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Swiggy said it will identify and significantly reduce every single indirect cost such as hubs and office infrastructure as well  (Photo: Priyanka Parashar/Mint)
Swiggy said it will identify and significantly reduce every single indirect cost such as hubs and office infrastructure as well (Photo: Priyanka Parashar/Mint)

Swiggy to lay off 1,100 staff as lockdowns hit food delivery startups

  • Food delivery business in India saw a 70% drop in food order volume, with just 25% of listed restaurants operational
  • Swiggy said all impacted employees will receive at least three months of salary, irrespective of their notice period or tenure

BENGALURU : Online food delivery firm Swiggy on Monday said it will lay off 1,100 employees across cities, just four days after rival Zomato axed over 500 staff members. The company will reduce head count across grades and functions, including at its Bengaluru head office.

As India’s coronavirus lockdown continues, customers and restaurants are leaving food ordering platforms in droves, posing a challenge to the country’s food tech unicorns.

“The core food delivery business has been severely impacted and will stay impacted over the short term...while we are very fortunate to have raised capital just before covid hit and have sufficient runway today, it is incredibly important to prepare for worse scenarios in the macro environment and make sure we are protected," Swiggy’s co-founder and chief executive Sriharsha Majety wrote to employees.

The staff cuts come at a time when the coronavirus lockdown has shrunk food order volumes significantly.

Only 25% of restaurant partners were operational, during the first two lockdowns, a Zomato employee told Mint last week.

Although both Zomato and Swiggy raised more than $100 million each earlier this year, the companies are bracing for tough days ahead.

Swiggy said all impacted employees will receive at least three months of salary, irrespective of their notice period or tenure.

Also, for every year an employee was with the organization, Swiggy will offer an extra month of ex-gratia payment, in addition to notice period pay, which will work out to be 3-8 months of salary, depending on the tenure.

The firm is also allowing impacted employees to vest their employee stock ownership plan (Esop) to the nearest quarter, which includes their notice period.

“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 off the one-year cliff for those who have not completed one year," Majety wrote.

The food delivery company is also looking to provide medical insurance for affected staff till 31 December, as well as career transition and upskilling opportunities.

Swiggy added that it will scale down or shut down adjacent businesses which are expected to be highly volatile or will not be relevant for the next 18 months. “We also need to build a much leaner org (organization) and reduce costs to be able to withstand any further risks from the uncertainty. We will have to reduce our expenses such that we can achieve profitability with a smaller order volume than hitherto planned," he added.

Swiggy’s cloud kitchen business, which operates its own brands like Homely and The Bowl Company, is expected to take the biggest hit.

In April, Swiggy laid off around 500 contractual cloud kitchen staff, and said it may shut many of its cloud kitchens, relocate them and re-negotiate rental contracts.

“The biggest impact here is on the cloud kitchens business, with many unknowns about volumes through the year. Since the onset of covid, we have already begun the process of shutting down our kitchen facilities temporarily or permanently, depending on their outlook and profitability profile. We are already operating at significantly lower levels on our staffing and physical infra than our earlier footprint, and will continue to optimize before we get more clarity on order volumes," Majety added .

Swiggy said it will identify and significantly reduce every single indirect cost such as hubs and office infrastructure as well.

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