In recent days, the Implementation Measures on the Administrative Licensing of Labor Dispatch (the “Measure”) was released by Ministry of Human Resources and Social Security, and took effect on July 1, 2013.

The Measure further specifies the transitional provisions stipulated in 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 became effective on July 1, 2013. The employment contracts and labor dispatch agreements entered after December 28, 2012, should be executed in accordance with the Decision since July 1, 2013. Labor dispatch service providers who has been providing labor dispatch service before the execution of the Measure, should obtain administrative licenses of labor dispatch to run new labor dispatch business. Failing to obtain such administrative license will render the labor dispatch service provider unable to run.

Furthermore, compared with the Measures of Administration on the Administrative Licensing of Labor Dispatch (Consultation Draft) (the “Draft”), it deleted the regulation that foreign-funded enterprises who apply for administrative licenses should establish a joint venture together with a Chinese labor dispatch service provider in order to enter into the market of labor dispatch business.

KWM Comments:

The Measure mainly focuses on specification of the administrative licensing of labor dispatch service providers. Since the new Measure has not banned foreign-funded enterprises from running labor dispatch business in China, it should be possible for foreign-funded enterprises to establish labor dispatch institution in China pursuant to the new PRC regulation.