Firms struggle for survival via salary cuts, layoffs amid COVID-19

By Zhang Hongpei Source:Global Times Published: 2020/2/20 22:08:40

A view of's 7Fresh, a "new retail" supermarket that combines online and offline sales, in a shopping mall in Xi'an, capital of Shaanxi Province on Sunday. The store, which opened on Sunday and also marked's first "new retail" supermarket in Northwest China, supports cutting-edge technology such as face-scanning payment. Photo: IC

Chinese firms, especially small and medium-sized enterprises (SMEs), are making their preparations to survive amid the onslaught of the coronavirus by cutting salaries and conducting layoffs.

The Global Times learned that owners of most small firms hold a realistic attitude toward the current situation and remain optimistic about a turnaround.

A picture posted on Chinese Twitter-like social media platform Weibo, showing that the salary of an employee of Beijng Huasheng Yuncang Co has been reduced to 1,540 yuan ($220) per month, has sparked heated discussion among netizens. The number is about 10 percent of the average monthly wage in Beijing.

Some say the company is trying to persuade employees to resign by themselves in such a sinuous way while others hold the opinion that staff should have some understanding toward businesses that are struggling to survive.

A human resources representative of the Beijing-based firm, which is focused on auto retail, told the Global Times that staff who are on leave will receive the minimum salary.

"Senior executives' salaries have also been reduced," the representative said, noting that the salary cut is "a forced choice without any intention of forcing staff out."

"We have more than 400 stores across the nation. Our priority is to keep their posts or it will cause large-scale layoffs, so the only way is to make adjustments for the headquarters staff," he explained.

Meanwhile, he expressed an optimistic view about private vehicle sales after the epidemic is controlled. "Auto retail is set to rebound after going through the current difficulties so now we all aim to survive until that moment."

Other firms have been cutting costs amid the epidemic.

A Beijing-based investment manager surnamed Zhou told the Global Times that he has been informed by his firm that there will not be salary raises this year because of the epidemic. 

"We have the tradition of getting a pay raise at the beginning of each year. No raise virtually means a salary cut at this moment," Zhou noted.

Since the outbreak of COVID-19, the whole services industry including catering, tourism and cinemas have all been seriously impacted.

Xibei, a leading Chinese catering chain, has allocated some of its staff to help with shoring-up business for Hema Fresh, Alibaba's online fresh food chain, the company said in a note sent to the Global Times recently.

Xibei, with an annual sales revenue of up to 6 billion yuan and over 20,000 employees, is among the first batch of services providers that felt the pinch amid the virus outbreak.

As business resumptions have been delayed due to the virus, SMEs in China are mulling at least 30 percent job cuts, Zhou Dewen, deputy director of the China Association of Small and Medium Enterprises, told the Global Times Thursday. Among over 10 calls he received from managers of SMEs, a majority have admitted to cutting payrolls and some are even prepared to declare bankruptcy if employees seek arbitration, Zhou said.

Liu Dingding, a Beijing-based internet industry observer, told the Global Times Thursday that so far internet firms seem to be managing the current situation better than brick-and-mortar businesses, but all companies have been affected.

Liu cited the example of an internet firm that provides software and technology support for offline catering chains. The latter's shutdown has indirectly affected its own business. 

He estimated losses of millions of yuan for big e-commerce platforms like Alibaba's and over the last two months since merchants might find it difficult to pay the platforms due to stagnant logistics services.

Posted in: ECONOMY

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