Labour Commissioner’s Summons: What Does the Paytm Layoffs Controversy Mean for Employee Rights?

The Regional Labour Commissioner of Bengaluru has summoned One97 Communication, the parent company of Paytm, over allegations of forced employee terminations.

This summons follows a series of complaints filed by employees with the Ministry of Labour and Employment, alleging the company violated labor laws and enforced terminations without pay, according to a June report by Moneycontrol.

The notice was issued by the Regional Labour Commissioner (Central), under the Office of the Deputy Chief Labour Commissioner (Central), Ministry of Labour and Employment.

As per the notice, reviewed by Moneycontrol, Paytm representatives and the complainants have been asked to present themselves at the department’s office with all pertinent records.

In response to these allegations, a Paytm spokesperson stated, “We highly value the contributions of all our employees and deeply appreciate their dedication. Transitioning some employees has been a challenging decision for everyone involved and was made after careful consideration of all available options.”

The spokesperson further emphasized the company’s commitment to supporting transitioning employees and maintaining fairness and transparency throughout the process. “We are committed to addressing and resolving any concerns raised by those affected and are actively listening to their feedback. We will continue to collaborate with all stakeholders to ensure the best outcomes for our employees,” they added.

The Issue

The affected employees, who were allegedly forced to “voluntarily resign” without prior notice or severance packages, filed complaints through the ministry’s Samadhan portal and other public grievance channels, providing relevant emails and documents to seek reinstatement of their jobs.

This development comes in the wake of the RBI’s decision to ban Paytm Payments Bank, a crucial component of the fintech company’s operations. As a result, the Noida-based firm has initiated significant restructuring efforts, including employee rationalization.

In a letter to shareholders on May 22, founder and CEO Vijay Shekhar Sharma indicated the company’s focus on core businesses and cost-efficiency improvements to create a leaner organization, suggesting possible future layoffs.

Sharma noted that employee costs had increased over the years due to investments in technology and financial services. While the company will continue investing in its merchant sales team and risk and compliance functions, steps will be taken to reduce employee costs, potentially saving Rs 400-500 crore annually.

The company asserts that it has provided outplacement support to employees who resigned as part of the restructuring efforts.