In the first three quarters of 2023, new-economy companies in India have let go of more than 28,000 employees as part of a significant restructuring effort aimed at preserving cash and prioritizing essential operations. Longhouse Consulting provided this information, indicating a notable impact on startups compared to the robust hiring trends observed in 2021. The data covers the January-September period, and the subsequent three months witnessed additional substantial layoffs by companies including Udaan, PhysicsWallah, Bizongo, and Third Wave Coffee.
Impacts of Layoffs: Unveiling Broader Economic Challenges and Sector-Specific Fallout in 2023
The repercussions of these layoffs extend beyond startups and are indicative of broader economic challenges stemming from high interest rates and inflation. Anshuman Das, co-founder and CEO of Longhouse Consulting, points out that tech firms globally have felt the effects. The sectors most severely affected include edtech, real money gaming, and business-to-business ecommerce, with fintech and deep tech sectors showing relatively better resilience. Even well-funded ecommerce giants like Flipkart have taken a cautious stance on hiring and appraisals, with no salary increments for the top 30% of employees, including senior leadership.
Byju’s, a prominent edtech giant, has laid off approximately 2,500 employees as of October 2023, with plans for additional job cuts affecting 4,500 more people to reduce costs. Other edtech firms like PhysicsWallah and Adda247 have also implemented layoffs. In the ecommerce sector, Udaan let go of around 120 employees, while Dukaan, a platform digitizing small stores, reduced its customer support staff by 90%. Dealshare, an ecommerce company focusing on tier-2 and beyond markets, cut approximately 130 jobs in September.
Job Insecurity and Shifting Dynamics: A Closer Look at Attrition Rates and Hiring Trends in the Wake of Layoffs in 2023
These layoffs have generated a sense of job insecurity in the job market. Despite experiencing the worst salary revisions in three years, attrition rates have ranged from 9% to 14% in 2023, according to Longhouse data. Yashna Ray, a partner at HR advisory firm Metamorph, notes that reduced incentives for employees to switch firms have normalized hikes and lateral movements across companies. In 2021, attrition rates were exceptionally high, between 32% and 35%, driven by record levels of startup funding, but they improved to 23-26% in 2022 as the funding environment became more challenging. Hike ranges also decreased from 25-75% in 2021 to 10-50% in 2022.
While layoffs in startups initially targeted non-core roles like marketing, sales, human resources, and operations, this year has seen an impact on core roles in tech, product, and finance teams. Despite these challenges, some hiring continues in the startup ecosystem, with approximately 122,000 people hired as of October 2023. Companies such as PhonePe, Paytm, PolicyBazaar, Ola, and Zepto have each recruited over 500 new employees.
