Start-ups have long been symbols of ambition and agility in India’s economic narrative. But in recent quarters, headlines have shifted—from stories of unicorns to stories of sudden layoffs. Edtech giants, fintech disruptors, and D2C brands alike have all made difficult workforce decisions, often in rapid and opaque ways.
While market forces and funding constraints play their part, the real question for HR leaders is this: What can we learn from how these start-up layoffs are handled—and mishandled?
Why start-up layoffs are different from traditional downsizing
Traditional corporates often have legacy systems, legal protocols, and unionized environments that slow down or cushion the impact of layoffs. Start-ups, on the other hand, are fast-moving, founder-led, and often operating in grey regulatory zones. This means their start-up layoffs tend to be:
- Sudden: Without phased rollouts or redeployment plans
- Under-communicated: Employees and teams often find out last
- Emotionally raw: Given the “family-like” culture, it hits harder
- Reputation-risky: Negative Glassdoor reviews or LinkedIn posts go viral quickly
HR in start-ups often gets caught between investor pressure and employee empathy. But how these moments are handled reflects an organization’s true values.
Lessons in compassion from start-up layoffs
Even in high-pressure scenarios, HR can ensure start-up layoffs are handled with dignity and transparency. Here are some key practices that forward-thinking HR teams are adopting:
- Clarity before speed
While quick decisions may seem necessary, clear communication is non-negotiable. Explain the business context, selection rationale, and future roadmap to all stakeholders—departing and staying. - Support beyond the exit letter
Offering outplacement support, resume help, and access to job boards or partner companies shows that the company values people beyond their tenure. - Empathy in action
Personalized conversations, flexible notice periods, mental health resources, and transparency about severance—these go a long way in making exits humane. - One narrative, many formats
Use written comms, live townhalls, one-on-ones, and team check-ins to ensure consistent messaging. Avoid corporate jargon that feels cold.
The way a start-up treats its employees during a layoff is remembered far longer than any funding round.
How start-up layoffs impact survivors
HR’s role doesn’t end with the exit process. One of the most overlooked effects of start-up layoffs is “survivor’s guilt” among retained employees. They often ask:
- “Am I next?”
- “Did our work matter?”
- “Do we still believe in the mission?”
Failing to address these questions erodes trust and productivity. Here’s how HR can rebuild confidence:
- Open up space for honest dialogue with managers and leadership
- Reaffirm the company’s vision and direction
- Avoid overloading remaining employees to compensate for cuts
- Recognize resilience and express appreciation for continued contributions
HR must become a bridge between business continuity and emotional continuity.
Building resilience through ethical frameworks
Layoffs are sometimes inevitable. But ethical, structured, and values-driven start-up layoffs can preserve culture even in crisis.
To do this, HR must:
- Codify a layoff playbook: Don’t wait for a crisis—build frameworks in advance
- Partner with legal and finance early: Avoid surprises or compliance errors
- Create escalation paths: Let employees voice grievances with respect
- Document lessons learned: Post-mortems aren’t just for product teams
And most critically—start thinking about downsizing policies as part of your workforce strategy. A people-first approach to exits protects employer brand, enables future hiring, and minimizes long-term cultural damage.
What Indian HR leaders must do differently
As the Indian start-up ecosystem matures, HR will need to evolve from being an enabler to being a conscience keeper. The flashy culture decks and talent war tactics now need to be balanced by governance, long-term thinking, and crisis preparedness.
Here’s what Indian HR can start doing now:
- Benchmark severance best practices across industries
- Train managers on difficult conversations and emotional intelligence
- Educate founders on the real cost of poor exits
- Invest in alumni networks to stay connected with former employees
Because every layoff today affects your talent pipeline tomorrow.
Continue the conversation at RethinkHR Conclave
Layoffs don’t define a company. How you handle them does. As India Inc learns from the churn in its start-up space, HR has an opportunity to rewrite the rulebook—with empathy, accountability, and foresight.
Join India’s top HR and business leaders at the RethinkHR Conclave 2025 to explore how to build sustainable people practices in high-growth, high-risk environments.
From layoff frameworks and legal updates to mental health response and survivor management—get actionable insights that help your HR team lead from the front.
Because great cultures aren’t built when times are easy. They’re built in how we respond when times are hard.