Zomato Lays Off 500 Employees, Slashes Salaries As CEO Blames Coronavirus

Food delivery app Zomato is cutting 13 per cent jobs as it does not see enough work for all its employees, co-founder and CEO Deepinder Goyal said in a company-wide email on Friday. As many 500 employees will be laid off.

"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.

These employees will remain with Zomato at 50 per cent salary for the next six months, outplacement teams will help these people look for jobs elsewhere, previously allocated ESOPs will continue to vest during this period of six months, the current health insurance, wherever provided by Zomato will continue for this period along with access to the company's in-house mental wellness team.

Those impacted will get e-mails for a Zoom call with the leadership team within the next 24 hours. The move may impact around 500 of the firm's 4,000-odd employees.

From June, Zomato has asked for a temporary reduction in pay for the entire organisation. Salary cuts will be up to 50 per cent for people with higher salaries and lower for those with lower salaries.

"Our business has been severely affected by the COVID 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.

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

[1/3] — Deepinder Goyal (@deepigoyal) May 15, 2020

He further said there was a need to redefine the company's business strategy, given the huge impact on business.

"Considering what we know at this point, the idea is 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," he added.

The company's burn rate is down from pre-Covid-19 levels, and is financially stable, he said, but there is no clarity on how the "black swan event" will pan out globally.

Click to read full letter

The restaurant and hospitality sector has been amongst the worst hit by the coronavirus outbreak. After a delivery executive with a restaurant tested positive in Delhi earlier, the risk perception around ordering food from outside also increased.

Hotels an restaurants have been shut for customers, and some remain open only for delivery.

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

To reduce real estate costs, the highest incurred by the firm, Zomato will allow employees partial or full-time work from home going forward.