Same in the bandwagon that has had numerous tech companies cutting costs to increase their profitability, Flipkart is now the latest member.
Background
It had decided to restrict the annual increment of salaries to only 70 percent of its employees, which means that around 5,000 of its senior staff won’t get any hikes this year.
This was communicated to employees via email on February 22 that those at Grade 10 and above levels won’t get any hikes.
Grade 10 and above includes roles as diverse as managers to vice presidents.
Notably, the company’s annual appraisals have been completed and the increments are expected to kick in from April 1, said reports.
No Increment For 30% Employees
“Given the current macroeconomic situation, we want to be prudent in managing our resources while keeping our employees’ best interests in mind.
In line with this, about 70 percent of our employee base will continue to get an increase in their compensation,” Flipkart said in a statement.
“Additionally, our stock option allocation and bonus exercise will continue as is for those who are eligible.
“We stay committed to enhancing value for all our employees through employee-centric policies, continued skilling and training programs, regular promotion cycles, wealth creation for ESOP holders, and enhanced benefits, including medical insurance,” it said.
Defending Its decision
“At Flipkart, we have always attempted to balance employee and organization priorities, with our actions being driven by what’s right for our people.
Given the current macroeconomic situation, we want to be prudent in managing our resources while keeping our employees’ best in mind”, the e-commerce said.
Buying back employee stock options
Meanwhile, Flipkart will buy back employee stock options worth about $700 million from employees as a part of its move to separate full ownership of PhonePe, as the former looks to hire and retain talent amid an ongoing funding winter.
This massive payout is expected to happen in the next few months after the paperwork for the separation of Flipkart and PhonePe is completed.
Flipkart and Walmart
One of the highlights of Walmart in the quarter ending January (Q4) was that its international business saw operating income drop 72 percent in constant currency terms to $300 million, primarily due to the re-organisation of Flipkart and PhonePe as separate businesses.
Flipkart’s contribution margin is positive and continues to expand and it accounts for a large portion of Walmart’s international e-commerce sales, top executives of the US retail major said in an earnings call on earlier this week.
Recent big tech layoffs
To look at this phenomenon as a whole, tech giants like Amazon and Google have decided to lay off 18,000 and 12,000 employees in a bid towards profitability.
Domestic unicorns like Byju’s, Sharechat, Swiggy, Zomato and others have also cumulatively let go thousands of tech workers citing costs and restructure their businesses in a tough macro environment.
