Richard Liu, the founder of Chinese e-commerce giant JD.com, announced in an email to all employees on November 22 that executive pay at the firm will be reduced. Starting from January 1, 2023, the cash salary of senior managers at JD.com will be reduced by between 10% and 20%, with the higher the position, the more pay will be reduced.
On July 26, JD.com completed an acquisition of more than 50% equity of logistics platform Deppon through JD Logistics. With the addition of this firm, the number of employees in JD.com exceeded 540,000. Today’s internal email showed that JD.com will gradually transform Deppon’s outsourced employees into formal employees, incrementally paying them social insurance and accumulation funds from January 1.
As for JD.com‘s insistence on paying social insurance and accumulation funds for front-line employees, Liu said earlier that 80% of the front-line logistics employees of the company come from rural areas, and that the company should not only provide support for the current welfare and personal development of employees, but also consider the problems that employees will face after the age of 60.
In the future, JD.com says it will invest 10 billion yuan ($1.4 billion) to set up a “housing security fund” for all grassroots employees such as logistics and customer service, including Deppon employees, which means that in the next 10 years, the accumulated investment of the group will reach tens of billions of yuan. At the same time, apart from the cash from JD.com and its business groups, Liu himself donated another 100 million yuan to expand the scale of the “employee children relief fund.”
Some industry insiders believe that this move will bring short-term financial pressure to JD.com. According to public data, in the first three quarters of 2022, JD.com spent more than 33 billion yuan on salary and welfare for front-line employees.
The timeline stated in the internal mail starts from January 1, with business integration, salary and welfare expenses of employees involved in warehouse management, sorting, packaging, transportation, distribution and customer services of JD Logistics increased by 27.8% year-on-year in the third quarter.
The acquisition of Deppon also supplemented JD Logistics with warehouse allocation resources and customer resources. According to a financial report by JD Logistics for the third quarter, revenue from Deppon was 5.82 billion yuan, accounting for 16.2% of the total revenue. In the third quarter, the revenue of external customers of JD Logistics reached 24.866 billion yuan, accounting for 69.5% of its total revenue.
Since the beginning of the year, cost reductions and efficiency increases have become the key aims of China’s tech industry, and executive salary reductions at JD.com are also the embodiment of this trend. In the third quarter, the group’s revenue was 243.54 billion yuan and the net profit was 6 billion yuan. During a telephone conference for the third-quarter financial report, Xu Lei, CEO of JD.com, said that the profit improvement measures of JD.com this year is mainly reflected in cost reductions, and that more attention will be paid to efficiency improvement in the coming years. “From my point of view, the whole group still has too much efficiency to improve,” Xu said.