Covid-19 crisis: Consumer internet start-ups brace for salary cuts, layoffs

Companies taking extreme steps to continue to stay afloat amid Covid-19 crisis

Consumer internet start-ups in India are bracing for measures like salary cuts and layoffs to mitigate the impact of losses after the nationwide lockdown to contain the spread of Covid-19. For now, Bounce, Shuttl, Fab Hotels, Instamojo, Zomato, Curefit, and HealthifyMe, among others, are going for salary deductions, according to multiple sources.
 

At Bounce, the Sequoia-backed scooter sharing start-up, co-founders Vivekananda Hallekere, Varun Agni and Anil Giriraj are taking a 100 per cent pay cut. For others the extent of reduction would be 20-60 per cent.

"Pay cuts will ensure no jobs are lost irrespective of the economic situation, and the company improves its runway to over 30 months," Bounce said in reply to a query by Business Standard. In January, the firm had raised over $105 million. The investment had more than doubled its valuation to over $500 million, from its previous funding round last June, according to sources.
 

Bounce said the company would reinstate salaries as soon as the situation becomes better. In lieu of the interim salary cut, employees will get ESOPs (employee stock ownership plans), so that everyone benefits from future upsides when the going gets better, it said.
 

Sandeep Aggarwal, founder of online car marketplace Droom, said employees would take a 15 per cent salary cut.

"I have taken a 100 per cent cut from March 16. The salary cuts for other staff are effective from April 1. No person has been laid off," he said. He said, however, that as part of the annual appraisal cycle (between mid-February and March), 15-30 employees were asked to leave based on performance.
 

Similarly, in a note to its employees late last month, MakeMyTrip's executive chairman Deep Kalra and group CEO Rajesh Magow had said: "(In the wake of Covid-19) We will continue to sharply reduce variable costs like advertising, sales promotions and payment gateway costs, along with optimising IT infra and expenses relating to the functioning of our offices and other establishments.

On people costs front, both of us will take the lead and take zero salary effective April 2020, while the rest of our leadership team have also offered to take a reduction of approximately 50 per cent.” Ixigo also announced salary cuts across the board though the firm would not layoff anyone for now. "To start with, the two of us (co-founders) took a decision to forego our entire salary for as long as required to get things back on track," co-founder and CEO Aloke Bajapai said. The company's leadership team has also agreed to take a pay cut of over 60 per cent based on their grade while for the rest of the employees, it would vary (20-50 per cent).
 

Fab Hotels has said it was implementing a pay cut of 15 per cent for those with salaries of less than Rs 25,000 and 20 per cent for those who are above this salary bracket, starting March. The co-founders will take a pay cut of 25 per cent. In a mail to the employees, CEO and co-founder Vaibhav Aggarwal said that in March alone, the budget hotel room aggregator had seen a 50 per cent dip in revenues. Instamojo is looking at downsizing 6-7 per cent of its total workforce apart from effecting 10-40 per cent pay cuts. A third of the company staff have not been considered for the pay cut and remain unaffected.
 

"We are expecting most of the consumer internet start-ups, unless you are in the grocery delivery, education tech, and video conferencing business, would ultimately lay-off people and cut back salaries," said Sachin Taparia, founder and chairman of LocalCircles. Before the coronavirus hit India, LocalCircles had done a survey to gauge the mood of the consumer in 2020. Around 45 per cent of the households had said they were planning to reduce discretionary spending. At well-funded companies such Ola and Swiggy, co-founders including Bhavish Aggarwal and Sriharsha Majety have taken massive salary cuts to help set-up various relief funds that would support their driver and delivery partners.

The Ola group and its employees will contribute Rs 20 crore, while Bhavish Aggarwal, co-founder and CEO, Ola will forgo 1 year's salary, both of which shall go towards the fund that aims to support auto-rickshaw, cab, and taxi drivers, through contributions from the Ola group. Foodtech firm Swiggy said it has set up a relief fund which will be used towards the safety and welfare of delivery partners and their families. The corpus for the fund will be created by Swiggy with primary contributions from the founders, senior leaders, employees and investors, as well as donations from customers and well-wishers. As a start, Sriharsha Majety, CEO at Swiggy, has committed 50 per cent of his annual salary towards this fund.