With funding coming under pressure, startups are tightening their purse strings and restricting the addition of new hires. The hiring of new permanent employees by startups has dipped by as much as 61% in the last one year, showed a recent report published by the neo-banking arm of fintech unicorn Razorpay. While most departments have become conservative in hiring new employees, the hiring of CXOs in particular has seen a massive correction, dropping by an estimated 93% since October 2021. The only saving grace has been tech—“technology-related jobs have managed to marginally increase their contribution to the overall workforce by 4% while the hiring trend is slowing down in general,” according to the report.
Technology, after all, comes in handy during a crisis as organisations across the board lean on tech capabilities to streamline operations and bring efficiency and agility into the systems. The report has analysed the payroll data from October 2021 to September 2022 of more than 25,000 employees across over 1000 local startups from more than 20 sectors.
Not only has new hiring taken a hit the industry has also been gripped by layoffs as cautious investors limited making fresh bets amid macroeconomic headwinds.
The Indian startup ecosystem is heavily dependent on external funding, especially in growth and late-stage investments. Startup funding in India hit a two-year low of $2.7 billion during Q3CY22, as per estimates by PwC. A bunch of startups including companies worth several billion dollars of valuation like Byju’s, Unacademy and Ola have laid off employees to check spiralling costs. Byju Raveendran has justified the downsizing as an attempt to embark on sustainable and capital-efficient growth. “I realise that there is a huge price to pay for walking on this path to profitability. We are having to part ways with 2,500 of our colleagues to avoid role duplication across our businesses,” Raveendran said in a letter to employees. Over 15,000 employees are estimated to have been laid off by startups, according to media reports.
As the urgency to trim costs amid economic uncertainty impacted the onboarding of permanent employees, companies are banking on temporary or contractual workers to get the job done. Payments to gig workers have seen a growth of 153% since October 2021, the report showed. The total number of enterprises that have shifted to a semi-gig workforce model has also increased by 15% since October 2021. Semi-skilled gig workers who are paid less than Rs 20,000 per month typically have the highest contribution to the entire pool of gig workers being hired by startups, followed by those who earn anywhere between Rs 20,000-40,000 per month. However, skilled gig workers who earn between Rs 85,000 to more than 150,000 per month, though contributing the least to the overall pool, have seen the highest growth in the last one year.
“Gig workers who earn between Rs 85,000-150,000 have grown by 62%, while gig workers who earn more than 150,000 grew by 69% in the last one year. This goes on to show that gig workers are gaining more popularity among startups than hiring full-time employees,” according to the report.