No increments for Flipkart's 4,500 senior personnel this cycle

Flipkart will not be handing out increments to its senior leadership in the Grade 10 and above category — that includes roles as diverse as managers to vice-presidents — in a ‘difficult decision’ that is likely to impact 4,500 personnel.

The company is purportedly trying to conserve cash and focus on profitability, said people familiar with the strategy of India’s largest e-commerce player. With hiring on the go-slow, the company isn’t persuading employees who wish to move to greener pastures to stay back either, they said.

“At Flipkart, we have always attempted to balance employee and organisation priorities, with our actions being driven by what’s right for our people. Given the current macroeconomic situation, we want to be prudent in managing our resources while keeping our employees’ best interests in mind,” said Krishna Raghavan, chief people officer, in a letter addressed to employees and reviewed by Business Standard.

However, 70 per cent, or 10,500 employees, below the level of a manager, will receive an increment this cycle. When contacted, a spokesperson for Flipkart confirmed the development. 

Flipkart has about 15,000 corporate employees.

The decision to provide increments to only about 70 per cent of employees comes at a time when Walmart Chief Financial Officer John David said in post-earnings call on Tuesday that a lot of its gross merchandise value and revenue growth come from Flipkart. But, Walmart International, which includes Flipkart, struck a cautious note in its economic outlook for 2023. The retail major’s forecast of full-year earnings was below estimates while posting net sales of $27.6 billion for the quarter under review. This was a growth of over 2 per cent year-on-year.

Late last year, Flipkart Chief Executive Officer Kalyan Krishnamurthy had said India cannot be isolated from the impact of the current global macroeconomic environment. He had said Flipkart was cutting down spending across new experiments, capital expenditure, and the firm would be more cautious in acquisitions and businesses in an uncertain macroeconomic climate.

Flipkart has about 200,000 third-party and contractual workers in the areas of supply chain and warehouse management, but the new policy doesn’t apply to them, revealed sources.

Glass half full

• 15,000: Estimated number of corporate employees at Flipkart
• 10,500: Employees below manager position set to get a raise
• 200,000: Third-party and contractual workers in the company; the new policy doesn’t apply to them
• 4,500: Grade 10 employees and above who won’t get increments in this cycle

The parent company Walmart, the world’s largest retailer, is also initiating an employee stock ownership (ESOP) buyback, under which it may purchase financial technology firm PhonePe’s stocks worth $700 million from Flipkart employees, informed sources.

This ESOP buyback is part of PhonePe’s fundraising plans.

PhonePe started its latest fundraising with a target of raising up to $1 billion in capital after its domicile shift to India. It has already raised $450 million within six weeks. The firm expects further investments from leading global and prominent high networth Indian investors in good time.

“Additionally, our stock option allocation and bonus exercise will continue as is for those who are eligible,” said Raghavan’s letter to the employees.

The letter said Flipkart would continue to identify high-performing individuals and enable growth for them in line with their contributions to the organisation. It said there would be promotions across grades and linked compensation increases in line with schedule, effective April and October.

It said during the pandemic and last year, the firm had invested in talent through continued skilling and training programmes, salary increases, and compensation corrections.

The firm said it also maintained regular promotion cycles, providing a liquidity opportunity for ESOP holders and enhanced benefits, including medical insurance.

In December 2022, the firm announced a special one-time discretionary payout for employees holding Flipkart ESOPs, creating a significant wealth creation opportunity for which the payout would happen in the second quarter of Calendar 2023.

The PhonePe separation from Flipkart Group was also mentioned in Walmart’s earnings. This contributed to an operating cost increase of 262 basis points (bps). Walmart International’s gross profit rate also increased by 52 bps for sale events. This included Flipkart’s flagship Diwali sale of BigBillionDays.