HONG KONG (BLOOMBERG) - 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 has claimed more than 2,000 lives, the Chinese authorities and big employers have encouraged people to stay home. Shopping malls and restaurants are empty; amusement parks and theatres are closed; non-essential travel is all but forbidden.
What's good for containment has been lousy for business.
With classes cancelled at a coding-and-robotics school in Hangzhou, employees will lose 30 per cent to 50 per cent 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 Mr 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 should not have to pay full salaries to quarantined employees who do not come to work.
It is 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 that the number of job resumes submitted in the first week after the January outbreak was down 83 per cent from a year earlier.
"The coronavirus may hit Chinese consumption harder than Sars 17 years ago," said Ms 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 Mr Edgar Choi, author of Commercial Law In A Minute and host of a legal-advice account on WeChat. For companies that are not making enough to cover payroll, it is permissible to delay salaries, as long as staff get the money they are owed eventually.
Mr Choi said he has heard from thousands of foreign workers who say their payments have been cut in half this month or halted altogether. That, he said, is illegal.
"A lot of these employees are foreigners, they don't know Chinese," he said. "Whatever their boss tells them, that's it. It's easy for them to get bullied."
NIO, an electric car-maker based in Shanghai, recently delayed pay cheques by a week. The company's chairman, Mr William Li, also encouraged employees to accept restricted stock units in lieu of a cash bonus.
At Foxconn Technology's Shenzhen factory, workers returning from the Chinese New Year break are quarantined in the dorms before they can return to work. They are getting paid, but only about one-third of what they would earn if they were working.
Without full, regular pay cheques and few places to spend them these days anyway, Chinese consumers could cut spending in some categories to zero, said Bloomberg'sMs Shu.
And it may not bounce back: For example, she said, if you skip your daily latte for two months, you are not likely to make up for those missed drinks later in the year.
With limited reserves and less by way of remote technologies, the smaller companies that underpin China's vast private sector are particularly vulnerable. Among broader efforts to help firms stay afloat, policymakers have called on state-run banks to make loans at cheaper rates to small businesses in particular.
In the case of Mr Pei Binfeng, co-founder of the Hangzhou coding and robotics academy, the outbreak forced them to suspend all in-person classes for students in kindergarten through grade 12.
With the loss of revenue, the company will withhold 50 per cent of salary for key executives and 30 per cent for other employees until business resumes.
"What we teach isn't a must-have for a lot of parents, so expenses like this are usually the first to go when things get tough," said Mr Pei.
Mr Rick Zeng, deputy general manager at the Lionsgate theme park in Zhuhai, said it has been shut down on government orders since the end of January. Starting next week, some staff will need to go on unpaid leave.
In the south-eastern city of Fuzhou, hotel manager Robert Zhang said all but two or three of his 100 rooms are vacant on average nights. Two-thirds of the employees are effectively on furlough, getting some salary but not as much as they are used to.
"When there's no business, there's no performance-based salary," he said.
"For a month or two, the impact isn't immediately obvious. But if the epidemic lasts and tourism doesn't recover for three to four months, our employees will feel the crunch."