ByteDance’s Dali Education and Gaotu to Layoff Employees Under Pressure of Double Reduction Policy

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(Source: The Economic Times)

With the implementation of the so-called “double reduction” policy, on Thursday, many Chinese media reported that ByteDance’s Dali Education plans to lay off some of its employees, while those that remain will switch to different products under the ByteDance umbrella. Bytedance did not confirm this report. On the evening of July 30th, Chen Xiangdong, founder and CEO of Gaotu Techedu, confirmed that quite a few employees would be let go.

LatePost reported that AIclass-based GuaGua Long plans to get rid of more than 50% of its experience class tutors before the end of August. NiPaiYi for children aged 3-12 and GoGoKid, a one-on-one English tutoring app, will shut down completely.

A person close to the business said that Qingbei will suspend enrollment in its junior high school and begin to layofftutors of its experience classes.

Two months ago, when the online education industry was overhauled, Chen Lin, CEO of Dali Education, said with confidence that “the company not only had no layoff plans, but that it was also was looking for experienced teachers from other educational institutions.”

CEO of Gaotu Techedu did not respond to the specific number of layoffs but said a large-scale adjustment of the organizational structure is inevitable. Among others, tutors for non-central classes and salespeople are especially under pressure. “The teachers of our systematic classes will remain active and we can say that we have retained the best of the best among our teachers and cadres. In this sense, our educational offerings have improved rather than declined,” Chen Xiangdong said.

Chen believes that online education companies can still offer classes from Monday to Friday, if they meet certain criteria required by the recent measures put in place by authorities. The prohibition of classes on weekends, however, in addition to winter and summer vacations, could reduce about 70% of class time offerings, which would lead to a large drop of income. It is for these reasons that companies are needing to adjust internally their organizations.

After cutting its business that cater to students in primary and junior high school, Gaotu will now shift its focus to senior high school and adult vocational education. Shen Nan, CFO of Gaotu, said in 2020 that the renewal rate of some high and middle school classes in Gaotu Classroom has exceeded 80%.

In recent years, the online education industry has expanded rapidly driven by the potential for profits. However, new problems have caused some public concern about the industry, such as aggressive sales tactics, false information, chaotic management and overloaded clauses.

At the end of July, China’s State Council issued the “Opinions on Further Reducing the Burden of Student’s Homework and Off-campus Training in Compulsory Education”. On August 3, the Education Leading Group of the Beijing Municipal Committee held a meeting, proposing to limit the number of educational institutions, along with their class time and the amount they could charge. The supporting measures of the policy released in July also mentioned “balancing the burden of family and school education, while strictly regulating off-campus training institutions.”

On the evening of August 1, New Oriental announced it would cancel its board meeting scheduled for August 2 and the release of the results for the fourth quarter of the fiscal year 2021 in view of the recent regulatory activities. Tomorrow Advancing Life (NYSE: TAL) also announced that, due to the new regulations, it will cancel its financial report and conference call originally scheduled for next week. Both companies indicated that they will provide further updates at a later time.

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