On June 30th, 2014, Shanghai Municipal Human Resources and Social Security Bureau released the Opinions on Several Issues concerning Regulating the Labor Dispatching in Shanghai Municipality (“Opinions”). The Opinions set specific rules for issues concerning the adjustment of labor dispatching plan, “equal pay for equal work”, auxiliary positions and service outsourcing as well as the legal liability thereof. Main contents of the Opinions are as follows:

  1. Filing of the Adjusted Employment Plans: Where the rate of dispatched employees within an employer prior to the implementation of Interim Provisions on Labor Dispatch (before March 1st, 2014) exceeds 10%, the employer shall make a plan for the employment adjustment, indicating the steps and schedule for reducing the proportion of dispatched employees and shall report such plan to the human resources and social security bureau of local district or county for filing purpose. The Opinions further stipulate thatwhere an employer whose proportion of the dispatched laborers meets the prescribed requirement needing to newly employ dispatched workers to satisfy the special need of production and management also needs to be put on records.

In addition, Shanghai Municipal Human Resources and Social Security Bureau issued a notice on July 7th, requiring that where the proportion of dispatched employees of an employer exceeds 10% before March 1st, 2014, the employer shall report the adjusted employment plan for recording before October 31st, 2014. Specific material needing to be submitted includes adjustment measures and schedules. If the employer fails to put on records within a time limit, the employer shall be supervised and checked by relevant departments.

  1. Implementation of Equal Pay for Equal Work: The Opinions emphasizes that dispatched employees and its employer’s employees holding the similar post should enjoy the same measures for labor remuneration distribution. Where the employer fails to implement the principle of equal pay for equal work, the human resources and social security authority shall order it to make correction within a time limit; where the employer fails to make correction within such time limit, the administrative department of human resources and social security shall impose an administrative penalty.
  2. Determination of Auxiliary Positions: The Opinions require employers to determine auxiliary positions in accordance with the Interim Provisions on Labor Dispatch, that is, after discussion at the employee representative congress or by all employees, the employer shall propose its plan and opinions, make consultation with labor union or employee representatives based on the basis of equality to determine the scope of auxiliary positions applicable to the dispatched employees, which shall be made available within the unit. Otherwise, the administrative department of human resources and social security shall order it to make correction within a time limit; if the employer fails to make correction within such time limit, the department shall impose an administrative penalty.
  3. Differentiating Labor Dispatching and Outsourcing:Considering the phenomenon where many “labor dispatching” are converted into “outsourcing”, the Opinions require employers to pay attention to make adjustments for employees’ management. The two concepts should be reasonably determined by the nature of outsourcing and by reference to the principles of direct management and indirect management

KWM Comment: The Opinions clarifies the specific requirement of implementation of Interim Provisions on Labor Dispatch in Shanghai; the labor dispatch service units need to carry out it strictly, and it shall communicate related issues with relevant authorities or legal counsels when it is necessary.