Legislative highlights

The amendment underlines the point that workers hired through labor dispatch service providers should receive the same treatment as direct recruits.

The original Article 63 states, "Dispatched workers shall enjoy the right to obtain the same pay as that received by regular staff of an employer for equal work. In case there is no worker in the same post in the employer, the remunerations thereof shall be determined by referring to the payment in the place where the employer is situated, and to workers at the same or a similar post."

That article was revised to add that employers should adopt the same "labor remuneration allocation methods" for dispatched workers and regular employees in the same position.

In addition, the revised article says that remuneration for dispatched workers specified in the contract between labor dispatch service providers and worksite employers must conform to the above clause.

Another highlight of the amendment is that it stipulates that employers should primarily hire workers directly, rather than via labor dispatch service providers.

It also requires employers to strictly control the number of dispatched workers, and make sure that dispatched workers do not exceed a certain percentage of the total number of workers. The specific ratio should be determined by the Ministry of Human Resources and Social Security.

The amended law stipulates that dispatch labor is a supplementary form of employment and may only be used for temporary, auxiliary or substitute positions.

The amended law defines a temporary position as one that will not last for more than six months, an auxiliary position as one not for the principal business of the employer and a substitute position as one to replace any regular employee who cannot work for some period due to full-time training, leave, or other reasons.

The amendment has also raised the threshold for setting up labor dispatch service providers. The required minimum registered capital has been raised from 500,000 yuan ($79,000) before the revision to 2 million yuan ($317,000) now.

Execution and impact

The implementation of the amended Labor Contract Law has greatly impacted labor dispatch service providers.

An owner of a Beijing company said on the condition of anonymity that previously, the salaries of dispatched workers managed by his firm were paid by worksite employers, and every month, he drew 250 yuan ($40) out of every worker's salary as commission.

Now, since the amended law mandates equal pay for equal work, his company can only charge every dispatched worker a one-time intermediary fee of 400 yuan ($65). "After that, I can make no more money from a dispatched worker," he said.

The amended law will prompt labor dispatch service providers to reshuffle or merge, said Rao Dejun, General Manager of employment company Zhongshan Chitone Executive Search. He said that the raised registered capital threshold is too high for many companies in the industry.

Worksite employers have mixed reaction to the amended law. Lu Jilie, Assistant to President of Guangdong Galanz Group Co. Ltd., one of China's largest home appliances makers, said that the new law will not affect his group since both directly recruited and dispatched workers are paid piecemeal, which conforms to the equal pay for equal work principle.

Dispatched workers only account for a small share of all workers in the Galanz Group. "In fact, dispatch labor is very limited in saving costs for a company. We do not wish to boost company's bottom line through saving on labor costs either," Lu said.

"A normal company should train its own workers, for they can create higher value for the company than temporary workers. The amended law will not only protect workers' rights, but also prompt firms to change hiring practices," he said.

However, some companies are fumbling for ways to circumvent the new law. For example, a few labor-intensive enterprises reportedly have decided to outsource some jobs previously performed by dispatched workers, and their pay and work duties will remain the same.

"Job outsourcing is a way to dodge the equal pay for equal work principle while it is similar to labor dispatch in lowering labor cost," said Zheng Jianhe, a labor lawyer with the Nanjing Office of Beijing's JunZeJun Law Offices.

To make sure that the amended law is properly enforced, the Ministry of Human Resources and Social Security will build an effective long-term mechanism to oversee dispatch labor, said a ministry official.

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