SoftBank-backed Indian hospitality giant Oyo is planning pay cuts for its employees in India, in addition to sending some of them on an unpaid leave, in a bid to create a longer cash runway to survive the novel coronavirus crisis.
The global spread of COVID-19 that has put a stop on all local and international travels, has reportedly slashed its revenues by almost 60%. India is its biggest market globally.
In an internal briefing on Wednesday, the Gurgaon-headquartered startup said it would be slashing the salaries of India employees by 25% for four months starting April.
“Today, our company is taking a difficult but necessary step for India, whereby we are asking all OYOprenuers to accept a reduction in their fixed compensation by 25%. This will be effective for April-July 2020 payroll,” said Rohit Kapoor, chief executive officer, Oyo India and South Asia, in a virtual town hall, according to a TechCrunch report.
The pay cut is not applicable to employees who earn less than INR 500,000 (USD 6,576) per annum.
Apart from the pay cuts, Kapoor said some employees would be furloughed for four months starting May 4. The employees, he added, going on temporary leave would continue to avail benefits including medical insurance, parental insurance, school fee reimbursement, and ex-gratia support, in case of an unforeseen medical emergency.
Local media Mint said Kapoor had sent an email to India staff giving the details of the furlough.
“Oyo is taking all necessary actions, like reducing controllable costs, voluntary salary cuts accepted by leaders and more, to mitigate COVID-19’s impact and ensuring long-term success and sustenance of the business while ensuring there are no job cuts in India, despite the economic pressures,” Kapoor said in an email.
However, Kapoor in the mail acknowledged that the steps “may not be enough as the extent and projected length of the crisis is highly unpredictable.”
The announcement to slash salary comes after multiple rounds of job cuts at Oyo over the past few months. The company had first started firing people in December last year when it started its restructuring process to streamline global operations in a bid to move toward profitability. By January, it had laid off 12% of its 10,000 staff in India and 5% of its 12,000 employees in China, apart from 360 people in the US. As the healthcare crisis descended upon the world and hit the global hotel demand severely, Oyo had no choice but to let go of more employees across segments such as sales, business development, and HR, among others. So far, it has laid off about 7000 employees globally.
Earlier this April, the company reportedly sent thousands of employees on leave for up to three months in the US and several other markets. Meanwhile, Oyo founder and CEO Ritesh Agarwal has said he would forego his salary for the rest of the year and that its executive leadership team would take voluntary pay cuts anywhere between 25 to 50%.
The company has seen a steep fall in occupancy rate, while revenues are down by 50 to 60%. For the year ended March 2019, Oyo had reported a loss of about USD 335 million on revenues of USD 951 million. However, having raised USD 1.5 billion from SoftBank and RA Hospitality late last year, Oyo might still have some wiggle room till the crisis blows over. Moreover, since its biggest backer SoftBank is busy dealing with its own problems, Oyo will most likely have to face the storm by itself.