The use for independently contracted workers in China has increased rapidly since the labor contract law was revised in 2007. The revisions then provided better protection for employees, but many employers got around these revisions by contracting workers to work long-term thus replacing the employer’s actual workforce. The legal rights of these independently contracted workers are not well protected, and they often negotiate lower pay and fewer benefits than regular employees. The market has also seen an increased number of contracting agencies which often do not comply with laws and regulations set in place to protect workers.
According to Xinhua News, Chinese lawmakers are now considering revisions of the Labor Law aimed to crackdown on employers classifying their workers as contractors. The new bill was submitted for its first reading to the National People's Congress Standing Committee in June of 2012. Under the current law, employers can hire contractors to do temporary, backup, or supplementary work. The proposed revisions create a clearer definition for these conditions and include an article requiring employers to follow the "equal pay for equal work" principle when negotiating with their independently contracted workers.
The Chinese Labor Law provides that all employers have to execute a labor contract with their workers. The written contract must include the terms of the employment, duties and responsibilities of the workers, conditions of their employment, and labor protection provisions. The contract must also include compensation and benefit provisions establishing work hours, rest periods, rest days, vacation times, and holidays. The labor contract must also establish disciplinary rules and grounds for termination as well as agreed upon dispute resolution methods.
The national Labor Law also preempts all laws and regulations at the provincial and local level. It applies to all enterprises including Foreign Invested Enterprises (“FIEs”) and State Owned Enterprises (“SOEs”). Employees are also entitled to collective bargaining rights, and the Labor Law protects the rights of employees to join or organize labor unions. A collective bargaining agreement is binding on all staff and workers after signed by the parties and must be submitted to the Ministry of Labor and Social Security or local labor administrations for approval.
It should be noted that it is difficult for foreign companies to retain highly-skilled Chinese laborers to maintain a competitive edge in China. Experts often recommend that FIEs provide in-house trainings and short-term overseas opportunities for their workers to help with retention. Other things to consider include providing continuing education classes and paying for a higher level of benefits. In light of the new popularity of independent contracted workers, FIEs’ should realize retention and employee loyalty is a key advantage in competing against Chinese domestic enterprises in a global economy. A loyal and happy workforce tends to increase productivity and quality of work; both are considered serious underpinning of China’s production and labor problems.