JD Logistics, the supply chain and logistics services arm of China’s e-commerce giant JD.com, is piloting a new pay structure offering couriers only performance-based compensation, replacing the previous model of offering base salaries plus bonuses. The move has triggered internal complaints and widespread external scrutiny, KrASIA reported last week.
The company’s founder and chairman Richard Liu circulated an email within the company today, explaining the reasons behind the change.
Liu cited JD Logistics’ losses exceeding RMB 2.8 billion (USD 417.5 million) in 2018—failing to earn a profit 12 years in a row—due to a lack of revenue from external orders and high internal costs.
JD.com started building its own logistics arm as early as 2007 to handle shipments to fulfill orders on its platform. Ten years later, the e-commerce company separated this logistics arm and brought in external investors, raising RMB 16 billion (USD 2.4 billion) in cash, its 2018 annual report shows.
Liu added that at the current rate of loss-making, the funds raised by JD Logistics will be completely drained in two years.
He said that the company has no other choice but to encourage all of its couriers to pick up external orders to increase revenue and to lower their housing benefits to cut costs.
Companies are required to pay 5% to 12% of their employees average monthly salaries to their housing fund accounts. The ratio for JD couriers is now 7%, marking a significant drop from the previously set 12%.
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