HR startup Zenefits laid off 15% of its employees because of the pandemic

HR startup Zenefits has laid off 15% of its staff.
It's the latest example of how the COVID-19 crisis is sparking job losses in Silicon Valley.
In an email to staff, the CEO said "we've had to re-think, rescope and realign our business plan."
The exact number of layoffs isn't clear, but it may be in the area of 80-100.
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HR startup Zenefits has laid off 15% of its staff, in the latest case of the coronavirus pandemic causing widespread job losses throughout Silicon valley

In early April, the San Francisco-headquartered company let go of dozens of employees across all departments of the company, Business Insider has learned.

In an email to staff, CEO Jay Fulcher said: "Like so many businesses around the world, we've had to re-think, rescope and realign our business plan due to the sudden impact of the COVID-19 pandemic. This has led to the gut-wrenching decision to let go of some talented members of our team."

Zenefits, founded in 2013, builds human resources and paywall software for small and medium companies to help them manage their workforces. The pandemic has delivered an unexpected and severe shock to businesses around the globe, and that's also the case for B2B companies like Zenefits that provide services for other businesses. It's not clear precisely how many employees were affected by the layoffs, and a spokesperson declined to share an exact figure.

As of April 23, professional social network LinkedIn lists 578 current employees for the company, though not all employees necessarily have profiles or list their employment status on the site, and others may not update their profiles immediately after they leave. (15% of 578 is around 87.)

Roughly 26 million Americans have filed unemployment claims in the past five weeks, as companies of all sizes feel the economic sting of the pandemic lockdowns on their businesses. Thousands of companies have introduced layoffs or furloughed staff, including Disney, Tesla, ClassPass, Boeing, Sephora, Macy's, Bird, and others.

Zenefits was once one of the buzziest startups in Silicon Valley, with a private valuation in 2015 of $4.5 billion. But it was plunged into scandal over alleged violations of insurance laws and other scandals. The company saw its valuation drop to $2 billion, replaced its CEO, was fined $7 million by California regulators, and ultimately laid off 45% of its staff — 430 people — in 2017 as it tried to turn the business around.

A spokesperson said that the company is currently doing well, and that it saw a 60% growth in year-over-year bookings and added more than 8,000 new customers over the past three years.

Zenefits is also running a number of coronavirus-related initiatives for customers and the public, including offering one year's free payroll for small and medium businesses, providing expert office hours for people to dial into to learn more about COVID-19 relief programs and loans available to them, and the creation of a coronavirus resource center.

It's also taking part in #OpenWeStand, a consortium of companies including Slack, Salesforce, PayPal, GoDaddy, and GoFundMe to provide resources for small businesses impacted by the crisis.

In his email, Fulcher said employees being laid off would receive an extra three months of health benefits, can keep their company computers, and will be offered "coaching references and resume reviews." He wrote: "Those leaving the company are not at fault. They are dedicated, passionate professionals who made a significant impact on our business, our customers, and on me personally. I am grateful to you. You helped our company execute a tremendous turnaround and you have so much to be proud of."

Here's the full email CEO Jay Fulcher sent to employees:

ZenNation,

This is a hard week.

Like so many businesses around the world, we've had to re-think, rescope and realign our business plan due to the sudden impact of the COVID-19 pandemic.

This has led to the gut-wrenching decision to let go of some talented members of our team.

Those leaving the company are not at fault. They are dedicated, passionate professionals who made a significant impact on our business, our customers, and on me personally. I am grateful to you. You helped our company execute a tremendous turnaround and you have so much to be proud of.

We're taking several steps to make this transition easier. For the affected employees, we are extending your health benefits for three months. You can keep your company-issued computer equipment if you want, and executives and managers will offer coaching, references and resume reviews. We are committed to ensuring that each of you has the tools, connections, and support to make this as smooth a transition as possible.

Even in these extraordinary times, I am amazed at the fierce commitment to our mission -- leveling the playing field for the other 99.7%. Last week alone 1) we launched a free payroll program; 2) made it easier for customers to track and pay for emergency sick and leave time in our products; and 3) created a "Coronavirus Emergency Loan" calculator to help customers estimate Paycheck Protection Program (PPP) loan amounts. I'm proud to work for a company that has such a clear and important purpose.

Now, more than ever, is the time for us to work 'in it together'. Please take a moment to introduce a former colleague to people and companies you know. Connect with each other on LinkedIn, endorse skills, and if you know someone that could benefit from an introduction, please connect them.

None of us have a crystal ball for what's next, but know this: the workplace and the workforce will be forever changed post-pandemic. Zenefits will shape what the "new normal" will be, and we will help tens of thousands of customers navigate a new world of work. We couldn't have been in position to do this without all of your efforts to this point. I'm grateful to all of our team for your incredible contributions, belief and support and I wish you all the best.

Above all, be safe and well.

How has your job been affected by coronavirus? Contact Business Insider reporter Rob Price via encrypted messaging app Signal (+1 650-636-6268), encrypted email (robaeprice@protonmail.com), standard email (rprice@businessinsider.com), Telegram/Wickr/WeChat (robaeprice), or Twitter DM (@robaeprice). We can keep sources anonymous. Use a non-work device to reach out. PR pitches by standard email only, please.

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