Summary of Key Points
Xingyu Co., Ltd., a leading domestic company in the automotive lighting industry, recruited a large number of fresh graduates for the class of 2026 (mainly master's degree holders) during the autumn recruitment season in 2025. However, just one month after they started working, the company laid off 107 of them, accounting for nearly a quarter of the total recruits. The laid-off employees were faced with a difficult choice: either accept a compensation of half a month's salary and a resignation letter stating "personal reasons" for leaving, or be transferred from research and development/technical positions to frontline roles, such as working on assembly lines. Angered by missing the recruitment opportunities for both the autumn and spring seasons and losing their status as fresh graduates, the employees filed complaints with labor authorities and social media platforms. They also reported the incident to Xingyu's Hong Kong Stock Exchange (HKEX) listing applicant and its overseas clients, including BMW and Mercedes-Benz, drawing public attention. An official investigation confirmed that Xingyu had not obtained any government subsidies, but the company's communication approach was criticized as harsh. As a result, the HR director was suspended and the company apologized. Despite Xingyu's impressive financial performance in 2025 (revenue of 15.2 billion yuan, profit of 1.6 billion yuan, and cash flow of 2.4 billion yuan), and the fact that it is a family-controlled company (controlled by the Zhou Xiaoping family, holding 54% of the shares), the contradiction between the company's profitability and its decision to lay off fresh graduates has become a focal point of debate.
The Dilemma for Fresh Graduates
For recent graduates, Xingyu's layoffs are more than just a case of unemployment:
1. Closed recruitment periods: The autumn (September to December) and spring (March to May) recruitment seasons are the prime times for fresh graduates to find jobs. These employees gave up other offers for Xingyu, but now they were hired in July and laid off in August, meaning they will have to wait another six months for the next round of campus recruitment, wasting a year.
2. Loss of fresh graduate status: Many companies only hire fresh graduates. Without this status, they have to compete with experienced candidates for open positions, significantly increasing their difficulty in finding jobs.
3. Demotion in job role: The employees were originally hired for research and development or technical positions (suitable for master's degree holders) but were suddenly transferred to tasks like assembling parts or wiring, which are not in line with their qualifications and disrupts their career development.
4. Insufficient compensation: A compensation of half a month's salary (e.g., 3,000 yuan out of a monthly salary of 6,000 yuan) is not enough to cover the transition period, and a resignation letter stating "personal reasons" may affect their prospects for future jobs.
Why a Profitable Company Lays Off Employees?
Xingyu's financial records do not indicate a shortage of funds:
- Revenue in 2025 was 15.2 billion yuan (a 15% increase), profit was 1.6 billion yuan (a 15% increase), and operating cash flow was 2.4 billion yuan (a 168% increase); cash flow is a more reliable indicator of financial health than profit.
- The company continues to invest heavily in research and development (880 million yuan in 2025, a 34% increase), and its clients include leading automakers like BMW, Mercedes-Benz, and Li Auto, making it a market leader.
So, why lay off fresh graduates? The likely reason lies in the cost-control strategies of a family-controlled company:
Xingyu is controlled by the Zhou Xiaoping family, with the owner serving as both chairman and general manager, leading to centralized decision-making. For a family-owned company, every expense saved (such as reducing salary payments or social security contributions) directly contributes to shareholder profits. Since fresh graduates have not yet generated much value for the company, laying them off is less costly (compensation of half a month's salary) compared to laying off more experienced employees, which would require paying severance benefits.
Creative Methods of Employee Rights Protection
The employees' approach to protecting their rights was clever, targeting Xingyu's vulnerable points:
1. HKEX Listing Application: Xingyu had just submitted its application for HKEX listing in July, and the HKEX has strict ESG (Environmental, Social, and Governance) requirements, with employee rights being a critical factor. The employees' complaints about poor company governance could affect the listing process.
2. Overseas Clients' Supply Chain Rules: European clients like BMW and Mercedes-Benz have high standards for human rights compliance in their supply chains. By filing complaints with these clients, Xingyu feared losing them as customers and had to take the issue seriously.
3. Social Media Impact: The employees shared recordings of interviews and details of the contracts online, gaining public sympathy and forcing the company to respond quickly.
These actions turned the issue from an internal dispute into a crisis that could affect the company's reputation and business operations.
Is the HR Director Really to Blame?
Xingyu ultimately took action against the HR director, but was it really her fault?
- Large-scale recruitment and layoffs: Hiring 440 employees and then laying off 107 of them was not a decision made by the HR department alone; it was certainly a company-wide or even top-level decision.
- Family Control: As the company is family-controlled, all major decisions, including recruitment and layoffs, require the approval of the family members. Suspending the HR director was more of a temporary measure to calm public opinion.
- Harsh Communication: While the company's communication was criticized, the real question is why such decisions were made, not just how they were communicated.
The Official Investigation
The Changzhou Human Resources and Social Security Bureau's investigation revealed two key points:
1. No government subsidies: Previous rumors that Xingyu received subsidies for hiring fresh graduates and then laid them off were confirmed to be false, indicating that this was not the main motive for the layoffs.
2. Poor communication: The company was criticized for its rigid communication approach, but the investigation did not require the company to reinstate the laid-off employees or increase their compensation.
For the employees, the main concerns are whether they can return to work or receive fair compensation. However, so far, Xingyu has only apologized and suspended the HR director, without addressing the core issues. This leaves the question of how the employees' rights will be protected unresolved.
Conclusion
The essence of the Xingyu incident is that a profitable family-owned company is sacrificing the rights of fresh graduates to cut costs. The employees' efforts to protect their rights highlight that when companies prioritize cost savings over responsibility, ordinary employees can still gain attention through targeted actions (such as affecting the company's listing process or leveraging the pressure from its supply chain partners). Ultimately, only by holding the decision-makers accountable can similar incidents be prevented. For recent graduates, when looking for a job, it is important to consider not only the size of the company but also its commitment to basic employee rights. After all, even the largest companies can dismiss you just one month after you start working.