OYO Cuts Salary Of All Employees In India But Will It Help Them To Recover?

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The SoftBank backed Indian-origin OYO was already struggling prior to the COVID-19 situation. Now, after things went completely south for the entire hospitality industry post the coronavirus outbreak, the startup unicorn seems to be knee-deep in trouble.

Recently, it has come to light that between April to July all employees of Oyo Hotel and Homes in India have been asked to take a 25% pay cut. Some employees have also been asked to take a leave with only limited benefits or go on a 4 month long furlough period starting from May 4th.

This decision was communicated on Wednesday via an email and company-wide town hall by the company’s Chief Executive Officer For India Rohit Kapoor. Sources believe that almost 3,500 employees in India have been asked to take this furlough by the company.

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Rohit Kapoor The CEO of Oyo India, in a statement, said that it was a very difficult albeit a necessary step for the Indian wing of the company. He further mentioned that the company will still be providing all other benefits to their ‘OYOpreneures’ and that the term of their contract will not be changed. Also, he said that post this pay cut period being over, the fixed compensation of all their employees will be bumped up to no less than Rs 5 lakhs per annum.

When asked about the employees they put on a leave with limited benefits, Kapoor said that this leave will still have all the crucial benefits such as the continuation of medical insurance, parental insurance, school fee reimbursement and ex-gratia support.

In addition to this, he also mentioned that in case any of their employees who have been put on leave with limited benefits come across an unforeseen medical emergency, the company will support them beyond the insured amounts.

An employee of OYO who has now been put on leave, under anonymity said that it would’ve been way better if the company fired them altogether. He further said that in countries such as Japan or the US, furloughing works because their government pays them 20-70 per cent salary. However in India that is not the case at all.

He also mentioned that this recent announcement has made most of the employees frustrated as it came all of a sudden and now nobody is able to decide their next course of action.

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Earlier this month, because of the business slowdown all across the world, the company had to hand pink slips to many employees and contractors in the US as well. However, at that point in time, OYO, in compliance with the Indian Government’s directive to retain employees during the entire lockdown said that as a company they were committed to seeing to the fact that none of their employees suffers unemployment or pay cuts.

This is why in this recent decision OYO has asked its employees to go on furlough from May 4 which is only a day after the proposed end of the lockdown in India.

The company, in an earlier statement, said that their entire executive team around the world willingly and voluntarily decided upon taking 25% to even 50% pay cuts. The founder and the Global CEO Ritesh Agarwal has also been reported to be taking an entire 100% pay cut for the entire year of 2020.

Even before the COVID-19 outbreak, OYO was reported to be facing a lot many problems across its sprawling operations in India, China and dozens of other markets.

The company’s hotel suppliers in India and China, the two markets that comprise an overwhelming majority of its business, were complaining of broken promises and delayed payments.

However, with the COVID-19 pandemic coming into play, it completely decimated the entire hospitality industry along with the business of OYO. A week before, the company reported that they were seeing very minor signs of revival in the China, Denmark and Japan markets but their revenues have dropped a whopping 50% – 75%.

Many analysts now believe that if Oyo is to survive the next 12-18 months or so, they will need another huge round of capital which only one of their early investors SoftBank can provide. However, it is highly unlikely SoftBank can do much to bail them out of this situation. This is because they have reported of incurring a whopping 12.5 billion loss for the financial year ended March 2020.

Oyo is active in 800 cities in 80 countries, with more than 23,000 hotels in its portfolio. Founded in 2013, Oyo has raised a total of $3.2 billion till date. In October last year, the valuation of Oyo was estimated at around $10 billion. However, since the beginning of this year, the company has been in hot water and the valuation is on a constant decline. Analysts, however, believe that the valuation of Oyo could tank to as much as 40% – 50% post coronavirus outbreak.

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