JD Logistic, the logistics arm of the Beijing-based tech heavyweight JD.com, will cancel the basic salary for delivery staff , CEO and Chairman Liu Qiangdong said in response to arguments on the company's salary adjustments in an internal email sent on Monday.
JD Logistics lost over 2.3 billion yuan ($342.9 million) in 2018, its 12th consecutive year to lose money. If the situation continues, Liu said, the company would only last for two more years.
If internal settlements are deducted, JD Logistics lost more than 2.8 billion yuan last year. The main reasons for the loss are few external delivery orders and high internal costs, Liu said.
The company has only two choices, according to Liu: one, increase external delivery orders to promote external income growth; the other, reduce staff members' well-being to the level of other express companies.
Reducing fund ratios to average levels and canceling the basic salary aims to encourage couriers to get more external delivery orders and increase revenue.
The company will not cancel social insurance and housing funds for the sake of cost-cutting, Liu said, adding some staff made 80,000 yuan a month in pilot areas for the new salary regime in southern China's second and third-tier cities.
Earlier this year, rumors spread that China's e-commerce giant would cancel couriers' basic salary and reduce welfare. The company confirmed the salary adjustment plan via its official Sina Weibo account on April 7, saying as the number of orders from individual clients increases, the company is looking to adopt an incentive plan to reward outstanding employees.
JD will reduce its delivery staff members' salaries by adopting a commission-based payment scheme starting in June and lower contributions to employees' housing funds from 12 to 7 percent, Sina Finance reported.
An anonymous courier with JD Logistics said the task of getting more external delivery orders under the new salary system would be hard to accomplish, and the new policy will reduce their salary, the report alleged, though the courier did not indicate an exact amount for the reduction.
Statistics show basic monthly salaries for couriers ranges from 1,500 to 2,000 yuan, accounting for 15 to 20 percent of the total according to the report.
JD refuted the mass layoff rumor and said more than 10,000 positions are expected to be added as JD Logistics provides services to more industry customers.
Facing tougher competition from rivals such as Alibaba and Pinduoduo, JD is eyeing opportunities in the consumer market, which has shown great potential, Sina Finance reported.
Driven by rapid growth of e-commerce consumption, China's express delivery volume reached 50.71 billion in 2018, an increase of 26.6 percent over the same period last year, the report said.