Snapdeal’s Payout Plan to Struck a Chord with Employees

In a first for an e-commerce company, Kunal Bahl and Rohit Bansal, co-founders of online marketplace Snapdeal, are planning to give $30 million, roughly Rs 193 crore, to the existing and some former employees from their own payout once the company’s sale to Flipkart is through.

#DigitalErra Thought Corner

According to sources, the 1,200-odd employees left at Snapdeal will get from the co-founders half the $60 million payout SoftBank will pay Bahl and Bansal for their 6.5 per cent stake in Snapdeal.

The co-founders, along with other directors including early investors Kalaari Capital and Nexus Venture Partners, agreed last week to SoftBank’s proposal to sell Snapdeal to Tiger Global-backed Flipkart.

Interestingly, the deal-linked payment would be extended to employees who do not own ESOPs to reward those staying on. Not only the present employees, some who have left the firm but hold Esops or were asked to leave would also be compensated.

Calming nerves of employees

In the past few months, Snapdeal has seen a number of voluntary and involuntary exits. While the company has hiked salaries by up to 15%, employees are concerned about their future as the impending takeover looms ahead.

Sources said that the founders had — as part of the deal to sell their stake — asked SoftBank to ensure that the 1,000-odd employees were absorbed in the merged entity at least for four to five months so they could have a smooth exit from the company.

“The founders have been asking for an employment guarantee that Flipkart should absorb the employee strength in total,” the source added.

In an e-mail sent to his employees on Saturday, Snapdeal co-founder Kunal Bahl said, “While our investors are driving the discussions around the way forward, I am reaching out to let you know that the well-being of the entire team is mine and Rohit’s (Bansal, co-founder) top and only priority.”

A Welcome Change

While in the past one and a half years around 30 ecommerce companies and startups — some even funded by big venture funds — have shut shop, none of the founders had promised such severance packages to their employees. Ecommerce firms such as Askme simply shut shop and left close to 4,000 employees high and dry.

But, now startups are dolling out good severance packages. Severance packages for very senior employees in technology and startups sectors have started to match global standards. Packages for employees running higher risk of litigation and who have agreed to an embargo on joining rival companies is also high.

Snapdeal’s bold move to payout employees could skew the whole trend of startups compensation packages in India.