After Leadership Change, Zenefits Announces Sweeping Layoffs

What has already been a week of significant change at Zenefits, the embattled San Francisco-based startup that provides health insurance and other human resources services to businesses, continued Thursday with news the company plans to lay off nearly half of its workforce, according to a report originally published by Buzzfeed News.

Once heralded as one of the most prized “unicorns” in Silicon Valley, Zenefits will part with 430 employees, or about 45 percent of its overall workforce, a company spokesperson confirmed Friday. This marks the third round of layoffs in a one-year period at the company.

The decision to trim the company’s staff count was coordinated by the Zenefits board of directors and former CEO David Sacks, and had been in the works “for some time,” according to the spokesperson.

Jay Fulcher, who was publicly tabbed to replace Sacks as Zenefits’ new CEO just four days ago, made the announcement to employees in an e-mail, which has since been provided to Xconomy.

“In 2015, Zenefits grew too quickly, hiring employees to support revenue projections that far surpass where we are today,” Fulcher wrote. “Today’s action aligns our costs more closely to our business realities and gives us the runway we need to build the business properly for the long term.”

The company plans to centralize its operations at its Tempe, AZ, facility and beef up engineering programs in Vancouver and Bangalore, according to Fulcher’s e-mail. He added that Zenefits will use a seasonal employment model to make up for a lack of manpower when the insurance selling season picks up at the end of each year.

The layoffs are just the latest development in a string of shakeups at the company, including millions of dollars in fines for sidestepping state insurance regulations, reports of a raucous office culture, and appointments of new top executives on back-to-back days this week.

Zenefits, formerly valued at approximately $4.5 billion, gained widespread notoriety in early 2016 when the firm’s original CEO and embattled founder, Parker Conrad, abruptly left the company after allegations he was creating workarounds for state insurance regulations.

Conrad’s controversy played a hand in melting the facade of a company that had managed to rake in nearly $600 million in funding in less than two years.

“It has been a winding road for this company,” Fulcher wrote in his e-mail to employees. “But I believe our best work and ability to be the best company we can be is ahead.”

Quincy Snowdon is a staff writer with the Aurora Sentinel, reporting on the arts, entertainment and business. He lives in Denver. Follow @QuincySnowdon

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