(Yicai Global) April 15 -- JD.Com's logistics arm cut the base salary of its delivery drivers partly because the unit lost money for a 12th year in a row in 2018, according to the e-commerce giant's founder and chief executive.
The delivery company's annual loss was CNY2.3 billion (USD343 million) last year, leaving JD Logistics with only enough money to keep running for two more years, Richard Liu said in an internal letter to explain why the firm had done away with the base salary. As compensation, it has hiked the commission for drivers.
JD has just two options to tackle the huge loss: deliver more packages to swell revenue or cut benefits to the same level as other couriers, Liu said in the letter.
The Beijing-based company sparked a heated debate this month by canceling the base salary and cutting housing provident fund contributions. The firm said on April 7 that it has seen business surge since operations began and the original pay structure was unsuitable and could not incentivize employees. JD Logistics has adjusted its pay structure and is trialing a new system in second- and third-tier cities in southern China.
The firm cancelled the base payment not to reduce staff wages but to increase the income of both the firm and employees, Liu said, adding that the base salary of each driver only makes up about a 10th of his or her total income.
A third of JD Logistics' drivers who worked in Beijing 10 years ago have bought homes in the capital, Liu added. The insurance and housing provident fund payments and commercial insurance the firm shelled out last year exceeded that spent by all four or five major private couriers combined, he said, while the average contribution to each driver was three to six times that of other logistics firms.
JD paid a CNY3,000 (USD447.40) subsidy to each employ who worked during the Spring Festival holiday. For staff who have been with the firm for more than five years, JD also paid substantial amounts to them and their families when their homes were damaged by natural and man-made disasters and covered all their medical expenses for serious illness, costing the firm hundreds of millions of yuan.
JD's drivers have enjoyed a big increase in wages since the firm canceled the basic salary in south China less than half a year ago, Liu said. A driver who does exceptionally well can earn CNY40,000 to CNY50,000 a month, or even more than CNY80,000.