NEW DELHI: India’s second largest online food delivery company, Zomato, has announced layoffs for 13 per cent of its entire workforce - nearly 700 employees - citing the reason of not having “enough work for the impacted workforce” behind the move.

Zomato, CEO, Deepinder Goyal said in a blogpost that over the course of the next few days, the company management will help the laid-off workforce find alternative sources of employment and continue supporting them financially for next six months by paying 50 per cent of their respective salaries, besides providing them with health insurance and ESOP benefits.

Zomato has also cut the salaries for the rest of the employees by as much as 50 per cent claiming that the company was trying to weather the storm in the event of worsening business environments, while voluntary pay cuts had already began within the organization. 

“In spite of so many people’s effort, we continue to be short of our salary reduction target. Starting June, I am proposing a temporary reduction in pay for the entire organisation. Lower cuts are being proposed for people with lower salaries, and higher cuts (up to 50 per cent) for people with higher salaries,” Goyal said.

He added that the temporary paycuts for the entire workforce could last for the next six months and the workforce will be eligible for 2xESOP grants during that period. As another cost optimization measure, Zomato said that a majority of its workforces (especially sales and marketing teams) would continue working from home permanently.

Gurgaon based food tech major said that apart from payroll expenses, the company is also cutting down on real estate costs by making WFH model permanent for employees across various teams.

India's second largest food delivery company @Zomato will lay off 13 per cent of its workforce ( 600 employees), nearly 20-25 per cent of the restaurants will log out of platform in next six months and 50 per cent salary cuts for the rest of employees @NewIndianXpress @XpressBengaluru @santwana99

— Bismah Malik (@bismahmalik) May 15, 2020

Re-defining business strategy 

With its mainstay food delivery business severely hit, Zomato CEO said that the focus will now be on reshaping the business model especially when the restaurant partners are shutting down due to COVID pandemic.

“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 added.

Zomato’s recent fund raise of nearly $155 million led by Alibaba-backed Ant Financial has helped the company reduce the cash burn and build a more profitable model as well as cash flow, however, analysts believe that the reduction in online food delivery orders may have swelled to 70 per cent in recent months due to COVID pandemic.

Both Zomato and Swiggy have ventured into delivering groceries and other essentials to adapt with the “new normal” and the emerging demand triggered by the pandemic.