Indian startups have laid off about 10,000 employees so far in 2024 with funding across stages continuing to be constrained, while companies hire talent cautiously with a focus on improving bottom lines early on in their lifecycle.
The first half of 2024 has been better than the last six months of 2023, when around 15,000 workers were laid off, and the first half of 2023, when 21,000 lost their jobs, according to data from Longhouse Consulting.
Even with the slowdown in layoffs, startups are still not out of the woods, senior human resources professionals and other industry executives told ET. Over the past six months, venture-funded firms like Swiggy, Ola, Cultfit, Licious, PristynCare and Byju’s have all fired employees in a bid to cut costs.
Some of the largest consumer internet firms like Flipkart and Paytm have also reduced employees. ET reported earlier this year that Flipkart was cutting 5-7% of its workforce, amounting to 1,100-1,500 employees, while Paytm has been consistently firing staff as part of restructuring, having cut 1,000 workers at least.
Changing Strategy
Swiggy fired at least 400 employees while IPO-bound Ola Electric is in the final stages of laying off over 600 after sister company Ola Cabs fired around 200 workers in late April.
Across startups, layoffs are pegged at 7-15%.
Startups are also letting go of people more quietly and gradually compared with last year, industry executives said. About 40-50% of the layoffs this year have been so-called ‘silent layoffs,’ where the firm did not make an official announcement or made the cuts in smaller batches, citing various reasons such as underperformance, said Anshuman Das, cofounder and chief executive of Longhouse Consulting and talent solutions firm Careernet. This compares with about 20% silent layoffs last year.
“A lot of the layoffs this year were also ones where higher paid resources were replaced by lower paid or less experienced resources, compared to last year where teams had to drastically scale down in one fell swoop,” Das said.
ET reported on June 6 that companies were replacing a section of those laid off with employees paid 15-20% less.
Across various companies that have conducted layoffs, the messaging on silent layoffs has also been focused on performance and not cost cutting, which also set expectations for bonuses and hikes for those retained, senior industry executives said.
“The directive from senior management has been clear–cut employee costs and rehire on a smaller budget with the least possible damage to work,” said a senior executive in the quick commerce sector. “So, say, for a decently experienced engineer or product manager we were hiring at Rs 60-70 LPA (lakhs per annum) earlier, now the target is to close at Rs 40-50 LPA.”
Silent layoffs are also aimed at containing negative sentiment around firings that could lead to workers getting anxious about their own jobs and jumping ship.
“Social media was abuzz with videos of unsympathetic founders or managers laying off hundreds over a Zoom call, and besides impacting morale, that has also left a cultural mark,” said Vaibhav Parchure, partner at startup hiring firm MetaMorph.
Cautious upside
However, things are slowly improving for the startup sector. Das expects the second half of 2024 to see about 5,000 layoffs, apart from unexpected layoffs due to mergers and acquisitions (M&A).
“This market is much better and we’re even seeing early signs of competitive offers for high-value talent making a comeback,” Parchure said.
At the same time, early-stage funding activity is picking up, while the string of public market listings of startups like Ola Electric and Swiggy, and the stable stock performance of Zomato and Nykaa could improve investor confidence in startups, Das said.
Sectors such as quick commerce, fintech, D2C brands and logistics could see an uptick in hiring over the next few months, he said.
In May, startup funding rose 62% from a year ago to about $817 million, while in the March quarter, total venture funding was at $1.97 billion, compared with $3.2 billion for the same period a year ago, according to data from Tracxn.
Employees are also hedging bets, taking up jobs outside the startup ecosystem, while multinational corporations (MNCs) and ‘traditional’ IT firms are increasingly opening up to hiring.
All said, the market is still in recovery, with those laid off feeling the mental impact of losing their jobs and the hiring cycles extending to between three to nine months as companies take their time to onboard new talent, executives said.
