The employment schemes in China offering an alternative to furloughing and firing

The US Labor Department released a report last week which showed 22 million jobs were lost in April, the worst month on record. As the world expects the greatest recession in a lifetime, we are all thinking about what our economies and job markets may look like after the pandemic is over.

China is no different when it comes to these concerns. There, the unemployment level settled around 5.9% last month, though this number does not include the almost 300 million migrant workers in the country, many who are still out of work.

However, a collection of employee-sharing schemes used by tech companies during the lockdown in China could offer another option for companies when faced with the tough decision of what to do with employees they can no longer afford to pay. We take a look at the case of Hema, an online supermarket chain owned by e-commerce giant Alibaba.

Employee-sharing schemes in China

During the epidemic, Xibei, a restaurant chain in China, suddenly no longer had any business. In March, revenues in the restaurant sector dropped 46.8% compared to a year ago, according to China’s National Bureau of Statistics.

Meanwhile, Hema was abruptly working at full capacity as the lockdown forced or persuaded many people to shop online. Hu Qiugen, general manager of national operations at Hema, said Hema was working at around 70% capacity over the Chinese New Year period, but after the outbreak became more serious, demand surged. Hema launched an operation to cope with the surge in demand, inviting restaurants to temporarily “share” their workers and come work at Hema.

An employee filling an order for Hema. Credit: Wu Xiaobo

Jia Guolong, chairman of Xibe, at the beginning of the epidemic was pessimistic of his company’s outlook, telling local media that the company could only go on for three months with its 20,000 employees out of work. Soon after the decision was made that 1,000 of his employees were to be sent to Hema to start work immediately.

By February 5, employees from more than 21 restaurants and catering companies had joined Hema. These new shared employees could only join after they had undergone health inspections and health and safety training.

Shared employees is not an entirely new employment relationship nor one unique to Hema. Since Hema welcomed its first batch of shared employees, many companies in China, including Walmart, Suning, and Carrefour, have begun similar initiatives.

On February 5, Jingdong 7Fresh, an online supermarket chain, released a “talent sharing” plan, inviting employees of temporarily closed restaurants, hotels, cinemas, and shops to come work for them temporarily.

On February 6, Ali Local Life, another e-commerce initiative of Alibaba, launched an employment sharing platform, recruiting 10,000 food and beverage employees to help them deliver goods.

The initiatives seem to have worked well. After all, they met the needs of both employer and employee. Also, the companies generally recruited employees from within their industry, meaning the roles were not difficult to adapt to. Even injuries were reportedly down.

As for legality, the companies sharing their employees did not profit from the schemes, so the hiring companies did not require a labour dispatch license. Also, as wages were paid through the original companies, the arrangement was not affected by dual labour relation laws.

Nonetheless, the schemes do come with a sum of additional considerations, including rights, obligations, and responsibilities. How to deal with work-related injuries, handle business secrets, and the risk of losing employees to other employers have been concerns too.

Journalist Li Mengqing believes over the next decade more “flexible employment” like shared employee schemes will become the dominant trend in China’s labour market. Companies could use such systems to navigate peak and low seasons. Festivals such as the Chinese New Year and Golden Week cause huge rises and falls in demands for specific industries. Flexible employment could keep company budgets down and employees in work during these times.

Flexible employment in the West

Schemes similar to the one used by Hema are also now being used in the US, albeit on a much smaller scale. For instance, food delivery startup DoorDash introduced a “priority access program,” which allows partnering restaurants to sign up as delivery workers “until their jobs return to normal.”

However, Julia Pollak, a labour economist, told the World Economic Forum she questions how widespread these schemes could become in the US given the high costs of health insurance. Nonetheless, if these costs could be covered by a government scheme, this could prove a viable option for employers.

Other “flexible” labour arrangements include zero-hour contracts, which do not oblige employers to provide any minimum working hours. These contracts have become notoriously unpopular in the UK, but other mechanisms such as shared jobs, where two or more people share one role, are desperately needed. In the economic downturn to come, provisions for more flexible working arrangements could help keep more people in work.

Adapted from (Chinese):

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