On January 24, the Ministry of Human Resources and Social Security issued the Provisional Regulations on Labor Dispatch (“Labor Dispatch Regulations”), which clarify many important issues regarding the use of dispatched/ contingency workers left unaddressed in the Employment Contract Law. The Labor Dispatch Regulations will take effect on March 1. Some of the more important provisions include the following:

  • Companies are now restricted to only hiring up to 10% of their workforce (including directly-hired employees and dispatched workers) through labor dispatch arrangements.
  • Companies must go through an employee consultation process when defining which job positions will be considered “auxiliary” (one of the allowable categories of job positions for labor dispatch).
  • Companies now have a clear basis to return dispatched workers back to staffing agencies when they undergo significant restructuring, face severe economic difficulties, or decide to liquidate. In such instances, staffing agencies only need to continue paying employees the minimum wage during the period when they have no work.
  • Representative offices will not be covered by the restrictions on labor dispatch.
  • Companies that used dispatched workers prior to the effective date of these regulations will have a grace period of two years (or longer in certain narrow circumstances) to adjust their use of dispatched workers to be below the 10% limit.
  • Companies cannot use fake outsourcing arrangements to get around the restrictions in these regulations.
  • Companies are prohibited from discriminating against dispatched workers in terms of benefits.
  • The Labor Dispatch Regulations are silent on whether dispatched workers can claim de facto employment with host companies that uselabor dispatch arrangements outside the allowable scope.