Zomato lays off 500 employees, slashes salaries as CEO blames coronavirus

Topics Zomato | job loss | Coronavirus

Zomato CEO says coronavirus has affected business.
Zomato will cut 13 per cent, or about 520, jobs as a result of the extended lockdown and restaurants shutting shop, Co-founder and Chief Executive Officer Deepinder Goyal told the firm in an email on Friday.

“Multiple aspects of our business have changed dramatically over the last couple of months and many of these changes are expected to be permanent. While we continue to build a more focused Zomato, we do not foresee having enough work for all our employees. We owe all our colleagues a challenging work environment, but we won’t be able to offer that to 13 per cent of our workforce going forward,” Goyal said in the mail.

According to sources, the total number of employees at Zomato is currently about 4,000. The employees being laid off in the latest round will remain with Zomato and will be paid half the salary for the next six months. Outplacement teams will help them look for jobs elsewhere, previously allocated ESOPs will continue to vest with them during this period, and the current health insurance, wherever provided by Zomato, will continue, along with access to the company’s in-house mental wellness team.   

The communication was similar in its tone to the recent email sent to staffers by Brian Chesky, Airbnb’s CEO and co-founder.     
The online rental listing marketplace said it would lay-off 1,900 of its 7,500 employees worldwide.


Here’s an internal email that I shared with all our employees earlier today about upcoming changes at Zomato. https://t.co/IoGeZVnlIS


— Deepinder Goyal (@deepigoyal) May 15, 2020
Those impacted will receive emails to join a zoom call with the leadership team within the next 24 hours, Goyal said. From June, Zomato has asked employees to take a temporary pay cut across the board. Salary cuts will be up to 50 per cent for people with higher salaries. To reduce real estate costs, the largest cost component of the firm, Zomato will allow employees partial or full-time work from home.

The restaurant, hospitality and travel sectors have been amongst the worst hit by the coronavirus outbreak. After a delivery executive of a restaurant tested positive in Delhi, the risk perception around ordering in increased, hitting businesses like Zomato and Swiggy. 

It was reported last month that rival Swiggy was also looking to reduce its burn rate and was planning to lay-off about 1,000 people in its private brand kitchens.

Companies associated with travel, such as MakeMyTrip, have pivoted into food delivery in partnership with luxury hotel chains. Oyo Hotel and Homes last month asked all its employees to take a 25 per cent pay cut between April and July, and furloughed about 3,500 employees for four months — from May 4 to the end of August.

Hotels and restaurants have been shut for customers, and some are open only for delivery. The smaller players are, however, finding it hard to make ends meet. “Our business has been severely affected by the Covid-19 lockdowns. A large number of restaurants have already shut down permanently, and we know that this is just the tip of the iceberg. I expect the number of restaurants to shrink by 25-40 per cent over the next 6-12 months. What actually happens, for better or worse, is anybody’s guess,” Goyal said in the email.

He further said the company would redefine its strategy, given the huge impact on business. It will look to make a complete shift towards being a “transactions first company, focusing heavily on a small number of large market opportunities in the food value chain”.

The company’s burn rate, however, is down from the pre-Covid-19 levels, and the firm is financially stable, Goyal said, adding that it was looking to get leaner as things might get worse. “We will continue to hire people in areas where we need them the most — primarily in product and engineering,” he said.

Goyal said further plans will be announced at a global townhall of the company soon.

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