China’s leading food delivery platform Meituan has decided to provide social security to its millions of riders, after e-commerce giant JD.com entered the business and placed its delivery workers under welfare insurance coverage.

Meituan says it will roll out the plan from Q2 2025, and gradually cover all full-time and stable part-time deliverers nationwide.

Analysts say the decision is a response to market competition and regulatory expectations.

Competition-wise, it is a reaction to JD’s entry into the food delivery space, along with its series of incentives including “no commission for platform vendors” to attract customers and “provisions of social security for deliverers” to gain workers’ loyalty – making it the first in the business to sign up its workers for welfare insurance.

Regulation-wise, it is responding to the government’s guidance on promoting the welfare of gig economy participants ( e.g., food deliverers, express couriers, ride-hailing drivers, etc. ). Previous to its latest move, Meituan said it had been cooperating with regulators in piloting social security provisions for food deliverers in seven provinces, with plans to expand the coverage to all provinces in the future.

Market reactions are mixed. Meituan saw its equity price fall by more than 5% after the announcement amid concerns that the plan would dent its profitability, while JD shares rose by 5%, presumably on the premise that adopting the policy has given it a first-mover advantage.

The move by Meituan and JD is likely to create ripple effects in the industry. Rivals such as Ele.me, Dingdong, and Shansong will face greater pressure to retain their platform workers by providing competitive benefits.

Welfare protection and profitability

Whether platform companies should purchase social security for their deliverers has been a contentious issue.

China’s gig economy has been growing at an incredible speed over recent years. A recent survey finds that there are an estimated 200 million gig workers across the country, accounting for about 20% of the total labour force.

Technically, gig workers don’t have an employment relationship with the platform they work for. Therefore, they are often not entitled to labour protection such as social security coverage and are exposed to more occupational hazards than those with regular employment status.

Their situation has been the subject of news reports from time to time, fuelling public calls for the protection of labour rights. Authorities are also concerned since gig workers, who represent a massive proportion of the labour force, are not contributing to the national social security system – and this is happening at a time when the funding pool is seeing more outflows than inflows in view of the country’s ageing population.

But the platforms’ profitability must also be considered. A rough estimation of the additional costs that Meituan would incur by providing social security for its “stable and active” deliverers – about 11% of the total number of registered deliverers – would be about 10 billion yuan ( US$1.38 billion ) per year. Meituan’s operating profit in 2023, according to its public financial statement, was 13.4 billion yuan.  

That said, since social security coverage will be phased in from Q2 2025, and Meituan can transfer part of the cost to its customers by increasing service charges, the additional cost for Meituan for 2025 might not be as substantial as estimated. According to a Goldman Sachs report, the additional cost for Meituan for the year will be 0.1 yuan to 0.2 yuan per order, while its gross merchandise value will grow at 3% per year. Similarly, Citi expects Meituan’s finances to remain manageable in 2025.

Labour protection improves ESG values

While promoting labour protection may reduce profit margins, it will go a long way in enhancing the corporate image of Meituan and JD, and promoting environmental, social and governance ( ESG ) values – particularly the S and G pillars – in the country’s robust gig economy.

In fact, the two companies both got an “A” in the most recent MSCI ESG rating, which is the average in the industry. In the case of Meituan, “labour rights and supply chain” under the social pillar was flagged as severe-to-moderate level controversies ( yellow category ). Also, MSCI rated both companies’ performance in corporate governance as “ESG laggard” relative to their industry peers.

Based on the ESG reports of both companies, many social and governance issues are also internally regarded as key issues in their respective ESG materiality maps, showing that the companies are aware that these issues could materially impact their ESG and financial performance.

The gap between the internal and external ESG evaluation indicates that the two companies have a huge room for improvement when it comes to social and governance metrics, and incorporating gig workers into the national social security scheme is a critical move to improve the S pillar in ESG management and drive up corporate ESG values. In China, sound ESG practices can also improve a company’s profile in government relations.

Other important measures in enhancing labour protection that Meituan seeks to address this year include adjusting the platform’s algorithm to improve route planning and time management, and lifting the “punishment fee” for late deliveries. Meanwhile, Meituan is also using delivery drones, which don't need social security.