Zenefits to Make Second Round of Job Cuts

The human resources software startup is restructuring as it seeks to rebound from a compliance scandal.
Katie Kuehner-HebertJune 15, 2016

Struggling human resources software startup Zenefits is making a second round of job cuts as it seeks to recover from a scandal over its broker training and compliance processes.

The layoffs of more than 100 staff, or about 9% of its workforce, are part of a restructuring that also includes shutting down Zenefits’ remote sales office in Arizona and come only a few months after the company laid off 250 people.

“This is a painful decision because we have a lot of great salespeople in Arizona and talented people in the Ops organization who will no longer be with us,” Zenefits CEO David Sacks wrote in an e-mail to employees. “But it is the right thing to do.”

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Zenefits is now consolidating all sales and marketing processes into its San Francisco headquarters, with the Arizona office only including operational employees. “These changes are about working smarter, not just more efficiently,” Sacks said.

The company provides free software to help small businesses manage their own human resources, making its profit  by selling health insurance to its business partners. It was valued at $4.5 billion in its latest round of funding.

But as CNBC reports, Zenefits’ founding CEO Peter Conrad resigned in February amid allegations that it had encouraged sales reps to skirt insurance broker licensing laws.

All the laid off employees will get three months’ severance pay and six months’ health coverage. The firm also plans to restructure its operational division to let individual employees control more aspects of the relationship with a given customer.

“We have too much complexity, and we have an opportunity to create a more customer-centric way of operating,” Chief Operating Officer Abhijeet Dwivedi wrote in a separate email to employees. “The goal of the changes we are making today in operations is to amplify what we do well, and obliterate our deficiencies.”

Sacks said he planned to create “version 2” of Zenefits, which he named “Z2.” If employees can’t get excited about the company’s plans, he said, “then frankly we need you to make space for someone who will.”