Employee-sharing schemes are softening the blow for China’s pandemic-hit businesses

Two months ago, Yang Tao was working as a sushi chef at a Japanese restaurant in Beijing. But when the restaurant ran into difficulties due to the coronavirus outbreak, like many other businesses in China, Yang’s employer found him a new temporary gig: Working as a grocery sorter at supermarket chain 7Fresh.

“It was very easy to pick up the work. The training only took one day. My main job was to find the items which customers had ordered online, and put them in a bag on a conveyor belt so they could be collected by delivery guys,” Yang told Quartz. He racked up as many as 50,000 steps some days, he said, because work was so busy. Yang has now returned to the restaurant, as life gradually returns to normal in China.

Yang is among thousands of workers who were loaned by their employers to other companies, such as 7Fresh’s owner, the e-commerce giant JD.com, which saw demand surge during the pandemic. Chinese workers, most of them employed by hard-hit businesses such as restaurants, karaoke bars, and cinemas, were sent to supermarkets, retail shops, or even bicycle-sharing startups (link in Chinese).

The workers’ original companies continued to pay for their insurance and other benefits, while the new, temporary employers paid their wages, usually on an hourly basis. When things picked up at the original companies again, they returned to their old jobs.

The worker-sharing scheme has thrown a lifeline to China’s smaller companies, especially restaurants. Revenues in the restaurant sector dropped 46.8% (link in Chinese) in March compared to a year ago, according to China’s National Bureau of Statistics. With staff costs a major burden for restaurants trying to stay afloat when few are going out to eat at the same rate as before the pandemic, employee-sharing allows them to shed some of those costs while continuing to keep their employees on the books, so they’re ready to hire workers back properly again when things pick up.

“The benefit of paying by the hour is that it gives workers the freedom to choose how many hours they want to work per day. If they want to earn the same amount or more than the salary of full-time employees, they just need to work longer,” Cao Chunhua, the head of human resources at 7Fresh, told Quartz. Cao added that the chain also requires the third-party human resources agencies that coordinate work-sharing arrangements to purchase coronavirus-related insurance for the workers, while the chain itself provides work meals and other protections in the same way it does for full-time employees.

JD’s rival Alibaba, which owns the supermarket chain Freshippo, also launched its own employee sharing scheme in early February in order to help workers and companies affected by the virus “maintain a level of stability during a challenging time,” according to an Alibaba spokesperson. Freshippo has hired more than 5,000 temporary workers from more than 40 companies so far. Even Walmart jumped into the fray (link in Chinese), and brought on more than 3,000 temporary workers in February for its over 400 supermarkets in China.

Most of the temporary workers at 7Fresh and Freshippo have now returned to their previous workplaces, according to the two companies. But both said they would continue using the employee-sharing scheme in the long run, with Alibaba planning to roll out a digital platform (link in Chinese) to formalize the practice.

“This [initiative] is an exciting example of the creative solutions we’re seeing emerge in response to the massive labor market disruption caused by Covid-19,” said Julia Pollak, a labor economist with ZipRecuriter, a California-based startup that matches potential employees with employers.

In China, the unemployment rate reached 6.2% for the January-February period, and inched down to 5.9% last month, though the figure doesn’t include the almost 300 million migrant workers. In the US, unemployment rate is predicted by economists to reach as much as 20%.

Such schemes are also being adapted on a much smaller scale in the US, where more than 90% (paywall) of the country’s 125,0000 restaurant workers were idle by late March, according to the Wall Street Journal, citing labor union UNITE HERE. Food-delivery startup DoorDash, for example, rolled out in March a “priority access program” to allow workers at their restaurant partners to sign up as delivery workers “until their jobs return to normal.”

Pollak, the economist, questioned how widespread worker-sharing in American firms could become given the high costs. Employer-provided health insurance, she said, often costs $8,000 per year for individual coverage and $20,000 per year for family coverage.