Ecommerce Giant Alters Compensation Structure Amidst Performance Reviews and Market Dynamics
Ecommerce behemoth Flipkart has announced a modification to its employee increment policy, opting to provide merit-linked payouts in two installments this year instead of traditional annual pay hikes.
In a statement to Inc42, Flipkart stated, “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.”
This move, reported by Mint, will apply to employees in the mid-management tier (Grade 12) and below. Eligible employees will receive two lump sum amounts, equivalent to their total annual salary hike, in April and October this year.
According to sources cited by The Economic Times, approximately 19,000 to 20,000 Flipkart employees will be impacted by this adjustment.
Furthermore, Flipkart will distribute a 100% bonus to its entire workforce this year, with promoted employees receiving increments across grades as usual. For other grades, the company has widened the spread of Employee Stock Ownership Plan (ESOP) allocation to foster wealth creation.
In a letter addressing the new compensation structure, CEO Kalyan Krishnamurthy reportedly stated, “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).”
This decision follows Flipkart’s freeze on employee hikes, including senior staff, last year amid challenging economic conditions. Additionally, the company initiated a workforce reduction of 5-7%, affecting approximately 1,000 employees, as part of a performance review exercise earlier this year, slated for completion by April 2024.
Amidst these changes, Flipkart has undergone significant restructuring, including the demerger of its digital payments arm, PhonePe, as a separate entity in late 2022, accompanied by substantial cash payouts totaling $700 million to its employees.
Despite recent injections of funds, such as the $600 million infusion from parent company Walmart in December 2023, Flipkart continues to grapple with losses. In FY23, Flipkart Internet, its B2C arm, reported a net loss of INR 4,026.5 crore, down 9% from the previous fiscal year, alongside a 42% year-on-year increase in operating revenue to INR 14,845.8 crore.
However, the ecommerce giant’s valuation saw a $5 billion decline to $35 billion by January 2024, attributed to the demerger of PhonePe into a separate entity, as reported earlier this month.
