Following the Provisional Regulations on Labor Dispatch issued by Ministry of Human Resources and Social Security, which took effect on March 1, 2014 (“Labor Dispatch Regulations”), a number of cities and provinces have issued local measures to administer the use of labor dispatch. The Labor Dispatch Regulations require companies that exceed the maximum cap on the use of dispatched employees (10% of the total workforce) to reduce their use of dispatched workers to below the legal threshold within two years (i.e. by February 28, 2016), and that such companies file a “workforce adjustment plan” with the local labor authorities.
The Beijing labor authorities were the first to issue measures related to such workforce adjustment plans on March 10, 2014. They require companies that use labor dispatch employees in excess of the 10% cap to file a “workforce adjustment plan” with the labor authorities by August 31, 2014. The Beijing measures provide some guidance on what should be in the plan such as information on total workforce, number of direct hires, number of dispatched employees, percentage of dispatched employees, plans to reduce use of dispatched employees, etc. The measures require that the labor bureau issue a recordal receipt within 5 business days upon receipt of the companies’ plans. This may implicitly provide the labor bureau a “quasi-approval” right with respect to the content of such plans. However, neither the Labor Dispatch Regulations nor the Beijing measures specify any penalties or other consequences for not submitting a workforce adjustment plan by the deadline, so it remains to be seen how strictly this will be enforced.
The Beijing measures likely are being reviewed by other cities
/ provinces. A handful of other cities / provinces have already issued their own measures related to submission of a “workforce adjustment plan” by a certain deadline, such as Hebei Province
(by August 31, 2014), Fujian Province (by August 31, 2014); Shanxi Province (by December 31, 2014); and Guangdong Province (by June 30, 2014). However, most of these local measures do not provide
as much guidance or detail as the Beijing measures, and none stipulate any penalties for not meeting the stipulated deadlines.
In some locations (such as Guangdong and Hunan Provinces), the local notices require that labor authorities closely monitor the use of outsourcing arrangements and prevent “disguised” labor dispatch arrangements. Therefore, companies that plan to use outsourcing arrangements (i.e., arrangements for services rather
than labor) should carefully review the business structure with their service vendors to ensure that such structure would not expose the company to legal risks.