Indian startup suffers ₹2 million loss, asks employees to take 20-30% pay cut for 2 months

A Delhi-based software professional has sparked a massive online debate after revealing that their startup wants employees to help absorb the financial fallout of a major business mistake. The engineer claimed the company was asking employees for written consent to a temporary pay cut after a single employee’s mistake allegedly caused value losses ₹2 crores.

The matter came to light through a Reddit post in which the employee sought advice on whether to accept the proposal, negotiate for a stronger stake in the company, or start looking for opportunities elsewhere.

“The company is asking for a 20-30% pay cut for 2 months due to a ₹2 million loss caused by another employee. What should I do?” the individual posted.

Here is the link to the viral post

The startup proposes a temporary pay cut

Giving more details, the technician explained that a testing error made by a colleague allegedly damaged a major order from a multinational client, resulting in significant losses for the startup.

“An employee made a critical error in testing that ruined a major order for an MNC brand and cost our startup ₹2 million,” the post read.

According to the employee, management proposed a cost-sharing arrangement to help recover the loss. Employees were reportedly asked to provide written consent to a 20-30 percent pay cut for two months, while annual appraisals were also suspended.

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“To cover the loss, management wants cost sharing. They are asking employees for written consent to a 20-30% pay cut for the next 2 months, plus evaluations are suspended. In exchange, they are offering either an ESOP or a promise to pay back the deducted amount later,” the individual wrote.

“Is this normal or legal?”

The employee, who said they lead a team of more than 20 people and has several years of experience in the industry, noted that personal finances were not a major issue. They claimed they had enough savings to handle the temporary reduction without difficulty.

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However, the proposal raised several concerns.

“Is it normal or legally permissible for a company to penalize an entire team for an individual’s technical mistake?”, “Since they desperately need me to maintain the core technology, should I demand a huge chunk of the ESOP if I agree to take the cut?” and “Should I just decline, let the chips fall where they may, and immediately start interviewing elsewhere?” asked the technician.

Reddit users are divided over the company’s proposal

The post sparked a backlash, with many users questioning the fairness of spreading the financial burden on the workforce.

One commenter advised: “Say ‘I’m sorry, I can’t afford this at this stage in my life.’ No further explanation is needed. Threaten to switch if you have to.”

Another user warned: “You shouldn’t. If you allow this now, it will become a culture in society.”

A third argued that responsibility should lie with senior management rather than employees.

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“This literally should come from the pay of founders and senior management, not regular employees. If you have significant stock options with the company, then that’s understandable, but if you don’t, then they’re turning you over for a problem out of your control,” the commenter wrote.

In response to the discussion, the original poster stated that the startup does not currently have external funding, but has promised an ESOP once investment is secured.

“The company is currently unfunded, but management says it will issue an ESOP once it secures a funding round. According to our CTO, the company’s current value is approx. ₹90 to ₹100 million crowns and they intend to get this funding in 2027. I honestly don’t know what to do,” the employee replied.

Another Reddit user rejected the suggestion outright, writing: “Simply deny it. Why should anyone else pay for someone else’s mistake? When they post a profit, do they pay an extra 20-30% of your salary as profit share? If not, then they have no right to share in the loss and no one should say yes to this hov** offer.”

(This report is based on user-generated content from social media. Livemint has not independently verified and does not endorse these claims.)