Paytm considering reduction of workforce by 20% amid rising employee costs

With plans to reduce employee cost, digital payments firm Paytm might cut around 15-20 per cent of its workforce in the current financial year.

During FY23, the company maintained an average of 32,798 employees on its rolls, with 29,503 actively engaged. The average cost per employee stood at Rs 7,87,000. In FY24, the total expenditure surged by 34 per cent year-on-year (Y-o-Y) to Rs 3,124 crore, and the average employee cost is estimated to have increased to Rs 10,60,000, according to a report by the Financial Express.

In light of mounting losses, Paytm has initiated an employee cost reduction plan targeting to save Rs 400-500 crore. This could potentially result in a reduction of 5,000-6,300 employees.

And the process of downsizing is already underway. Reports indicate that over 1,000 employees were laid off across various departments in December last year, as part of streamlining operations and curtail costs. The exact number of employees in FY24 remains undisclosed, the report said.

In an investor presentation, the company said, “In recent years, our employee costs have increased due to investments, primarily in technology, merchant sales, and financial services. For the coming year, while we continue to invest in the merchant sales team, as well as risk and compliance functions, we expect reductions in other employee costs.”

The company is confident that streamlining its cost structure, using artificial intelligence capabilities (AI), and concentrating on core operations will yield substantial cost savings. However, Paytm remains committed to advancing high-performing individuals by promoting them to leadership positions and recruiting new senior executives to drive growth.

In the January-March quarter, the company experienced a net loss of Rs 550 crore, compared to Rs 168 crore a year earlier, primarily due to a decline in revenue. The revenue fell 2.9 per cent year-on-year (YoY) to Rs 2,267.1 crore, from Rs 2,334.5 crore. Sequentially, revenue dropped 20.5 per cent from Rs 2,850.5 crore.

Vijay Shekhar Sharma, chairman and managing director (MD) of Paytm, said, “We expect near-term financial impact to our revenue and profitability, due to disruptions faced in our business in Q4. This includes steady state impact due to pausing of PPBL wallet. We had also paused a few other payments and loan products to our customers during the last quarter, and I am happy to share that many such products have been restarted or are in the process of starting soon.”

Difficult times began for the fintech company from January 31, when the Reserve Bank of India (RBI) imposed restrictions on Paytm Payments Bank, preventing it from accepting further deposits and top-ups, as well as conducting credit transactions in customer accounts, among other limitations. These restrictions imposed by the RBI significantly affected the company’s performance in the fourth quarter.

During the post-earnings analyst call, Paytm announced that it plans to recruit additional sales executives as part of its commitment to strengthening the merchant ecosystem. Additionally, the company aims to improve governance structures throughout Paytm and its subsidiary entities by appointing subject matter experts as advisors or independent directors, with increased regulatory involvement.