China’s JD.com said on Tuesday it would cut the salaries of more than 2,000 senior managers by 10 per cent to 20 per cent next year to help pay for improved benefits for other staff amid the government’s “common prosperity” drive to reduce income inequality.
The e-commerce giant plans to allocate US$1.40 billion for a fund to assist employees of JD and recently-acquired courier firm Deppon Logistics with buying homes, according to an email to staff signed by JD founder and chairman Richard Liu.
Liu also plans to personally donate $15,4 million to a fund that help children of JD employees should anything happen to their parents, said the letter, which was circulated online and later confirmed by JD.com as authentic.
“The employee benefits plan is currently being improved, with a focus on front-line staff,” a JD representative told Reuters. The company has 540,000 employees.
Liu said the move would put short-term financial pressure on JD, leading to the decision to cut the salaries of more than 2,000 senior executives.
“I apologise to you all,” he said in the letter. “If JD.com’s performance returns to a high level of growth in the next two years the group will restore everyone’s remuneration.”
Chinese President Xi Jinping last year launched a renewed drive for “common prosperity”, as an effort to reduce income inequality that threatens long-term economic growth and even the legitimacy of Communist Party rule.
Alibaba Group and Tencent Holdings last year pledged to spend billions to support the effort, while state-owned investment banks have implemented pay cuts and delayed bonus payments this year.
JD has been hit by a slowing economy and flagging consumer spending this year, though it last week posted an 11.4 per cent rise in third-quarter revenue and said it was seeing signs of a demand recovery as China adjusted it zero-Covid policy.
- Reporting by Sophie Yu, Brenda Goh; Editing by Kim Coghill and Jamie Freed, of Reuters.