On December 28, 2012, the Decision regarding the Modification of Employment Contract Law (the “Decision”) was passed by the 30th session of the Standing Committee of the 11th National People’s Congress, which will be implemented from July 1, 2013. This modification is relating to the labor dispatch part in the Employment Contract Law, which clearly expresses the qualification of the dispatch service providers, the administrative license for dispatch service, the “equal pay for equal work” of the dispatched employees and the position applying to the dispatch service.

The Decision mainly has the following requirements regarding the qualifications of the dispatch service provider: (1) increasing the registered capital requirement of the dispatch service provider from RMB 500,000 to RMB 2,000,000; (2) requiring the dispatch service provider to legally apply for and obtain the prior administrative license from the competent labor administrative bureau. The enterprise who is operating the dispatch service before the effectiveness of the Decision shall obtain the administrative license and apply for the change registration before June 30, 2014.

The Employment Contract Law only stipulates that the dispatched employee shall be generally applied to the temporary, ancillary and substitute positions without any specific definition. The Decision further explicitly defines that labor dispatch shall be an ancillary method of the employment and only can be applied to the temporary, ancillary and substitute positions.

The temporary position means the position existing no more than six months, the ancillary position means the position relating to non-core business which provides certain services to the core business positions; and the substitutive position means the position can be substituted by other labor when the employee can not perform his/her duties for certain period due to full-time study, vacation and other reasons. The enterprise using the dispatched employees shall strictly control the number which shall not exceed certain ratio of the total employees (which ratio will be regulated by the labor administrative department of State Council).

When using the dispatched employees, we suggest pharmaceutical companies should review relevant qualifications of the dispatch service providers. Besides, whereas the Decision will narrow the applicable scope of the dispatched employees, we suggest pharmaceutical companies seek for legal advice on whether dispatch arrangement could be used for a particular position.

You can find the Decision at http://www.gov.cn/jrzg/2012-12/29/content 2301592.htm