Coronavirus Lockdown: Ola to lay off 1,400 staff; CEO says revenues decline by 95% in last two months due to pandemic
Cab aggregator Ola is laying off 1,400 staff from rides, financial services and food business as revenues declined by 95 percent in the last two months due to coronavirus pandemic, a note by CEO Bhavish Aggarwal said
After Uber made two announcements of laying off 6,500 employees in total so far, cab aggregator Ola said on Wednesday it is laying off 1,400 employees. These employees are from rides, financial services and food business as the company's revenues have declined by 95 percent in the last two months due to coronavirus pandemic, a note by CEO Bhavish Aggarwal said. Like Ola, Uber too had made its second announcement of lay offs on mail.
Sources say @Olacabs to lay off nearly 1,400 employees, 25% of workforce. Affected employees to get payout of fixed salary for 3 months, Sources to @MugdhaCNBCTV18 pic.twitter.com/RjnI143fJj
— CNBC-TV18 (@CNBCTV18Live) May 20, 2020
In an email to employees, Aggarwal made it clear that the prognosis ahead for the business is "very unclear and uncertain" and the impact of this crisis is "definitely going to be long-drawn for us".
"The fallout of the virus has been very tough for our industry in particular. Our revenue has come down 95 percent over the past 2 months. Most importantly, this crisis has affected the livelihoods of millions of our drivers and their families across India and our international geographies," he said.
The company has decided to downsize and "let go" of 1,400 employees, Aggarwal added, according to PTI.
One-time job cut announcement
Aggarwal said this will be a one-time exercise and will be complete by the end of this week for the India Mobility business, and by the end of next week for Ola foods and Ola Financial Services.
"No more COVID-related cuts will be done after this exercise," he said in the email.
Aggarwal explained that more companies are expected to have a large number of employees work from home, air travel will be limited to essential trips and vacations being put off for better times.
"...the impact of this crisis is definitely going to be long-drawn for us. The world is not going to revert to the pre-COVID era anytime soon. Social distancing, anxiety, and an abundance of caution will be the operating principles for everyone," he said.
Aggarwal, in his mail, said the crisis necessitated the need to conserve cash aggressively so that it is able to invest in opportunities in the future.
"While we restructure our organisation to the new realities of our business, we are also going to recommit ourselves to strengthening our operational excellence.
"We are increasing our investments and adding people capabilities in R&D as a group, through this crisis to double down on innovation and engineering...This crisis is accelerating macro trends of digital commerce and clean mobility, and our businesses are well-positioned to leverage these macro trends well," he said.
The company has, in the past, spoken of its aim to turn profitable and go public in the next few years.
ESOPs for employees
The impacted employees at Ola will receive a minimum financial payout of 3 months of their fixed salary, irrespective of the notice period.
"Employees who have spent significantly more time with us will be eligible for higher payouts depending on tenure," Aggarwal said.
Also, all eligible ESOPs will vest forward to the closest quarter and for those who may not have completed a year, as an exception, Ola will enable pro-rated vesting for the period of time spent with the company, he added.
"All affected employees will be able to continue using their medical, life and accident insurance cover for themselves and their families up to December 31, 2020 or the start of their next job whichever is earlier, to help minimise the financial burden of health and other risks in a time like this," Aggarwal said.
The company has also decided to offer medical insurance for up to 2 parents (or in-laws) to each employee. This insurance will cover parents for all pre-existing ailments up to the age of 90, for a sum of Rs 2 lakhs.
"While we have made every possible effort to accommodate as many affected team members in open roles in our other group companies, we are rallying the support of the Ola Talent Acquisition team to help with outplacement support for as many people and in helping find suitable roles for them outside of Ola," he said.
In addition to this, we are also allowing all company-issued laptops (primary work devices) to be retained by affected employees, he added.
Pay cuts for senior employees
Aggarwal said all members of Ola's extended leadership team have taken significant salary cuts.
"We had all hoped in the beginning that this would be a short-lived crisis and that its impact would be temporary. Over the past couple of months, all members of our extended leadership team have taken significant salary cuts to be able to help the organisation delay tougher people decisions as we waited for the situation to evolve. But unfortunately, it's not been a short crisis," he said.
Aggarwal said economic activity returns, so will the need for mobility.
"Formats will evolve depending on context - personal, shared, public transit, or the niches in between. This pandemic has only highlighted the need for each of us to have safe and reliable mobility solutions. As economic activity returns, so will the need for mobility, but the paradigm will have changed,"
Layoffs in December, too
In December 2019, there were reports about Ola laying off around 20 percent of its workforce in a bid to cut costs and course correct for the over-hiring done in the past few years, according to four people aware of the development, reported Entracker.
The report said the layoffs were part of the cab hailing platform's measures to reduce costs ahead of its public listing in the future.
According to the report, the number of people being laid off could reach 1,000 as the company had then a workforce strength of 5,000. Around 500 employees had already been asked to leave, the report said.
A spokesperson for Ola then had told the news site that only 5-7 percent of its strength of 4,500 employees would be impacted and the number of employees given the pink slips would be a little over 300.
COVID-19 and social distancing
A study by Ipsos conducted in China-a global market and opinion research firm, revealed that 66 percent of respondents are now thinking of buying a car as opposed just 34 percent before the outbreak. Around 15 percent of the respondents said they now plan to opt for cab services compared with 21 percent before, according to a report in Mint. Around 77% of respondents said their intention of buying a vehicle was to reduce chances of infection.
--With inputs from agencies
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