Zomato laid off around 500 employees from its Zomato Associate Accelerator Program (ZAAP) across Gurugram and Hyderabad, according to a report by Outlook Business. The company logged employees out of its systems without prior notice and asked them to leave immediately, offering two months’ severance pay. This coincided with the launch of Nugget, Zomato’s AI-powered customer support platform, which now handles 80% of inquiries without human involvement.
Lack of Clarity in Layoffs
Many of those who were fired criticised the lack of visibility that would not allow them to see how certain incidents, like late clock-ins, vague complaints from customers or strained relationships with managers, would directly lead to dismissal.
The company reportedly uses Nugget’s AI-powered assessments, as per which it ranks employees into different tiers such as ‘Gold’ or ‘Iron’. Some employees alleged that this AI assessment potentially cost them their jobs. Zomato has not issued a public response on this as of now.
Industry-Wide Trends in AI-Driven Layoffs
Zomato’s actions are consistent with the general trend of the industry where companies are adopting AI capabilities that eliminate the need for workers. Dukaan previously eliminated 90% of its customer support staff, and in the five years following the launch of PhonePe, the company reduced its team by 60% with AI-based automation, according to the company’s annual report for 2024.
Across the fintech, e-commerce, and food delivery sectors, companies are adopting AI in customer service operations which offers cost-effectiveness and greater query resolution efficiency.
Zomato is also reportedly using AI in deliberating whether an employee retains their job or not.
Using AI in determining job security raises serious ethical, accountability and fairness considerations regarding the role of technology in determining workforce decisions.
Key Questions
MediaNama has reached out to Zomato with the following questions regarding its recent layoffs and AI-driven employee assessments. We are awaiting their response:
- How did Zomato determine Karma Scores (e.g., Gold, Iron) for dismissals?
- Did human oversight play a role when AI recommended terminations?
- Were these layoffs linked to cost-cutting measures, given the rise in ESOP and employee expenses?
- Does Zomato plan further workforce restructuring based on AI-driven assessments?
Why This Matters
Zomato’s firings are a harbinger of a broader shift: AI is starting to do more than automated tasks. It is now making decisions about who gets to keep their job and who doesn’t. The reliance on AI systems that are not transparent about the reasons for sacking employees is a troubling precedent that paves the way for compromised fairness in the workplace.
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If AI continues to be involved in the hiring and firing of employees, then policymakers, business leaders, and labour advocates will need to keep fairness and accountability at the forefront of their deliberations.
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