JD Logistics, the supply chain and logistics services arm of China’s e-commerce giant JD.com, confirmed late Sunday night on its official Sina Weibo account that it’s piloting a new pay structure offering couriers only performance-based compensation, replacing the previous model of basic salaries plus bonus. The pilot is taking place in some regions in the country.
In Beijing, where JD.com is headquartered, employees are protected with a mandatory 2,120 yuan (USD 316) monthly minimum salary law. The standard varies in different cities nationwide.
If this adjustment has the agreement of the trade union inside JD.com and the agreement of employees, it is legal, Zhang Guangdong, a lawyer with Shanghai City Development Law Firm, told KrAsia.
He added that in addition to taking into account the procedure, he would still need to see the actual contracts couriers have signed to decide whether they are problematic.
A Weibo user commented that under this arrangement, couriers’ income will decrease dramatically if they need to take leave in case of sickness or emergency.
Another Weibo user asked JD Logistics to consider this carefully because it could backfire, as canceling basic salaries will hurt the stability of couriers and in the long run lower consumer trust.
JD.com started building its own logistics arm as early as 2007, differentiating itself from Alibaba which relied on external delivery services. Ten years later, the company separated this logistics arm and brought in external investors.
The e-commerce giant said in its 2018 annual report that it gained RMB 16 billion (USD 2.4 billion) in cash through JD Logistics’ fundraising.
Also in this report, JD.com disclosed that it new businesses, which include logistics services provided to third parties, technology initiatives, and overseas business, booked RMB 14.7 billion (USD 2.1 billion) in revenue in 2018, 144% higher than the RMB 6 billion booked in 2017.
Since couriers not only pick up orders from JD Mall but deliver packages for other JD Logistics clients, the previous model of basic salary plus performance bonus has become out of date, explained JD Logistics in a statement posted on Weibo.
This shift in the compensation model for couriers isn’t only doing away with basic salaries, JD.com is also tweaking the ratio of their housing accumulation fund.
In China, companies are required to pay 5% to 12% of their employees average monthly salaries to their housing fund accounts and each employee is required to also pay the same account to this fund. This can be withdrawn when buying property, like an apartment.
JD Logistics, on its Weibo account, said that it has also “adjusted” this percentage, partly based on the request of its couriers, but didn’t mention the new ratio it settled on. The firm added that it was still higher than the industry average. A JD Logistics courier told KrAsia that the new housing ratio is 7%.
In May last year, Chinese authorities introduced the 5% to 12% range instead of the former rigid demand of 12% for the housing fund. Some companies have kept the 12% ratio to keep this benefit for its employees while others decided to cut it.
JD Logistics added that it will keep adjusting its pay structure to make sure that couriers who “work more, get paid more”, adding that some couriers in the second and third tier pilot cities have earned more than RMB 8,000 (USD 1,191) per month with the new model.
The company said that each year it receives work applications and will open more than 10,000 courier positions this year gradually.
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Editor: Nadine Freischlad