After laying off hundreds of employees following the pandemic, Softbank bank-backed hospitality firm Oyo has now offloaded 150 employees to research and consultancy firm KPMG with an aim to expel an ancillary unit like finance shared services and focus on core departments like hotel onboarding, according to sources privy to the development.
Conventionally, corporates outsource specific jobs to consultancies; however, transferring employees to another company is not a common affair in India.
Oyo, which did this transition between November and January, had floated a request for proposal which was won by KPMG last year. Following this, it has transferred 150 employees to the payroll of KPMG.
Currently, all these employees are working on the projects of Oyo and reporting to the managers, some of which are still working for Oyo.
"The move is not aimed at saving money currently but is purely strategic in nature," said one of the sources quoted above.
"This specific action is related to financial works such as financial filing, accounting, transaction management, etc which is not core to Oyo in any form," he added.
He, however, did not rule out that there will be a cost benefit in the longer run because the company gets rid of statutory liabilities such as provident fund, gratuity, medical among other things.
Oyo on the other hand plans to focus broadly on technology, an area which needs good attention besides onboarding partner hotels.
Oyo confirmed the development. "Oyo’s core expertise lies in being a technology and revenue growth brand for owners and operators of small hotels and homes. Oyo’s financial shared services teams primarily worked on transaction processing covering payables and receivables management, travel and expenses, and other related routine financial operations. And we believe these are best run by companies that have proven expertise and experience to do so," said an Oyo spokesperson.
While the salaries of these employees have not witnessed any change, they do have a six-month contract with KPMG. The company however said it has entered into a multi-year service engagement with KPMG for end-to-end delivery of finance shared services.
"This is a long-term multi-year contract and not a six-month arrangement. To clarify, the six-month term is a commitment of employment at KPMG, this ensures job continuity for employees. Post which, they will continue to remain on the rolls of KPMG and will be governed by KPMG people practices and policies of appraisal, promotion, performance evaluation, etc," the spokesperson added.
Following the pandemic which brutally impacted the travel and hospitality industry, Oyo has resorted to sending employees on furloughs as well as layoffs.
In April, following the pandemic, the hospitality firm asked select employees to go on leave with limited benefits and also asked all employees in the country to accept a cut in their fixed salaries by 25 percent.
Until early last year, the company had around 10,000 employees in the country. However, according to sources, that number has now come down to barely 2,000-2,500 with Oyo shifting to a lean model.
"Such arrangements are mostly done by EBIDTA positive companies for tax purposes. But in this case, it seems to be done purely for economies of scale. Since Oyo is offloading employees, it helps in two ways. Firstly, these employees are familiar with the company and already know the requirements and secondly, it helps save their jobs which would have gone if the company had decided to purely outsource the task to a third party consultancy," said a corporate lawyer requesting anonymity.
Oyo which claims to have a $1 billion war chest was also learnt to have offered increments and promotions selectively to its technology team, stressing the increasing role of technology in future operations late last year.