You're fired! Layoff crisis getting out of control at unicorns in India

It’s the season of layoffs. The world is stunned to see big techs such as Meta and Twitter sacking employees, but the Indian startup world too has had its share of bad news. Add to this the absolutely low level of empathy shown by the companies while handling such situations. Take the case of a recent sacking by one of the leading edtech players in India. The staff alleged that the company resorted to unethical means forcing them to sign pre-drafted resignation letters. As if this was not enough, the company also hired bouncers to handle any untoward situation as workers were suddenly asked to leave.

A growing list of top tech unicorns or companies with over $1 billion valuation each is laying-off employees in an attempt to conserve cash and focus on profitability amid a funding winter this year. Experts said that these companies are coming out with all guns blazing to fire employees, struggling to justify their decisions, and not doing enough to support the sacked employees.  Over 23,000 employees in startups have lost their jobs since the pandemic began in 2020, according to the staffing firm TeamLease. 

However, it said amid the funding winter this year, 15,216 employees have been laid off by 44 startups, including unicorns. With 14 education technology startups laying off 6,898 employees in 2022, edtech sector has laid off the most workers followed by consumer services and e-commerce. The sacking of employees has happened in multiple tranches throughout the year. “It is absolutely wrong, that one would need to retrench. But bad news should be communicated fast and in one go,” said edtech pioneer Ronnie Screwvala, also co-founder and chairperson, upGrad, India's largest online higher education company. “Don't do something (layoffs) then two months later do another lot. That creates more insecurity among people.”

Screwvala also said the companies should focus on providing empathy, over communicating with the staff in such situations and making sure the employees exiting the firm are ‘good leavers’. Sorry letters To soften the blow on those who have been sacked founders have written sorry letters, however those who were impacted said these letters don’t mean much. What matters is how the news to them was conveyed. “We received Whatsapp call and were asked to resign. No one called us in person or told us. No letters on the efforts we have made to grow the business. Just a call asking and in some cases where someone would say they will not resign then they said we will sack you on other grounds,” said a person who was recently laid-off from an edtech startup. 

The latest note that went out to staff was by Gaurav Munjal, co-founder and CEO of Unacademy group. It is conducting another round of job cuts and laying off 350 employees or 10 per cent of its workforce of 3,500, as the SoftBank-backed edtech firm targets profitability and reduces costs. In April, the firm laid off about 1,000 employees. At that time Unacademy had said it will not lay off any more employees and cost-cutting would be the company’s key focus moving forward. In a recent note, Munjal again blamed the harsh economic conditions for the decision to lay off staff. “These are very difficult times for the technology ecosystem,” said Munjal in the letter. “And things are getting worse with each passing day.” He said the parting team members will receive the severance pay equivalent to their notice period and an additional two months. They would be granted an accelerated 1 year vesting period, medical insurance coverage for an additional year, and dedicated placement and career support.

Unacademy’s chief rival Byju’s is also set to lay off nearly 2,500, or 5 per cent, of its 50,000 employees as part of an “optimisation” plan amid steep losses. The firm, which is valued at $22 billion, is targeting to be profitable by March next year. It booked a loss of Rs 4,588 crore for the financial-year-ended March 31, 2021, 19 times more than the preceding year. In June, Byju’s laid off about 600 employees at its group companies —WhiteHat Jr and Toppr.

Byju Raveendran, chief executive officer and founder of Byju’s said recently he is “truly sorry” to those who'll have to leave Byju's. He said that many adverse macroeconomic factors this year changed the business landscape. Raveendran said the firm has made available the best possible exit package to the employees which have to part ways with the company. This includes extended medical insurance coverage for them and their family members and outplacement services led by some of the industry’s finest recruitment specialists. It also includes a fast-track full-and-final settlement, and a special provision to allow them to look for jobs while on Byju’s payroll.

“According to 86 per cent of CEOs in India, compared to 71 per cent globally, a recession will have a 10 per cent impact on firm earnings during the following 12 months,” said Ajoy Thomas, Vice President, TeamLease Services. “The layoffs are believed to be the result of a global funding slowdown that has also hit Indian start-ups this year, forcing them to conserve cash and discipline themselves.”

HR experts however caution companies on such rash decisions. “Companies need to handle these situations in a humane manner. If companies take this decision as a temporary measure, I think the attractiveness of the brand as a positive one is lost. A lot of good candidates may not even come back when things improve,” said Aditya Narayan Mishra, MD and CEO, CIEL HR Services. Mishra shares that he came across a case where an individual had taken leave to attend his wedding and when he came back he did not have a job. “The leadership team needs to be very transparent when they take such action. They should meet every person and talk to them,” he added.

Experts said these layoffs are now spreading to other segments as well in the tech sector. For instance, Udaan is laying off 350 employees, or 10 per cent of its workforce of 3,000, as India’s largest business-to-business e-commerce firm targets profitability, according to people familiar with the development. It is laying off people across department functions in a move to drive cost efficiency. The Bengaluru-based firm which is valued at $3.1 billion, had already sacked 180 employees in June this year.

Top venture capitalists such as TC Meenakshi Sundaram, Founder and Vice-Chairman of Chiratae Ventures, said that if layoffs are inevitable, the companies should handle them with honesty and empathy. “This is not the first time for a funding slowdown or layoffs, nor will this be the last time,” said Sundaram. “But it is important for people to manage the process much more sensitively and avoid biases.”

Indeed, Thomas of TeamLease Services, said if layoffs have to take place, they need to be based on employee performance and keeping the workers informed about future actions. He said laid-off employees should receive severance pay for 45-90 days (depending on company policy) which also includes medical benefits and performance bonuses.

He said the maximum number of days an employer may lay off an employee is 45 days, per Section 25C of the Industry and Dispute Act of 1947. During those 45 days, the laid-off employee is entitled to compensation equal to 50 per cent of the total of his basic salary and dearness allowance, which would have been due to him had he not been so terminated.