Key Points

The draft Amendment to Labour Contract Law:

  • Limits the scope of positions for employee secondment
  • Sets higher market access threshold for secondment services company
  • Further emphasizes “same work, same pay” policy
  • Provides new administrative sanctions for violations of laws  

Background

On 6 July 2012, the Standing Committee of the National People’s Congress reviewed for the first time the draft Amendment to Labour Contract Law. If it comes into force, the amendment will change rules regarding employee secondments and secondment services companies.  

Highlights of the Regulations

  • Employees can only be seconded for temporary, auxiliary or substitute positions.
  • Formation of a secondment service company requires minimum registered capital of RMB1 million and approval from the labour bureau.
  • The policy of “same work, same pay” must be specified in contracts.
  • Violation may result in fines, confiscation of illegal incomes and revoking of approval.  

Summary  

As a result of the amendment, secondment services companies must:

  • Only second employees to temporary, auxiliary or substitute positions.
  • Have a registered capital of no less than RMB1 million and a sound labour secondment management system. They shall obtain approval from the labour bureau before registration with AIC.
  • Specify the policy of “same work, same pay” in the contract between the secondment services company and the employee and in the contract between the secondment service company and the employer.  

Final Thoughts

The practice of outsourcing labour will be strictly regulated if the draft amendment is put into force. It may be a problem for a secondment service company to second employees to a representative office, as most of the positions offered by representative office are not temporary, auxiliary or substitute.  

If a secondment services company carries out secondment business without approval from the labour bureau, the business will be shut down. In addition, the illegal incomes will be confiscated and fines of up to five times the value of the illegal incomes will be imposed on the secondment services company.  

In case of a serious violation, a fine ranging from RMB5,000 to RMB10,000 shall be imposed on the secondment services company for each employee it concerns and any approval granted by the labour bureau may be revoked.