Flipkart, a prominent player in the e-commerce industry, has revised its approach to employee increments. This year, instead of the customary pay raises, eligible employees will receive merit-based payouts divided into two installments.
“At Flipkart, we have always prioritised what’s right for both our employees and the organisation at large, and this compensation review cycle is in line with this intention. We are providing compensation increases to employees getting promoted, merit-linked payments and bonus payouts. Additionally, our stock option allocation exercise will continue as is, for those who are eligible,” Flipkart said in a statement.
Mint was the first to break the news on this development.
The one-time adjustment will reportedly be implemented for employees at the mid-management level (Grade 12) and below. Eligible employees will receive two lump-sum payments, in April and October of this year, equivalent to the total annual salary increase they would have otherwise obtained.
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A Flipkart executive informed The Economic Times that this change will impact approximately 19,000 to 20,000 employees of the company.
Meanwhile, the e-commerce giant will also provide a 100% bonus to its entire staff this year, and promoted employees will receive their usual increments across all grades. For the remaining grades, the company has expanded the allocation of ESOPs to foster wealth creation.
In a letter sent to employees detailing the new compensation structure, CEO Kalyan Krishnamurthy reportedly said, “The company multiplier for the bonus payout is typically arrived at by measuring the company’s performance against key business parameters, which are GMV, contribution margin,… We have decided to keep the 2023 company multiplier at 100% for all employees (including VPs and SVPs).”
Significantly, last year the company had halted salary hikes for one-third of its employees, including senior staff, due to macroeconomic challenges and unfavorable market conditions. Additionally, earlier this year, the company reportedly initiated a workforce reduction of 5-7%, amounting to around 1,000 employees, as part of a performance review process. This downsizing is anticipated to be finalized by April 2024.
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The new policy comes in the midst of significant changes at the e-commerce giant over the past year. In late 2022, Flipkart spun off the digital payments platform PhonePe into a separate entity, subsequently distributing cash payouts totaling $700 million to its employees as part of the demerger.
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The company has also been exploring opportunities in the quick commerce sector and has been swiftly expanding into new market segments.
Despite receiving a $600 million investment from its parent company Walmart in December 2023, the e-commerce major continues to experience significant losses. Flipkart Internet, its B2C division, reported a net loss of INR 4,026.5 crore in FY23, a 9% decrease from INR 4,419.5 crore in FY22. However, the customer-facing division saw its operating revenue surge by 42% year-on-year (YoY) to INR 14,845.8 crore in FY23.
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Earlier this month, reports indicated that Flipkart’s valuation had dropped by $5 billion to $35 billion as of the end of January 2024, compared to January 2022, due to the spin-off of PhonePe into a standalone entity.
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