Chinese e-commerce giant JD.com to cut pay for 2,000 senior managers amid efforts to boost housing, education benefits for workers

The salary cuts, which will start next year, form part of JD.com’s efforts to boost housing and education benefits to rank-and-file employees
JD.com will establish a US$1.4 billion housing fund for all employees of the group and its subsidiaries

E-commerce

Ben Jiangin Beijing

Published: 5:45pm, 22 Nov 2022

Why you can trust SCMP

Chinese e-commerce giant JD.com will slash the salaries of around 2,000 senior managers by up to 20 per cent, as part of efforts to boost housing and education benefits for its rank-and-file employees, company founder Richard Liu Qiangdong announced in an internal email on Tuesday.

JD.com will establish a 10 billion yuan (US$1.4 billion) housing fund for all employees of the group and its subsidiaries, according to the email, which was seen by the South China Morning Post and its content confirmed by a company spokeswoman.

The Beijing-based firm, which is listed on both the Nasdaq and Hong Kong stock markets, will also start paying social security for all of the nearly 150,000 personnel at Deppon, a local courier service that was acquired this year by JD Logistics.

Liu, who stepped down as JD.com’s chief executive in April, wrote that he will personally donate 100 million yuan, which will be matched by the company and its subsidiaries, to a relief fund that will provide for the offspring of JD.com employees in the event of their death or when they get injured at work or outside work.

JD.com employees are seen sorting products at one of the company’s warehouse and distribution facilities in mainland China. Photo: Shutterstock

“This is to ensure our JD brothers have our solid backing and ensure that under no circumstances will their family return to poverty,” Liu wrote, signing the internal email as “your brother Dong”.

The senior managers’ salary cuts, which range from 10 per cent to 20 per cent, will start next year, according to the email.

JD.com’s move to strengthen employee welfare reflects the stand taken by billionaire founder Liu – with a net worth of US$11.4 billion as of November 22, according to Forbes – to adhere to Beijing’s “common prosperity” strategy.

Earlier this year, Liu gave away about US$2.05 trillion in JD.com stock to charity. Liu donated 62.38 million Class B shares of the company to a third-party charity foundation, according to a February filing to the US Securities and Exchange Commission. He became China’s most generous donor for the first time after that donation, according to the Hurun Philanthropy List 2022.

JD.com founder Richard Liu Qiangdong leads other tech tycoons in this year’s ranking of China’s top 10 philanthropists, according to the latest Hurun China Philanthropy List. Photo: Handout

Still, the latest initiative by JD.com to bolster employee welfare is likely to weigh heavily on the balance sheet of JD Logistics, which is still losing money. The logistics unit recorded a 149 million yuan loss in the third quarter, while its employee salaries and welfare costs rose to 11.2 billion yuan after adding Deppon’s 150,000 personnel.

“This [welfare coverage for Deppon employees] will increase expenditure, so the company has to cut senior executives’ salaries to balance its financials,” said Li Chengdong, founder and chief analyst at Beijing-based e-commerce consultancy Dolphin. “Many other major courier services don’t pay [social security] for their employees.”

Li also indicated that JD.com’s net profit is thinner when compared with those of Baidu, Tencent Holdings and Post owner Alibaba Group Holding.

Shares of JD Logistics declined 3.05 per cent to HK$13.34 at the close of trading in Hong Kong on Tuesday. Parent JD.com’s shares closed down 4.36 per cent to HK$197.60.

E-commerce giant JD.com’s logo and mascot are seen at the facade of its headquarters in Beijing. Photo: Shutterstock

In the internal email, Liu said its latest move was also geared to help create value for JD.com’s investors.

“We should not forget our stakeholders, many of whom are regular people like us,” he wrote. “They spent all their savings to buy JD and Deppon shares. If we mismanage our businesses, they will lose money.”

“We might not be able to wield influence over short-term share price, but as long as we perform in the long run, eventually we will be able to give back to them,” he said. “I hope all our brothers will work hard to reward them.”.