Home >Companies >News >Lockdown impact: Zomato to lay off employees, opt for temporary pay cuts
Zomato, provides services across 24 countries. (Photo: HT)
Zomato, provides services across 24 countries. (Photo: HT)

Lockdown impact: Zomato to lay off employees, opt for temporary pay cuts

  • It will extend partial or full work from home for some employees—across locations—to save on rental expenses
  • Crisil estimates the lockdown will swallow 40-50% revenues of the India's organised restaurants business

New Delhi: Online food delivery company Zomato is set to lay off 13% of its workforce as the covid-19 induced lockdowns have hit its food delivery business.

In a note sent out to employees on Friday, which was published on the company's blog, founder and chief executive Deepinder Goyal also sought temporary pay cuts as it tries to preserve cash in an uncertain business environment.

“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," Goyal said.

This, said Goyal, has severely hit business at the aggregator that has also branched out into delivery of groceries.

As a result, "we do not foresee having enough work for all our employees," he said. "We owe all our colleagues a challenging work environment, but we won’t be able to offer that to 13% of our workforce going forward."

Zomato had earlier sought voluntary pay cuts at the onset of the nationwide lockdown. However, the company is now moving to temporary reduction in pay for the entire organisation as it “continues to be short of our salary reduction target".

“Starting June, I am proposing a temporary reduction in pay for the entire organisation. Lower cuts are being proposed for people with lower salaries, and higher cuts (up to 50%) for people with higher salaries," he said.

“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 six months from now."

Goyal also said the company will extend partial or full work from home for some employees—across multiple countries where it is present—as it seeks to save on rental expenses.

“Our highest recurring expense today (outside of payroll) is real estate. We have 150+ offices globally, most of which are spaces for our sales & 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."

Calling covid-19 a “black swan" event, Goyal said the pandemic has prompted the company to “preserve 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."

The company’s top management will initiate video calls with impacted employees to walk them through the next steps, according to Goyal’s blog.

“We are going to assure them that we stand by them, and will financially and emotionally support them to the fullest possible extent."

The company is expected to hold a global townhall to discuss details of these changes soon.

The layoffs at Zomato come as India’s restaurant industry is reeling from a prolonged slump in business after the country went in to a lockdown in March to contain the spread of covid-19. Several restaurants remained shut or worked on limited capacity to fulfill delivery-only orders. This has hit both volumes of orders for food aggregators and footfalls in restaurants.

On Thursday, Crisil estimated that India’s lengthy lockdown will hurt the country’s organised restaurants business that could see a 40-50% cut in revenue in the current financial year. Moreover, even when the lockdown curbs are eased, Crisil expects recovery to be “gradual".

This could put thousands jobs at risks, prompt restaurants to shutter down unviable businesses, and even impact suppliers and vendors that work with eateries.

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