On April 19, 2013, the Measures of Administration on the Administrative Licensing of Labor Dispatch (Consultation Draft) (the “Draft”) was released by Ministry of Human Resources and Social Security, soliciting comments from the public up to May 19, 2013.

The Draft mainly focuses on specification of the administrative licensing of labor dispatch service providers. For example, foreign-funded enterprises who apply for administrative licenses should establish a joint venture together with a Chinese labor dispatch service provider to run the labor dispatch business.

In addition, the Draft further specifies the transitional provision of the Decision Regarding the Modification of Employment Contract Law (the “Decision”) which was passed by the Standing Committee of the National People’s Congress, and will be implemented on July 1, 2013. The employment contracts and labor dispatch agreements executed after December 28, 2012, should be implemented in accordance with the Decision since July 1, 2013. Labor dispatch service providers who will have been providing labor dispatch service before July 1, 2013, should obtain administrative licenses of labor dispatch before June 30, 2014 to run new labor dispatch business. Otherwise, they can only fulfill the employment contracts and labor dispatch agreements, which were executed before December 28, 2012, to the expiration thereof.

KWM Comments:

After the promulgation of the Decision on December 28, 2012, a series of laws and regulations related to labor dispatch will be issued to further specify the new rules set in the Decision. The employers should pay attention to those new rules, make adjustment of labor dispatch management accordingly, and check the qualification of labor dispatch service providers, to avoid potential legal risk.