Key Points

  • Limits the scope of positions for employee secondment.
  • Sets higher market access threshold for secondment services company.
  • Further emphasizes "same work, same pay" policy.
  • Limits the employee secondment rate of total labor of the employing company.
  • Provides new administrative sanctions for violations of laws.

Background

On 28 December 2012, the 30th Meeting of the Standing Committee of the National People’s Congress adopted the Amendments to Labor Contract Law.

Highlights of the Amendment

  • Employees can only be seconded for temporary, auxiliary or substitute positions.
  • The formation of a secondment service company requires a minimum registered capital of RMB2 million and approval from the labor bureau.
  • The policy of "same work, same pay" must be specified in contracts.
  • The employee secondment rate of total employees must be limited to certain proportion to be determined by labor authorities.
  • Violation of these rules may result in fines, confiscation of illegal incomes and revoking of approval.

Summary

Under the terms of the amendment, a secondment services company must:

  • Only second employees to temporary, auxiliary or substitute positions.
  • Have a registered capital of no less than RMB2 million and a sound labor secondment management system. It shall obtain approval from labor bureau before registration with AIC.
  • Have the policy of "same work, same pay" specified in the contract between the secondment services company and the employee and the contract between the secondment service company and the employer.
  • Not exceed the employee secondment to total employees proportion set forth by labor administrative authorities.

Conclusion

The practice of outsourcing labor is strictly regulated now that the amendment is in force.

If a secondment services company carries out secondment business without approval from the labor bureau, it may be forced to cease business. In addition, all illegal incomes from this act will be confiscated. Fines up to RMB50,000 or five times the illegal incomes will also be imposed on the secondment service company.

In case of serious violation of employment contract law, a fine for each employee concerned (ranging from RMB5,000–RMB10,000 per employee) will be imposed on the secondment service company and the approval previously granted by labor bureau may be revoked.