E-Commerce Firm Flipkart Revises its Salary Increase Policy

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Three points you will get to know in this article:

  • Flipkart replaces salary bumps with merit-based bonuses.
  • Eligible employees to receive lump sum payments.
  • Entire staff to receive 100% bonus this year.

Flipkart's Employee Compensation Strategy

Flipkart, the prominent player in online retail, has adjusted its approach to employee increments. This year, instead of the traditional salary bumps, eligible employees will receive merit-based bonuses in two installments.

Compensation Review Details

“At Flipkart, we’ve always put our people and the company’s interests first. This year’s compensation review reflects that commitment. We’re rewarding employees who earn promotions, offering merit-based bonuses, and ensuring bonus payouts. Moreover, our stock option program remains unchanged for those who qualify.”

The one-time adjustment will be implemented for employees in the mid-management (Grade 12) tier and lower. Eligible employees will receive two lump sum payments (in April and October of this year) equal to the total annual salary increase they would have normally received. A Flipkart executive informed The Economic Times that this decision will impact approximately 19,000 to 20,000 employees of the company.

Generous Rewards for Entire Staff

Meanwhile, the leading online shopping platform is set to generously reward its entire staff this year with a 100% bonus. Additionally, those who have been promoted will receive their usual salary increments across all levels. For other staff members, the company has introduced a broader distribution of ESOPs (Employee Stock Ownership Plans) to foster wealth creation.

Criteria for Bonus Payouts

In a heartfelt letter addressed to the team, CEO Kalyan Krishnamurthy expressed, “The criteria for determining the bonus payout typically involves evaluating our performance against key business metrics such as GMV and contribution margin. I am pleased to announce that we’ve decided to maintain the company multiplier at 100% for all employees, including our esteemed VPs and SVPs.”

Impact of Previous Year's Economic Circumstances

In the previous year, during difficult economic circumstances and challenging market conditions, the company made the decision to halt salary increases for one-third of its employees, including senior staff. Furthermore, earlier this year, they implemented a performance evaluation process which resulted in a 5-7% decrease in workforce, amounting to approximately 1,000 employees. This reduction is expected to be completed by April 2024.

Significant Events for Flipkart

This shift in policy arrives after a series of significant events for the ecommerce giant over the past year. In late 2022, Flipkart separated digital payments arm PhonePe into its own entity. Following this, they generously rewarded their employees with $700 million in cash as part of the split.

Financial Performance

The company has been eyeing the fast-paced quick commerce market and swiftly venturing into new areas. Despite a substantial injection of $600 million from its parent company Walmart in December 2023, the major player in e-commerce continues to face significant losses. Flipkart Internet, its business-to-consumer division, saw a net loss of INR 4,026.5 crore in FY23, a decrease of 9% from the previous fiscal year. However, the revenue generated from customer interactions surged by 42% year-on-year to reach INR 14,845.8 crore in FY23.

According to recent reports, Flipkart’s valuation dropped by $5 billion to $35 billion by the end of January 2024 compared to January 2022. This decrease is primarily due to the separation of PhonePe into its own independent entity.

Flipkart has shifted its employee compensation strategy by replacing traditional salary increases with merit-based bonuses, impacting around 19,000 to 20,000 employees. The company plans to reward its entire staff with a 100% bonus and introduced ESOPs for wealth creation. Despite facing losses, Flipkart continues to innovate and expand into new markets post the separation of PhonePe. CEO Kalyan Krishnamurthy emphasized maintaining a 100% company multiplier for bonus payouts. This strategic adjustment reflects Flipkart’s commitment to prioritizing employee rewards while navigating economic challenges and market dynamics.

Karan Balodi

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