Gurugram-headquartered foodtech unicorn Zomato is the latest company to announce mass layoffs and pay cuts across the organisation to survive the Covid-19 pandemic’s severe economic impact.
CEO Deepinder Goyal told employees in an email that the company will have to layoff around 13% of its total workforce i.e. nearly 5000 employees.
Goyal added in a blog post said, “Our business has been severely affected by the COVID lockdowns. A large number of restaurants have already shut down permanently, and we know that this is just the tip of the iceberg. I expect the number of restaurants to shrink by 25-40% over the next 6-12 months. What actually happens, for better or worse, is anybody’s guess.”
Zomato’s Layoff Plans
The laid-off employees will receive half of their salaries along with health insurance, for the next six months or till they find their next job, whichever is earlier. Goyal also clarified that the impacted employees will get an invite for Zoom call with the leadership team in the next 24 hours.
Goyal also said some employees that have been laid off work with Zomato through manpower agencies and not directly on its payroll. “We are going to help these agencies support these employees with two months of severance (vs. 15 days of contractual obligation),” he added.
Further, the laid-off employees will be allowed to keep their Zomato-issued laptops and phones (if any) and will get outplacement support. Zomato is also letting employees vest their ESOPs.
The company will also inform the retained employees about the security of their jobs within the day.
Temporary Pay Cuts
Further, Goyal also announced temporary pay cuts across the organisation from June. “Lower cuts are being proposed for people with lower salaries, and higher cuts (up to 50%) for people with higher salaries,” Goyal said in an official post. This temporary reduction in pay will also be eligible for 2X employee stock grants.
“We expect these cuts to be discontinued as soon as the economy starts getting back on track. I foresee (and hope) this to be around 6 months from now,” he added.
Preparing For The Worst
Goyal said that Zomato’s financial runway looks solid. He further said that the company’s burn rate is significantly down from pre-Covid19 levels. “We have enough capital to continue growing our business – are financially stable and have a very generous amount of runway in the bank (which is continuing to improve as we bring our burn rate down),” he added.
However, the company wants to prepare for the worst and believes that it needs to make sure that it preserves as much cash as possible to weather the storm if the business environment gets worse, or continues to be the same for the rest of the year or more.
Further, the company said that its highest recurring expense today (outside of payroll) is real estate. “We have 150+ offices globally, most of which are spaces for our sales and logistics teams. Given how well we have been working from home, we have decided to make partial or full work from home a permanent feature of our lives,” he added.