Chinese companies can’t afford to pay workers


  • Economy
  • Thursday, 20 Feb 2020

HONG KONG: A growing number of China’s private companies have cut wages, delayed paychecks or stopped paying staff completely, saying that the economic toll of the coronavirus has left them unable to cover their labour costs.

To slow the spread of the virus that’s claimed more than 2,000 lives, Chinese authorities and big employers have encouraged people to stay home. Shopping malls and restaurants are empty; amusement parks and theaters are closed; non-essential travel is all but forbidden.

What’s good for containment has been lousy for business. With classes canceled at a coding-and-robotics school in Hangzhou, employees will lose 30% to 50% of their wages.

The Lionsgate Entertainment World theme park in Zhuhai is closed, and workers have been told to use up their paid vacation time and get ready for unpaid leave.

“A week of unpaid leave is very painful,” said Jason Lam, 32, who was furloughed from his job as a chef in a high-end restaurant in Hong Kong’s Tsim Sha Tsui neighbourhood. “I don’t have enough income to cover my spending this month.”

Across China, companies are telling workers that there’s no money for them - or that they shouldn’t have to pay full salaries to quarantined employees who don’t come to work. It’s too soon to say how many people have lost wages as a result of the outbreak, but in a survey of more than 9,500 workers by Chinese recruitment website Zhaopin, more than one-third said they were aware it was a possibility.

The salary freezes are further evidence of the economic hit to China’s volatile private sector - the fastest-growing part of the world’s second-biggest economy - and among small firms especially. It also suggests the stress will extend beyond the health risks to the financial pain that comes with job cuts and salary instability.

Unsurprisingly, hiring has all but ground to a halt: Zhaopin estimates the number of job resumes submitted in the first week after the January outbreak was down 83% from a year earlier. “The coronavirus may hit Chinese consumption harder than SARS 17 years ago,” said Chang Shu, chief Asia economist for Bloomberg Intelligence. “And SARS walloped consumption.”

By law, companies have to comply with a full pay cycle in February before cutting wages to the minimum, said Edgar Choi, author of “Commercial Law in a Minute” and host of a legal-advice account on WeChat. For companies that aren’t making enough to cover payroll, it’s permissible to delay salaries, as long as staff get the money they’re owed. — Bloomberg

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Covid-19 , China

   

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