China Seeks Comments on Labor Dispatching Regulations
Aug. 8 – China’s Ministry of Human Resource and Social Security released “Several Regulations on Labor Dispatch (Draft for Comments) (hereinafter referred to as ‘Regulations’)” on August 7, which clarify several issues regarding labor dispatching services in the country. Detailed information can be found below. The issue is important for foreign investors with large workforces in China as it impacts on the use and definition of independent contractors, an issue we discussed recently on China Briefing in the article “Independent Contractors in China and Available Alternatives.”
Detailed information concerning the new regulations can be found below.
The Regulations provide that labor dispatch refers to a method of employment whereby the employer dispatches the employees it recruits to other employers, and the latter employer directly manages the working process of such employees.
According to the Regulations, labor dispatching arrangements are only applicable to the following three types of positions:
- Temporary position: A position with a duration of no more than six months
- Auxiliary position: A position that provides auxiliary services to the main or core business of the employer
- Back-up position: A position that can be performed by a dispatched employee in place of a permanent employee during the period when such employee is away from work for study, vacation or other reasons
Moreover, the number of dispatched employees used by an employer at the auxiliary positions shall not exceed 10 percent of its total number of employees.
However, the representative offices set up by foreign companies and financial institutions in China are free from the 10 percent hiring restriction, and such entities can assign dispatched employees to positions other than the temporary, auxiliary, and back-up positions.
Signing of Labor Contract
The labor dispatching entity shall sign a written contract with the dispatched employees and inform them that the employment will be conducted through the labor dispatch.
The contract signed between the parties shall be a fixed-term labor contract of more than two years, however a non-fixed term contract may be signed upon agreement between both parties.
Termination of Labor Contract
The dispatched employee may terminate the labor contract by giving a written notification to the labor dispatching entity 30 days in advance. During the probation period, such notification may be given 3 days in advance.
The labor dispatching entity may terminate the contract with the dispatched employee upon mutual agreement or under any of the following circumstances:
- The dispatched employee has proved to be unqualified for the post during the probation period;
- The dispatched employee has seriously violated the rules and regulations of the employer;
- The dispatched employee has caused significant losses to the employer due to serious dereliction of duty or engagement in malpractices for personal gain;
- The dispatched employee is concurrently engaged in a labor relationship with another employer, which seriously affects his performance at the current job;
- The dispatched employee has been investigated for criminal responsibility;
- The dispatched employee is unable to take up their original work or any other work arranged by the employer upon conclusion of the medical treatment period for illness or non–work related injury;
- The dispatched employee is incompetent for the post and remains incompetent after receiving training or after being assigned to another post; or
- Where the labor contract is concluded or modified against one party’s true intention by means of deception or coercion, or by taking advantage of one party’s unfavorable position.
“Equal pay for equal work” principle
The Regulations stipulate that the principle of “equal pay for equal work” shall be applied to all labor dispatching agreements, meaning that the employers shall apply the same remuneration standards for dispatched employees as those for its direct-hire employees who hold similar positions.
Where the employer has not hired any employee holding a similar position, the labor remunerations payable to the dispatched employee shall be determined with reference to those payable to employees holding a similar position in the place where the employer is located.
Cross-Region Labor Dispatch
Under the Regulations, if a labor dispatching entity dispatches employees to an employer located in another region, the labor remunerations and social insurance to be enjoyed by the dispatched employees shall be provided according to the rates and standards of the place where the employer is located.
For employers and dispatching entities who violate the law, if they fail to correct the violations within the time period specified by the relevant labor bureau, they may be fined between RMB5,000 and RMB10,000 per dispatched employee, and labor dispatching entities may get their business licenses revoked.
The Regulations are currently seeking public opinions and comments, and such feedback can be submitted via the methods below through September 7, 2013.
- Website: Log on to www.chinalaw.gov.cn, and submit comments through the “Opinion Collecting System” on the left side of the website homepage
- E-mail: email@example.com
- Address: Policy and Regulation Division, Ministry of Human Resources and Social Security, No.3, East Pingli Rd, Dongcheng District, Beijing. Postcode 100013.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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