Paytm’s Layoff Tactics Raise Red Flags: Forced Resignations, Bonus Clawbacks and Uproar!

Paytm‘s troubles seem far from ending following the RBI’s ban on its Paytm Paytments Bank earlier this year. The shutdown of its wallet business has compelled the fintech giant to implement restructuring and cost-cutting measures, resulting in sudden mass layoffs. Employees at Paytm are reportedly being asked to “voluntarily resign” without prior notice. However, the company’s approach raises eyebrows.

The decision to seek voluntary resignations rather than implementing direct terminations is attributed to the financial challenges faced by One97 Communications, Paytm’s parent company. The shutdown of Paytm Payments Bank and the consequential impact on its lending business have severely strained the company’s financial health.

In response, several current and former employees have alleged that Paytm is denying them severance pay and insisting on repayment of joining and retention bonuses. This unsettling situation has taken an emotional toll on many employees, exemplified by accounts of distress during termination meetings.

“I started crying at the meeting… I was willing to work even at a lower salary and designation,” statement of one affected employee at Paytm.

Lack of Transparency and Communication

Paytm’s alleged lack of transparency in the restructuring process added fuel to the fire. Employees claim they haven’t received any formal communication outlining the reasons behind the sudden layoffs or the number of positions affected. Employees are also being restricted from recording HR meetings, raising concerns about the fairness of the process.

One employee highlighted these issues, stating, “The calls with HRs are being labelled as ‘connect’ or ‘discussion’. There is no formal documentation of any kind.” This practice has raised suspicions about the clarity and openness of the communication between management and staff during this turbulent period.

A closer look at employee offer letters reveals a clause allowing Paytm to reclaim joining and retention bonuses if the employee leaves within 18 months. However, some employees dispute the validity of this clause, especially in cases of termination initiated by the company.

Further complicating matters, some employees entirely lack this clause in their offer letters. Paytm claims the relevant information is included in appointment letters issued after joining. However, many employees allege that they never received these appointment letters, raising questions about the transparency of the process.

Paytm’s Response

Paytm has denied all allegations of forced resignations or unfair treatment. The company asserts that its HR teams strictly adhere to official channels when communicating terminations to employees.

Additionally, Paytm emphasizes its commitment to upholding all regulations outlined in employee appointment letters. This includes extending full notice periods, providing outplacement services, and ensuring the timely processing of due bonuses during final settlements.

Employee Resistance and Legal Action

Amidst the restructuring process at Paytm, a significant number of employees opted to voluntarily resign out of apprehension over potential termination notices.

However, another segment of the workforce has chosen a different course of action. These employees have opted not to resign and instead are actively engaged in what has been described as a “silent battle.” This group has raised concerns to Paytm’s employee escalation team, seeking a fair and equitable exit process.

In addition to internal efforts, affected employees have also mobilized on social media platforms to discuss their situation and strategize potential legal actions. One employee has already lodged a formal complaint with the labour ministry, signalling their resolve to hold Paytm accountable for their employment conditions.

The sentiment among some Paytm employees reflects disappointment and frustration, particularly in cases where the fintech company’s leadership has not upheld its promises regarding job security.

In Q4 FY24, which ended March 31, 2024, Paytm’s losses amounted to ₹550 crore, a notable increase from ₹168 crore in Q4 FY23. The company’s revenue from payments, financial services, and marketing services declined during the quarter. The volume and value of loans distributed through Paytm also plummeted a massive 86% YoY and 54% YoY in Q4 FY24.

In response to these challenges, Paytm has recently shifted its strategy to focus solely on distribution, departing from its earlier ambition of becoming a full-fledged general insurance provider. Additionally, Paytm has forged a strategic partnership with Samsung to integrate travel and entertainment services into Samsung Wallet in India.

Now, it remains to be seen whether the legal actions initiated by disgruntled employees will impact Paytm’s future or if it is just a temporary phase. Regardless, Paytm’s actions raise questions about employee treatment in Indian startups. Many well-funded Indian startups have laid off their employees in 2024 as a cost-cutting measure, either due to the lack of funding or a focus on profitability for IPOs.