Mint Explainer: Why startups will continue to be plagued by moonlighting

Several startup founders have said Parekh was impressive in interviews but failed to perform at the required level once hired. Parekh justified his actions citing “financial conditions”, on the Technology Business Programming Network’s podcast.

But what’s really the issue here, why is everyone up in arms about Parekh’s moonlighting, and what can companies do about it?

What is moonlighting and why is it a problem?

Simply put, moonlighting refers to an employee holding more than one job without disclosing this to their employers. Many large companies around the world include clauses against moonlighting in job contracts for full-time employees.

Moonlighting took off during covid curfews when employees were required to work from home. Such was the popularity of having more than two jobs that an entire community cropped up on Reddit called r/overemployed, where people talk about strategy, job hacks, and more to keep those extra jobs. The community was started in May 2021 at the height of the pandemic and currently boasts more than 450,000 users.

Moonlighting isn’t inherently problematic, provided an employer isn’t expressly against it. But if the delivery and quality of work gets impacted, especially in early stage startups, employers take notice. Which is how Parekh got caught.

“I think the concern here is more about lack of disclosure and not adhering to certain company policies,” said Tarun Bhatia, regional managing director and co-head of Asia Pacific, investigations, diligence and compliance, at Kroll, a global financial and risk advisory firm.

The bigger issue, especially for large companies and startups, is that their systems are open to vulnerabilities when they have employees working different jobs from the same computer system. “You don’t know if your code is going to get compromised, that’s the biggest one,” said Ashok Hariharan, co-founder and chief executive at IDfy, an identity verification company based out of Mumbai.

For companies that are just starting out, their code base is extremely important and if that is affected, it can push startups back months or even cause them to shut down.

Why is it harder to stop startup employees from moonlighting?

For startups, especially early-stage companies looking to sign on employees quickly, contracts, background verification, and employee history aren’t important factors. Resumes and referrals are their go-to method of hiring.

“When startups are small, they aren’t thinking about background checks very purposefully until something happens or they get big enough where their auditor says they need to start doing it,” said Hariharan.

In fact, companies in India don’t need to register with the Employees’ Provident Fund Organisation if they have fewer than 20 employees. The moment they cross that threshold, they’re legally required to enroll with the EPFO.

As a result, people joining early-stage startups can not only get away with joining multiple startups, but it’s also possible for them to get away with it as long as they’re moving frequently.

“When you’re a founder who’s starting out, what are you going to prioritise—security of your systems or growing your business,” said Hariharan. “Only after a certain point do you start worrying about security, because then you’re holding so much data from users and businesses.”

How are companies tracking moonlighting?

EY in a 2022 report flagged employee behaviours that could point to moonlighting—“avoiding in-person meetings, increased requests to work from home, leaving important virtual meetings unannounced, resistance towards periodic shift rotations”.

For a surer approach, background verification companies like IDfy and OnGrid help companies figure if potential employees have been moonlighting—including by looking at provident fund data, bank account statements, social media activity, and other public data markers.

“If 5% of companies were doing background and moonlighting checks now, after this Parekh incident, that number might become 10%,” said OnGrid co-founder and chief executive Piyush Peshwani.

Some companies, especially large ones, also install screen-monitoring technology on work computers as well as idle-time trackers, mouse-movement trackers, and machine-active time systems to keep track of their employees’ productivity. Some companies ask employees to log their daily commitments on time sheets.

“Companies are putting a greater deal of scrutiny on their own technology and are also putting controls on their devices,” said Kroll’s Bhatia.

However, he added a caveat: “I think (only) a small percentage of companies are willing to do that because all these checks and balances require institutional level investment. Small companies and MSMEs (micro, small, and medium enterprises) will not be able to do that. I think moonlighting is here to stay.”

Is this the end of work-from-home?

In 2022, PwC India, in a report titled ‘India Workforce Hopes and Fears’, highlighted that 81% of the 2,608 Indian employees it surveyed believed their jobs could be done from home. 

But following the pandemic years, several information technology services companies in India ordered their employees back to office. While some companies enforced this in phases, some ruled out work-from-home completely. 

Following the Parekh incident, employees in India are likely to see an erosion of trust from employers. 

“The bigger implication is the so-called betrayal of trust,” said Peshwani of OnGrid. “Now companies will start calling more people into office from a risk-of-moonlighting standpoint.”