Mumbai Startups are shying away from engaging in bonus and stock options offers in addition to shortening the notice period as they conserve cash to navigate a funding slowdown. Instead, many of them are hiring where necessary from the available pool of laid-off employees, even as they prepare for more layoffs.
Shiv Aggarwal, managing director of recruitment firm ABC Consultants, said the prime days of 50-60% pay hikes for new hires are gone, and many startups no longer offer any pay hikes for new talent. “The joining bonus is not coming, and though the startup’s story hasn’t gone bad, its growth story is prickly,” Agarwal said.
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In the past six months, startups have laid off about 11,000 employees, and senior industry executives say more work could be done in the next six months amid rising costs, shrinking valuations and lack of funding.
Cost-cutting and redundancy in roles are some of the reasons startups cited for laying off employees.
“Mass layoffs happen in every bear cycle as companies face a lot of constraints. The increasing demand and limited supply of technical talent in the market usually sets the wage limit. This can change in the short term as companies are looking for a way to make a difference. We focus on the strengths and fundamentals of running a healthy business,” said Kunal Bhatia, who founded SuperLearn, an edtech platform that recently shut down its operations after two years.
Stock market volatility and inflation around the world have affected valuations in public and private markets, reducing fundraising discussions.
“Though the notice period of senior talent cannot change, the middle management will not look into their contracts with a notice period of more than 30 days from the earlier 2-3 months. For juniors, it was and will always be a month,” said Rituparna Chakraborty, co-founder and executive vice president of TeamLease Services, a recruitment company.
Senior executives say stock options, one of the key components of startup offer letters, are no longer attracting talent, given the declining valuations of many newly listed companies.
Jerin Venad, co-founder and chief executive of Mumbai-based private bus aggregator CityFlow, acknowledges that funding has been difficult in the past few months.
“Now, the pain of layoffs cannot be avoided,” he said.
He said that over the years, many startups have offered significantly higher packages, stock options, more flexibility and salary hikes to new employees. “From now on, startups will have more patience with recruitment,” he said.
A Bengaluru-based investment banker said startups have bloated tech teams as they aggressively hired and expanded their sales and marketing teams to show their presence amid massive fundraising. “In the next 6-9 months, such firms will be required to show numbers and cash on their financial position. There will be more job cuts as many companies will do it more quietly in installments to avoid attention,” the banker said.
Edtech and fintech startups may face the biggest brunt of changing policies and post-Covid preference for physical rather than online schools.
So far, many big startups including Byju’s, Unacademy, Meesho, Vedantu, Udaan, Rupeck, Cars24, Trail and Furlenko have laid off employees.
“We have recently seen an increase in layoffs in the startup space. Attraction and retention challenges continue, both in startups and in other organizations. Organizations continue to innovate with programs to engage and retain, and we see this trend to continue,” said Rajul Mathur, Consulting Leader, India-Work and Rewards for consulting firm WTW.