Coronavirus Lockdown: After Zomato, Swiggy sacks 1,100 employees as pandemic continues to hurt business

Joining arch-rival Zomato, food ordering and delivery platform Swiggy on Monday announced it is laying off 1,100 employees--nearly 14 percent of its workforce, spanning across grades and functions in the cities and head office--over the next few days as COVID-19 continues to hurt its business across verticals including cloud kitchens.

"We are already operating at significantly lower levels on our staffing and physical infra than our earlier footprint, and will continue to optimise before we get more clarity on order volumes for food delivery".

In an email to all employees, Swiggy Co-Founder and CEO Sriharsha Majety said, "Today is one of the saddest days for Swiggy as we have to go through an unfortunate downsizing exercise."

All impacted employees will receive at least three months of salary, irrespective of their notice period or tenure, Majety told employees in a virtual town hall meeting.

COVID-19 has hit the company with a huge blow of uncertainty, forcing it to look even harder at its cost base and preparedness for the road ahead, he added.

Cloud kitchen business worst-hit

Giving the reasons for the laying off of 1,100 employees, Majety shared the management outlook and key business decisions that were reasons for this decision.

The core food delivery business has been severely impacted and will stay impacted over the short-term, but is expected to start growing again after that, Majety said to PTI.

"We need to hence prepare to come out stronger on the other side by continuing to build on capabilities that will help us make the most of the opportunity when things are better again. We also need to build a much leaner organisation and reduce costs to be able to withstand any further risks from the uncertainty," Majety said.

The company is choosing to scale down or shut down adjacent businesses that are either going to be highly volatile or will not be highly relevant for the next 18 months.

"The biggest impact here is on the Cloud kitchens business, with many unknowns about volumes through the year. Since the onset of COVID-19, we have already begun the process of shutting down our kitchen facilities temporarily or permanently, depending on their outlook and profitability profile," Majety said in a detailed statement later.

"While this crisis has impacted our core business negatively, there is no doubt that we are now at an inflection point for the penetration of digital commerce and home delivery in India. This offers us opportunities to continue investing our efforts in grocery and other service offerings that we think will continue to do well," Majety said.

The company will identify and significantly reduce every single indirect cost like hubs, office infrastructure, etc, if is one of the areas where the cut is most prudent given it doesn't affect customer or employee experience, he added.

Employees to get ex-gratia

In line with these business decisions, Majesty said, "we unfortunately have to part ways with 1,100 of our employees spanning across grades and functions in the cities and head office over the next few days. This is easily the hardest and longest deliberated decision the management team and I have been faced with over recent times."

Swiggy is fully committed to providing the best financial, emotional and career-related support that it can to make this journey less painful, and to ease the burden on the impacted employees and their families, he added.

"For every year they have spent with us, we will be offering an extra month of ex-gratia in addition to their notice period pay, working out to between 3-8 months of salary depending on the tenure," said Majety.

Swiggy said if someone's notice period is three months and they've spent five years with the company, they will get eight months of salary.

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Regarding equity, Majety said, "while our standard ESOP policy has a one-year cliff and annual vesting, we will now be extending ESOP vesting to the nearest quarter (including the months of notice period) and waive the 1-year cliff for those who have not completed 1 year".

The company will also provide medical insurance cover for impacted employees and nominated family members until 31 December, 2020. Additionally, it will also be providing insurance cover for their parents. They will also be provided accident and term insurance till 31 December, 2020, he added.

Swiggy will also provide the impacted employees career transition support, connectivity support, learning support and relocation support, Majety said.

The company will inform those being laid off in one-to-one video calls.

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"We will have to reduce our expenses such that we can achieve profitability with a smaller order volume than hitherto planned. This will be done keeping in mind already identified efficiencies, along with additional reductions in teams and initiatives that will have lower activity because of COVID-19," he added.

Zomato lays off nearly 13% of its workforce

Last week, Swiggy's closest rival Zomato announced to lay off nearly 13 percent of its workforce -- over 600 employees -- via Zoom calls, along with salary cuts for the rest of the employees for at least the next six months starting June, with higher cuts going up to 50 percent for people in senior roles.

CEO Deepinder Goyal on Friday said that multiple aspects of his business have changed dramatically over the last couple of months and many of these changes are expected to be permanent.

"While we continue to build a more focused Zomato, we do not foresee having enough work for all our employees. We owe all our colleagues a challenging work environment, but we won't be able to offer that to 13 percent of our workforce going forward," he said in a detailed statement.



(With inputs from agencies)

Updated Date: May 18, 2020 15:25:17 IST

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