Due to the abuse and excessive use of the labour dispatch arrangement since the implementation of the PRC Labour Contract Law (which came into effect on 1 January 2008) and following the Draft Amendment to the PRC Labour Contract Law which was released on 6 July 2012, the Decision on Amending the PRC Labour Contract Law (“Decision“) was recently released by the Standing Committee of the National People’s Congress (“NPC“) on 28 December 2012 and will come into effect on 1 July 2013.
The Decision intends to further protect dispatched staff’s interests by strengthening the regulation regarding labour dispatch arrangement. The salient points are highlighted below:
- The minimum registered capital of a labour dispatch services provider shall be RMB2,000,000.
- The labour dispatch services provider shall have a fixed premise and facilities adaptable to its business and shall have a labour dispatch management system in compliance with laws and regulations.
- The labour dispatch services provider shall apply for administrative licence with the relevant labour administrative department in accordance with laws and shall go through corresponding company registration procedures pursuant to the laws after being granted the licence.
- Employment by way of labour contract shall be the basic way of employment in China while employment by way of labour dispatch shall be a supplemental way of employment which shall only be applied to temporary, ancillary or substitutable positions. Temporary position refers to position which lasts for not exceeding 6 months; ancillary position refers to position which provides services to the core business; and substitutable position refers to position which is in substitution of an employee who is not able to report to duty for a period of time for reasons like going on study or leaves etc.
- The dispatched staff shall be entitled to receive equal pay to that of the employer’s employees for the same work. An employer shall comply with the principle of equal pay for equal work and pay dispatched staff equal salary with that of the employees in the same position.
- The employer should strictly control the number of dispatched staff which should not exceed a certain percentage of its total workforce. Such figure shall be set down by relevant labour administrative department.
- Whoever violates the PRC Labour Contract Law and engages in labour dispatching business without licence and authorization shall have its business operation banned and illegal gains confiscated by the relevant labour administrative department and be subject to a fine of not less than one time but not more than five times of the illegal gains or a fine of up to RMB50,000 if there is no illegal gain.
- Labour dispatch services provider or an employer that is in violation of the labour dispatch provisions of the PRC Labour Contract Law shall be ordered to rectify by the relevant labour administrative department and failing to make corrections within the prescribed time limit shall be subject to a fine ranging from RMB5,000 to RMB10,000 per dispatched staff and the labour dispatch services provider shall have its licence for operating labour dispatch business revoked. The labour dispatch services provider and the employer shall assume joint liability to compensate the dispatched staff if damage is caused.
It is advisable to pay attention to the latest developments of the PRC Labour Contract Law and start to review the current employment structure and prepare for changing the employment arrangement in order to comply with the latest legal requirements.