Flipkart Updates Employee Policy with 100% Merit Bonuses

In a phase where tech and tech-based companies are laying off their employees, India’s largest E-commerce company Flipkart made a one-time change of giving bonus and merit-linked payout to their eligible employees.

What does this payout policy cover?

Usually, companies give an annual hike to their employees. According to this policy, Flipkart will give bulk payments to employees. These payments will be received two times in April and October. The eligible employees will be in grades 12 and below. This includes their junior and mid-level management employees. A total of around 19000-20000 employees will operate under the revised policy.

Employees who are promoted will receive increments, as usual, irrespective of the grades. For the remaining employees, Flipkart has planned ESOPs for their wealth creation.

Apart from the lump sum payments, the company will also give a bonus equivalent to 100 % of their salary this year. This applies to all employees.

What does the top management say?

In a letter sent out to all the employees, Flipkart’s CEO Kalyan Krishnamurthy said “On behalf of the Management Team, I am pleased to announce that we have decided to keep the 2023 company multiplier at 100 percent for all employees (including vice presidents and senior vice presidents). This is to recognize the quality of performance and effort by all of you”

In another excerpt of the letter, the CEO 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, net promoter score, EBITDA and people metrics (attrition and inclusion and diversity). We have decided to keep the 2023 company multiplier at 100% for all employees (including VPs and SVPs)”

How will the scheme benefit the employees?

As per the sources, all employees will get the bonus with their March salary. This bonus will vary based on the current compensation and how does staff perform throughout the year. This is an annual exercise. What differentiates this year is the number of employees receiving such increments is higher than the previous year. The total amount Flipkart is disbursing is not available to the public. This bonus and the merit-linked payout are strong indications of growth happening in Flipkart. The company hopes that these new steps will keep the workforce motivated and reduce the attrition rates among its workforce.

The other side of Flipkart

Another side of Flipkart is the firings they did on Jan 24. As a part of their annual restructuring, Flipkart laid off 5% workforce, which accounts for around 1000 employees. They have been on a hiring freeze since 2023 and did not provide salary increments to its top 30% of employees, including their senior leadership. Usually, the company conducts performance-based layoffs. But in 2023, things were different.

Although the headquarters of Flipkart didn’t announce any such news, this restructuring move did result in the departure of around 50 employees. So, Flipkart has been making strategic moves while maintaining a balanced workforce and adapting to economic conditions without making a heavy job cut.

Understanding Flipkart’s business model

Flipkart has emerged as a leading player in the online shopping segment. The company’s growth is based on its online business model and partner alliances.

Marketplace model: Flipkart operates on a B2C marketplace model, where it connects sellers with potential customers. There are multiple categories of transactions done, including electronics, clothing, furniture, etc. Offering a variety of products at a competitive pricing.

Revenue Generation: Flipkart’s primary source of revenue is the commission it charges from the sellers on this platform. The commission rate varies according to the product category and seller’s rating. Flipkart also charges a minimal secondary fee from its sellers for faster delivery of products. They also give logistic support to the sellers, adding to another revenue stream.

Advertising & promotions: Flipkart provides advertising services to sellers and brands. This helps in increasing their visibility and increasing sales.

Subscription services: Flipkart Plus is their subscription-based loyalty program which provides different benefits to its customers like free delivery, exclusive discounts & early access to new offers. This improves customer retention and increases revenue.

Financial Services: Flipkart also offers financial services through its subsidiary, Flipkart Financial Services. They offer working capital loans, insurance, and invoice financing to their sellers, generating additional revenue through the upselling of their services.

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