The Modification regarding Modification of Employment Contract Law (the “Modification”)
Q1: When the Modification is to take effect:
A: The Modification is to take effect on July 1, 2013
Q2: What is the main amendments in this Modification?
A: This Modification amends the section in the Employment Contract Law with regard to dispatched personnel. It provides rules on the following:
- Qualifications of the dispatch service provider;
- The administrative license requirements for the dispatch service provider;
- The concept of “equal pay for equal work” as it applies to dispatched personnel and the company’s direct hire counterparts for the same job position in the same location;
- The job descriptions of the positions for which companies are permitted to hire dispatched personnel.
Q3: What qualification is required for the Labor Dispatch Service Provider
A: the Labor Dispatch Service Provider should meet the following requirements:
(1) The registered capital requirement of the dispatch service provider has been increased from RMB 500,000 to RMB 2,000,000;
(2) The dispatch service provider is required to apply for and obtain an administrative license from the competent labor administrative bureau prior to providing labor dispatch services. A company already engaged in providing labor dispatch services prior to the implementation of the Modification must obtain the administrative license and apply for the change of business registration before June 30, 2014.
Q4: What positions can retain Dispatched Personnel?
The Modification supplements the Employment Contract Law on this point by providing definitions for temporary, auxiliary or substitute positions
A “temporary” position means a position existing for no more than six months.
An “auxiliary” position means a position which relates to a non-essential business and provides certain services to the essential business positions.
A “substitute” position means a position which can be performed by another employee when one employee cannot perform his/her duties for a certain period of time due to absence as a result of full-time study, leave or other reasons.
A company using dispatch services must strictly control the number of dispatched personnel. The ratio of the number of dispatched personnel versus the number of total employees (direct hires plus dispatched personnel) of the company must not exceed a certain ratio threshold. Such ratio threshold will be published by the Ministry of Human Resources and Social Security before July 1, 2013.
Q5: What are the legal liabilities for breach the rules in the Modification?
The administrative penalty imposed upon the labor dispatch service providers and the accepting companies for violating the relevant labor dispatch regulations: RMB 5,000 to RMB 10,000 for each dispatched personnel.
Any unauthorized labor dispatch service in violation of the Employment Contract Law shall be ceased, the illegal gains shall be confiscated and a fine between one and five times the amount of the illegal gains shall be imposed by the labor administrative department.
Q6: What are our suggestions you can take as reference?
- When engaging the dispatch service provider for the relevant dispatched personnel, The qualifications of the dispatch service provider should be reviewed to make sure that the above requirements have been met. Since if the accepting company fails to do so which renders the labor dispatch agreement invalid and accordingly causes damages to the dispatched personnel, the company and the unqualified dispatch service provider will be jointly liable.
- The explicit definitions of “temporary”, “auxiliary” and “substitute” positions limit a company’s choice in using dispatched personnel for only those positions which have been defined by the Modification. Therefore, in order to minimize the risk of violating the amended Employment Contract Law, we advise companies to revise their hiring policies and procedures so as to accommodate this change in law.
- We advise companies to pay close attention to these amendments and any changes to relevant local judicial practices in near future.