The Decision on Amending the Labour Contract Law was passed by the 11th Standing Committee of National People’s Congress in its 30th session, held on 28 December 2012; the Amendment shall come into effect on 1 July 2013. The amendments reflect further improvements and refinements regarding labour dispatch policies, the core concept of which is to perfect employment system, to regulate the employment market, as well as to strictly refine the labour dispatch scheme. It is hoped that this piece will help employers to comprehend the content of the amendment..,

 

The number of labour-dispatch company has increased significantly since the promulgation of the Labour Contract Law in 2008. The scope of labour dispatch employment has experienced rapid expansion whereby in the meantime it has given rise to a number of related problems, such has been represented a in several aspects. Mainly and namely, these are: labour dispatch companies become too big and were poorly regulated; secondly, there are a number of companies who keep the dispatched workers for overly long periods of time and even have labour dispatch as their major employment mode; thirdly, dispatched workers receive lower remunerations while working on the same post. The abuse of the labour dispatch system not only harms the workers’ legitimate rights, but also brings negative impacts on the regular employment mechanisms and the labour contract system. For such concerns, the Legislative Affairs Commission of National People’s Congress took the lead to conduct a survey in relation to labour dispatch, based on bringing forward amendments to the Labour Contract Law. 

 

The Amendments mainly cover the following four areas: (i) raising thresholds for the establishment of a labour dispatch company; (ii) Strictly limiting the scope of employment posts for labour dispatch; (iii) following the principal of “same post same wage” for dispatched workers; (iv) intensify penalties regarding violations of the law. 

 

The current applicable Labour Contract Law requests the registered capital of a labour dispatch company no less than CNY 500,000. The Amendment however increases the amount to CNY 2,000,000. A qualified place of business plus a labour dispatch management system are also mandatory requirements to set up a labour dispatch company. Furthermore, the establishment of such companies shall adopt the system of administrative license, “those companies who undertake labour dispatch services shall lawfully apply for an administrative license from the labour administrative department…… Without a license, neither corporation nor individual shall undertake any labour dispatch services. 

 

It is hereby recommended that an employee company should be careful and prudent to select a labour dispatch company, be aware of the need to verify whether the dispatching company has satisfied the statutory qualifications as stated in the amendment. If the current dispatching company does not conform to the new law, it is suggested to select a new one instead upon the expiry of the labour dispatch service agreement currently in force. Otherwise, the employing party will be suspected of breaching the law and would be subject to penalties in accordance with the amended labour contract law. 

 

It is clarified in the current applicable Labour Contract Law that “labour dispatch is generally practiced on posts where there are temporary, supplementary or substitutive”. However it clearly did not offer the exact definitions of these “three terms”, which has consequently left room for its broad application. It is explicitly delivered by the amendment that labour dispatch is merely to be a supplementary mode of employment. Furthermore, the “three terms” aforementioned have been specifically defined, “a temporary post shall refer to a one which exists for no more than 6 months; a supplementary post shall refer to a non-core business post that exists to serve the core business posts; a substitutive post shall refer to an employee whose work can be done by dispatched labour as a replacement since the employees of the employing company are not able to work for a certain period of time due to off-production studies, on-leaves and so on.” As a result, the room for application of labour dispatch services is significantly narrowed.

 

Nevertheless, considering the actual needs of labour dispatch services by various corporations, the legislator, while limiting the definition of the “three terms”, has left room free for practice at the same time. It is stated that the establishment of one “term” instead of all “three terms” can be sufficient to employ labour dispatch service. As a consequence, although the definitions of “temporary” and “substitutive” are clear, the meaning of “supplementary” varies according to different professions and different corporations; hence it is indeed very tricky to have a yardstick in actual practices, and therefore an employing company may take their own measures to retain labour dispatch employment. Surely, the legislator is afraid of any abuse of the labour dispatch policies by employing companies, so a limit is placed upon it, whereby the law states that “an employing company should make sure that the quantity of dispatched workers is strictly limited, which shall not exceed a certain proportion of its total employment, and the exact proportion shall be determined by the Labour Administrative Department of the State Council.” However, as how this proportion is determined shall still remain an outcome of the discussion among various parties.

 

Although it is stipulated in the current applicable law that dispatched workers shall enjoy the right of “same post same remuneration” as the employees of the employing company, it is hardly achieved in practice. Dispatched workers generally receive lower wages. To bring some changes, the Amendment pays attention to this issue, and requires that “an employing company shall distribute the same labour remunerations to dispatched workers who work on the same post as the employees in the company… both the dispatch agreement and the employment contract shall explicitly include remuneration terms in accordance with the aforementioned provision. ”

 

Yet the author reckons that comparing to the Labour Contract Law currently in force, the amended version has not brought many innovations upon the existing articles. Therefore, the key for whether the idea of “same post same remuneration” can be achieved shall be the case of enforceability of the administrative bureau. 

 

The current applicable Labour Contract Law only contain penalties against dispatching company who shall face a fine of more than CNY 1,000 but less than CNY 5,000 for a severe violation. Such a penalty has been raised by the amendments, and it has been stated that not only the dispatching company may face penalty but the employing company too, and the amount of fine has been increased to more than CNY 5,000 less than CNY 10,000. Where the employing company has caused losses to the dispatched worker, the dispatching company and employing company shall be jointly liable for damages.

 

In addition to the change of law, the Amendments also states that any employment contracts and dispatch agreements which concluded prior to the promulgation of the Amendments shall remain in force until expiry, but if the remuneration terms in such agreements are in violation of “same post same remuneration”, then they shall be adjusted as per the provisions in the Amendments.