firms Fab Hotels had laid off numerous employees amid the lockdown.

Further, transport tech startups like Vogo, Bounce, and Drivezy have also reportedly laid off employees due to the lockdown. It was learned that Bounce hadn’t laid off employees due to lockdown, but the timing coincided with the lockdown and business difficulties. Further, the company’s founders and employees have taken voluntary salary cuts now.

Founders Take Pay Cuts

Similarly, at ixigo, founders have foregone their salary while employees have taken salary cuts to help the company manage runway till conditions improve in the travel industry.

The data by Big.Jobs’ further showed that used car online marketplace Droom, rental platform Rentomojo and edtech firm Adda247 have also laid off employees while giving some salary cuts.

It was reported that Droom’s employees will take a 15% salary cut from March while founder Sandeep Aggarwal will be taking a 100% pay cut. It, however, denied layoffs. Further, Adda247 said that it did a “rightsizing exercise” in January but reportedly denied laying off 150 employees.

Further, B2B ecommerce company Udaan had cut back on ground staff over the last few months at its pharmaceuticals and fresh division. It was said to be done to stay afloat.

Earlier last week, Anand Lunia, partner, India Quotient, tweeted to the Prime Minister saying that job cuts will start from April 1. “And we will spiral downwards so much that the crash of 2008-9 will feel like the good days. It will be on you if you don’t act in the next 3 days,” he added.

The government has failed to calm entrepreneurs who have been seeking relief packages to survive the lockdown. Without an economic aid package, investors have repeatedly emphasised on cutting costs to build a robust runway for at least a year. And the cost of human capital may also be a factor for such cost-cutting processes.

This makes more sense in the light of reports that several businesses, big or small, have put a stop on fresh hiring as well. At the same time, the businesses have been led to the path of remote work where employees and business leaders are meeting through calls and video calls for daily work. This may also impact productivity on the company as well as individual-level, which has an impact on layoffs as well.