Eisya A. Eloskari, Jakarta – Southeast Asian ride-hailing firm Grab announced on Tuesday that it would lay off 360 employees, just under 5 percent of its total employees in the region, as the company felt the economic pressures of COVID-19.
In a note to Grab employees published on the company's website, Grab CEO and cofounder Anthony Tan said the company had felt "the stark impact of COVID-19" since February and that it was expecting the pandemic to lead to a prolonged recession.
"Please know that we did not come to this decision lightly. We tried everything possible to avoid this but had to accept that the difficult cuts we are making today are required because millions depend on us for a living in this new normal," he said in the note on Tuesday.
Grab, which has been valued at US$14 billion and operates in eight countries, including Indonesia, cut its senior executive salaries by 20 percent in March and offered no-pay leave and reduced working hours in April prior to the layoffs.
The pandemic has taken a heavy toll on ride-hailing services because of social restrictions enforced to contain the COVID-19 virus.
The company, backed by SoftBank Group Corp., said that in addition to the layoffs, it would also be eliminating non-core projects, consolidating functions and "right-sizing" teams. It would also redeploy its employees to cater to the growing demand for deliveries.
A Grab Indonesia spokesperson told the Post in April that its package and food deliveries had seen increased business as people stayed at home during the pandemic. This coincided with a slump in demand for passenger services.
Grocery shopping service GrabMart and courier service GrabExpress orders rose by 22 percent and 21.5 percent year-on-year (yoy) respectively from February to March, the company previously said.
Tan pledged that the layoff would be the last for this year.
"I assure you that this will be the last organization-wide layoff this year, and I am confident as we execute against our refreshed plans to meet our targets that we will not have to go through this painful exercise again in the foreseeable future," Tan added.
A Grab Indonesia spokesperson told the Post that the layoffs would affect Grab globally and did not specify the proportion of the layoffs in the Indonesian office.
Grab is offering laid off workers severance pay, enhanced separation payments, waivers of annual cliffs for equity vesting so employees can leave as shareholders, outplacement support and other forms of assistance.
Bhima Yudhistira, a researcher from the Institute for the Development of Economics and Finance (Indef) said that while Grab had enjoyed an uptick in its delivery services, it still relied heavily on the ride-hailing business especially outside of Indonesia.
"Even in Indonesia where Grab has diversified its business, their profit might not make up for the losses during the social distancing period, when some of Grab's partner restaurants and merchants have been affected," he said.
Bhima added that the pandemic had shocked Grab's business model of "burning money", or the practice of putting more money into a business than the expected immediate return in order to build a customer base in an effort to earn larger profits later.
"I think funding for ride-hailing companies will be more difficult to access as investors will become more skeptical," he said.