Paytm looks to rationalise employee costs by revising hiring strategy

The company, said to be exploring different ways to save on employee costs, has laid off a few employees for 'poor performance'

Changes in its business due to shifts in regulatory stance and the adoption of artificial intelligence have been responsible for fintech major Paytm rationalising its employee cost structure, which includes revising its hiring strategy, focusing on contract employees, and a stricter performance appraisal.

Sources close to the development told Business Standard the company was exploring different ways to save on its employee costs and had laid off a few employees on “performance” grounds.

“We will see a similar development for the next few months. The company is fine-tuning its hiring policies and implement rigourous measures to look into employee performance,” a source said. 

The person added employees who did not directly contribute to the company’s revenue-generating verticals, such as support functions and marketing, were likely to be affected. 

Meanwhile, without disclosing the number of employees asked to leave their job, the Noida-based company confirmed the reduction in its headcount.

“We are transforming our operations with artificial intelligence-powered automation to drive efficiency, eliminating repetitive tasks and roles to drive efficiency across growth and costs, resulting in a slight reduction in our workforce in operations and marketing over a period of time. We will be able to save 10-15 per cent in employee costs as AI has delivered more than we expected it to,” Paytm said in a statement. 

The fintech firm’s employee costs have increased over the past two quarters. It spent Rs 807 crore in the second quarter of 2023-24 (Q2FY24), up from the Rs 730 crore in Q1FY24, the data available in the company’s regulatory filings show. This amount excludes the employee stock ownership plan.

Meanwhile, the company is looking to add nearly 15,000 salespeople on contract to expand its merchant network. The number of sales employees has increased from 28,000 in Q4FY23 to 35,000 in Q2FY24.

“Our core business of payment may see manpower increase by 15,000 more in the coming year. In this, Insurance and Wealth will be a logical expansion of our platform, in continuation of our focus on the existing businesses. Having shown the strength of our distribution-based business model in loan distribution, we are expanding the same to focus on new businesses to drive scale,” Paytm said.

Earlier this month, the company announced its plan to reduce the disbursement of small-ticket loans, specifically those less than Rs 50,000, in the wake of the Reserve Bank of India (RBI) tightening norms for unsecured personal loans.

The company said this adjustment would result in a roughly 50 per cent decline in disbursements, also known as postpaid loans. The company had said it would shift its focus to disbursing higher-ticket personal and merchant loans to lower-risk and highly creditworthy customers.

Last year, the RBI asked Paytm not to take on board new merchants. It has yet to receive a nod from the regulator despite others in the segment, such as Razorpay, Cashfree Payments, Enkash, and Google Pay, being allowed to do so. 

“Developments such as the decision to reduce postpaid loans and a pause on new merchants are unlikely to have affected the company’s decision to fire employees. The layoffs have been happening for the past few months, whereas the former development occurred recently,” a person said. 

-Focus on AI-powered automation, will save 10-15 per cent in employee costs

--May offer reduced salaries for replacements of resigning employees in future

--Employee costs (excluding ESOPs) have increased, up from Rs 730 crore in Q1FY24 to Rs 807 crore in Q2FY24

--Aims to add another 15,000 sales employees, current headcount pegged at over 35,000