Online food delivery platform Swiggy on Monday said it would lay off 1,100 employees over the next few days due to the impact of COVID-19 on business.
Only last week, its rival, Zomato, announced the reduction of its workforce by 13% , while implementing a temporary pay cut of up to 50% for the remaining employees.
Swiggy will also “scale down or shut down” adjacent businesses that are either going to be highly volatile or will not be highly relevant for the next 18 months. The biggest impact here is on the cloud kitchens business, with many unknowns about volumes through the year.
‘Unfortunate exercise’
In an email to employees, Sriharsha Majety, Co-founder & CEO of Swiggy, said, “...today is one of the saddest days for Swiggy as we have to go through an unfortunate downsizing exercise…we unfortunately have to part ways with 1,100 of our employees spanning across grades and functions in the cities and head office over the next few days.”
Swiggy would provide financial, emotional and career-related support to the affected employees. “All impacted employees will receive at least 3 months of salary irrespective of their notice period or tenure. For every year they have spent with us, we will be offering an extra month of ex-gratia in addition to their notice period pay, working out to between 3-8 months of salary depending on the tenure,” he said.
The company would also provide medical insurance cover for the impacted employees and nominated family members till December 31. In addition, insurance cover for parents would also be given.
“While our standard ESOP policy has a 1-year cliff and annual vesting, we will now be extending ESOP vesting to the nearest quarter [including the months of notice period] and waive off the 1-year cliff for those who have not completed 1 year,” he said.
The impacted employees who had relocated to join Swiggy within the last one year would be reimbursed the expenses in case they wish to move back.
“...we started chalking out an accelerated path to profitability for the food delivery business last December. We also started making great progress on our unit economics over the following months before COVID-19 hit us... As we came closer to chalking out the final details of that exercise, Covid hit us with another huge blow of uncertainty, forcing us to look even harder at our cost base and preparedness for the road ahead,” Mr. Majety said.
While COVID-19 might have long-term tailwinds for the delivery business and digital commerce when things settle eventually, nobody knows how long the uncertainty would last, he said. The company, therefore, needed to be prepared to see through this winter, to emerge stronger on the other side.
“The core food delivery business has been severely impacted and will stay impacted over the short term, but is expected to start growing again after that...While we are very fortunate to have raised capital just before COVID-19 hit and have sufficient runway today, it is incredibly important to prepare for worse scenarios in the macro environment and make sure we are protected,” he said.
The company should also build a much leaner org and reduce costs to be able to withstand any further risks from the uncertainty. “We will have to reduce our expenses such that we can achieve profitability with a smaller order volume than hitherto planned. This will be done keeping in mind already identified efficiencies, along with additional reductions in teams and initiatives that will have lower activity because of COVID-19,” he said.
However, he added “...there is no doubt that we are now at an inflection point for the penetration of digital commerce and home delivery in India. This offers us opportunities to continue investing our efforts in grocery and other service offerings that we think will continue to do well.”
