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New framework for dispatch services in China

The Chinese legal framework is always in development, but no sector has received so much attention lately as that of dispatch services.

Rules for Labor Dispatch Service Providers

In late 2012, the PRC Labor Contract Law was amended to set new requirements on companies providing dispatch services.
Another set of rules that went into effect on 1 July 2013 are the Implementing Rules for the Administrative Licensing of Labor D ispatch (published in June 2013).
This presents a particular challenge for foreign investors. 

Rules for Companies that Use Dispatched Workers

The legislative circle was completed with the Interim Provisions on Labour Dispatch Rules, which were promulgated in late January 2014 and came into effect on 1 March 2014.
Dispatched workers are only permitted in temporary, substitute or auxiliary positions:
For dispatched workers, social insurance must be contributed at the place where the hiring company is registered, and according to the regulations of that locality.
The Interim Provisions provide companies with flexibility to return dispatched workers to the labor dispatch service provider in the following circumstances:
What the Interim Provisions do not clarify, is whether the dispatch service provider is obliged to enter into an open-ended labor contract with its employee after two fixed terms, as would be required by a regular employer.


The Interim Provisions set out various different legal consequences for violation of its provisions thereof. The most important are:

  1. Unlawful use of dispatched workers.
  2. Violation of the PRC Labor Contract Law and implementing rules is subject to Article 92 of the same law.
  3. Dispatched workers that suffer from violations should be compensated by the dispatch service provider and the hiring entity jointly and severally.
  4. Unlawful return of dispatched workers will trigger employer liabilities under the PRC Labor Contract Law, namely reinstatement or economic compensation.
  5. It is unclear how violations of the rules on social insurance will be penalized, nor is it clear whether the hiring entity can be penalized for.

Rules for Representative Offices

Since representative offices of foreign companies are unable to hire Chinese employees directly, they have always had to hire based on the dispatch model.
An unexpected consequence of the new framework on labor dispatch, however, is that the representative office may become more attractive for some foreign investors.;


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