JD Reconsiders Its Spending Practices after Losses

Company eliminates base salaries for delivery staff

JD.com (JD) is changing the compensation plan for its delivery workers. The company is removing base salaries for its delivery drivers and transitioning them to commission-based compensation, according to a company communication cited by Caixin Global. JD’s shift from base salaries to commission-based earnings indicates that it will pay only those delivery drivers who actually work. According to JD, the change is meant to improve employee performance.

In addition to removing salaries, JD is also reducing its contribution to the driver workers’ housing program. The company is lowering its contribution to the housing program to 7.0% from the current 12%.

JD Reconsiders Its Spending Practices after Losses

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JD posts losses

JD is overhauling the payment plan for its delivery staff following a mixed year for it in 2018. JD saw a loss of $0.7 billion in the fourth quarter. It posted a profit of $0.4 billion in the third quarter, suffered a loss of $334.4 million in the second quarter, and posted a profit of $243.1 million in the first quarter. In contrast, its competitors Alibaba (BABA), Amazon (AMZN), and eBay (EBAY) posted profits of $4.8 billion, $3.0 billion, and $763 million, respectively, in the fourth quarter.

JD’s doing away with base salaries for its delivery staff is expected to help it cut costs and hopefully improve its profitability. JD’s operating expenses increased 21.5% YoY (year-over-year) to $19.7 billion in the fourth quarter. Operating expenses rose 17.8% YoY at Amazon and 53.7% YoY at Etsy (ETSY) in the fourth quarter.