Layoff Season for Startups: Experts says more than 60,000 Employees could lose their Jobs

A layoff occurs when an employer temporarily or permanently suspends or terminates a worker for reasons other than the employee’s performance. A layoff is not the same as a firing, which might result from employee inefficiency, misconduct, or a breach of duty.

The year 2022 got off to a shaky start for the global economy, with a stock market breakdown earlier this month due to worldwide sell-off pressure. As a result, India has received $16 billion in startup capital in the first five months of 2022. While the financing amount is undoubtedly higher than the previous year, the momentum gained by the end of 2021 appears to have faded.

25 Indian businesses have let off 9,608 people, including unicorns like Cars24, Ola, Meesho, MPL, Trell, Unacademy, and Vedantu. And the number is increasing every day.

There were 9 layoffs in May alone, affecting 3,379 jobs. So far in June, there have been nine layoffs. However, the total number of employees affected is down from 849 in May.

The most layoffs have been in eCommerce, followed by edtech. So far, 17 businesses in the two industries have laid off 8,318 workers. This indicates that nearly 9 out of every 10 laid-off employees worked in either eCommerce or edtech.

OLA tops the layoff list with 2100 employees, Blinkit in the second position with 1600 employees. The third position is Unacademy with 1000 employees and WhiteHat Jr with 995 employees in the fourth position. In 5th, 6th, 7th, 8th, 9th and 10th position Vedantu(624), Cars24(600), MFine(600), Trell(300), FarEye(250) and Rupeek(200) respectively.

Possible Reasons for the Layoff

• Many startups had blindly hired under-qualified personnel for various positions, costing the startup a lot of time and money. Finally, when the startups have faced hefty monetary losses, they have no options other than lay off their employees.
• Late-stage finance is growing scarce for startups and will ultimately run out. Investors want corporations to return to their roots, to classic profit-making methods rather than negative cash burn. They want to have a more significant role in the responsibility and management of these companies.
• Experts also point to the issue of over-hiring as a contributing factor. During the pandemic, businesses spent a significant amount of money on human resources, focused primarily on the requirements and demands of the curfew period. As the world becomes more open, their goals have altered to meet the needs of the open world. Massive salary raises and mass recruiting are now harming businesses, costing them a lot of money to run their businesses. This is one of the reasons for layoff.

Future prediction of Layoff

For startups, it would be an extended layoff season, with experts estimating that 60,000 people may lose their employment. According to an IMA study, Indian enterprises are laying off 20% of their workforce.

This is not a good sign from the employment point of view. It will give birth to the unemployment situation in the country.

From my point of view, the layoff is not a good thing for an economy. A lot of people will lose their livelihood. But if you think from the startup perspective, the startups should stop over-hiring and excessive salary raise.