First Revision of Labor Contract Law of the People’s Republic of China

Chinese Factory

  • Background

Labor dispatching probably is the most popular employment form among foreign enterprises. According to a report from All-China Federation of Trade Union in 2011, the total number of dispatched workers around China has broken through 60 millions. However, it is also the employment form that has been criticized most due to the relevantly low salary, low social insurance, worse working environment etc. At the 30th Session of the Standing Committee of the 11th National People’s Congress, the Standing Committee has adopted the first revision (“Revision”) of the Labor Contract Law which will take into effect on July 1, 2013. The very first Revision mainly focuses on labor dispatching issues as explained below.

  • Summary of the Main Changes under the Revision

1. Higher Threshold for Labor Dispatching Entity

The standard for establishing a labor dispatching entity has been raised. Now, the registered capital for such entity shall be more than RMB 2 million. Moreover, the Revision requires the entity shall have permanent business premises and facilities for the business as well as dispatching management system. Also, administrative licensing with the labor administrative department shall be obtained in order to engage in labor dispatching business.

2. Principle of “Equal Pay for Equal Work”

Emphasis has been placed on the famous principle. The Revision provides that the labor remunerations payable to a dispatched worker shall be in compliance with the principle under both the contracts concluded between the labor dispatching entity and the dispatched worker and the contracts between the labor dispatching entity and the actual employer of the dispatched worker.

3. Three Characters of the Labor Dispatching

The Revision has specified the three characters, i.e. temporary, auxiliary and back-up. Temporary shall refer to the jobs with a term of no longer than six months; auxiliary refers to the positions for the dispatched workers shall be non-core business operations; and back-up means the jobs are kind of work that the permanent staff from the actual employer are unable to do because they leave the jobs for full-time study or vacation/leave, or due to other reasons.

4. Escalated Punishment for Violation

The fine for violation shall be no less than RMB 5000 but no more than RMB 10,000 per dispatched person. Also, the business license of the dispatching entity will be in the danger of revocation. Moreover, the dispatching entity shall assume joint and severable liability with the actual employer to compensate the damage, if any, caused by the actual employer to the dispatched workers involved.

  • Comments

After the promulgation of the Labor Contract Law in 2008, the number of dispatched workers has substantially increased. As a result of the growth, the relationships among dispatching entity, dispatched workers and actual employer have become much tenser. The new Revision is born to ease the tense and we believe that it will be the future trend to protect dispatched workers.

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