On January 26, 2014, the PRC Ministry of Human Resources and Social Security (“HRSS”) released the Interim Regulation on Labor Dispatch (the “Regulation”) which will take effect on March 1, 2014. Key provisions of the Regulation are summarized below:
1. Scope of Labor Dispatch
According to the Regulation, the employer shall comply with this Regulation when using employees by way of labor dispatch in the name of contract for work or outsourcing. But it would not be deemed as labor dispatch if the employer delegates its employees to work overseas or work for families or individuals.
KWM suggestion: the companies should substantially distinguish outsourcing from labor dispatch when engaging outsourcing services for avoidance of being recognized as “labor dispatch under outsourcing’s cover”.
2. Identification of Auxiliary Positions
The Regulation specifies the identification of ancillary positions. The auxiliary positions which the company determines to use for dispatched employees shall be discussed, proposed and commented by the employee representative congress or all the employees, consulted and determined with the company’s trade union or employee representatives on an equal basis, and published within the company. Where the company violates such stipulation, the HRSS administrative authorities will order it to correct and impose warning on it; also the company shall indemnify any damages suffered by the dispatched employees therefrom.
KWM suggestion: the companies should follow the mandatory procedures to consult the auxiliary positions with the trade union or employee representative congress in order to avoid any administrative penalty or damage compensation liabilities.
3. Permitted Percentage of Dispatched Employees
The number of dispatched employees shall not exceed 10% of the total number of the company’s employees. Here the total number of the company’s employees is the sum of directly-hired employees plus dispatched employees.
KWM suggestion: the Regulation further controls the labor dispatch practice by covering the number of dispatched employees in temporary and substitute positions under the percentage limitations, which the companies should strictly comply with.
4. Statutory Clauses in Labor Dispatch Agreement
Pursuant to the Regulation, the labor dispatch agreement shall include: (1) name and nature of the positions for labor dispatch; (2) working location; (3) number of dispatched employees and term of labor dispatch; (4) amount and payment manner of labor remuneration in accordance with the principle of “equal work, equal pay”; (5) amount and payment manner of social insurances; (6) working hours and leaves; (7) treatment for the dispatched employees during work-related injury, pregnancy, maternity, nursing period and illness; (8) working safety, sanitary and training; (9) fees such as severance payment; (10) term of labor dispatch agreement; (11) payment manner and standard of service fees for labor dispatch; (12) liabilities for violation of labor dispatch agreement.
5. Recognition of Work-related Injury and Diagnosis of Occupational Disease of Dispatched Employee
In the event that the dispatched employee suffered accident injury during work in the company, the labor dispatch agency shall apply for the recognition of work-related injury and assume the work-related injury insurance liabilities. But the labor dispatch agency may reach agreement with the company for compensations.
The company is responsible for matters relating to the occupational disease diagnosis and identification for the dispatched employee, and shall provide necessary materials such as dispatched employee’s history of occupation and exposure to occupational disease hazard, and testing result of hazardous factors of occupational disease, while the labor dispatch agency shall provide other necessary materials.
6. Circumstances for Company to Return Dispatched Employees
Based on the PRC Employment Contract Law, the Regulation expands the circumstances under which the company may return the dispatched employees to the labor dispatch agency, such as material changes to the objective circumstances, statutory redundancy, bankruptcy or early dissolution, and expiration of labor dispatch agreement.
7. Prohibition for Return of Dispatched Employees under Special Circumstances
The Regulation indicates that if the dispatched employee is under the circumstances as specified in Article 42 of the PRC Employment Contract Law, the company is not allowed to return him/her for the reason of material changes to the objective circumstances or statutory redundancy before the end of the dispatch term; and when the dispatch term expires, the company shall not return the dispatched employee until the relevant circumstance disappears.
The abovementioned circumstances in Article 42 of the PRC Employment Contract Law are the following: (1) being exposed to an occupational disease hazard without a pre-departure occupational health check-up, or suspected of having an occupational disease and being diagnosed or under medical observation; (2) suffering from an occupational disease or work-related injury during the employment and being confirmed to have completely or partially lost ability to work; (3) suffering from a disease or non work-related injury and under the prescribed medical period; (4) for a female employee, during her pregnancy, maternity leave or nursing period; (5) working for the employer continuously for no less than fifteen years and there is no longer than five years left before he/she reaches the statutory retirement age; (6) other circumstances stipulated by laws or regulations.
8. Social Insurances’ Contribution for Trans-regional Labor Dispatch
For trans-regional labor dispatch, the labor dispatch agency shall contribute the social insurances for the dispatched employee according to the local regulations where the company locates.
If the labor dispatch agency has branch in the place where the company locates, the branch shall undertake the contribution of social insurances for the dispatched employees; otherwise the company shall conduct these procedures for the labor dispatch agency.
9. Transitional Period and Adjustment of Labor Dispatch
If the company exceeds the limitation of 10% before March 1, 2014, it shall formulate an adjustment scheme and reduce the percentage to the permitted number within 2 years since March 1, 2014. However, the employment contract and labor dispatch agreement which were concluded legally before December 28, 2012 with the expiration date after March 1, 2016 may be executed till the contract end.
Meanwhile, the Regulation requires the company to submit the adjustment scheme to the local HRSS administrative authorities for file while no legal consequences for failure to file are mentioned thereunder.
KWM suggestion: the companies which are using labor dispatch should check as soon as possible whether the current percentage is compliant with the Regulation; if not, it shall establish an adjustment scheme to file as required. In addition, it is recommended to keep a close eye on legislation of local implementation rules and changes to judicial practices.
Related Event
When: Tuesday, April 22 to Wednesday, April 23, 2014
Where: InterContinental Shanghai Pudong Hotel, Shanghai
To learn more, visit: http://americanconference.com/ChinaEmployment