Shanghai-based companies needing to reduce their reliance on
dispatched workers have until 31 October 2014 to formulate and
submit reduction plans. Guiding principles have also been issued to
distinguish between human resourcing outsourcing and labour
dispatch. These new provisions were recently issued by the Shanghai
The New Implementing Rules
The Shanghai Municipal Human Resources and Social Security
Bureau ("Shanghai HRSSB") has issued local implementing
rules regarding various labour dispatch issues. These new rules
provide guidance on the Provisional Regulations on Labour Dispatch
issued by the Ministry of Human Resources and Social Security on 24
January 2014 (the "Regulations") (see our
e-bulletin dated 19 February 2014).
Shanghai's new local implementing rules include:
the Opinions on Regulating Certain Issues regarding Labour
Dispatch in Shanghai issued by Shanghai HRSSB on 30 June 2014 (the
the Shanghai Municipality Provisions regarding the Filing of
the Plan on the Use of Labour by Entities Using Dispatched Workers
issued by Shanghai HRSSB on 7 July 2014 (the
Both the Opinions and the Provisions were effective upon
Reducing Dispatched Workers – Procedures and
Under the Regulations, dispatched workers may comprise no more
than 10 per cent of a company's total workforce, with a grace
period of two years before that requirement applies to companies
that have previously used dispatched workers.
The Provisions state that any Shanghai company that, prior to 1
March 2014 (i.e., before the effective date of the Regulations),
had more than 10% of its total workforce as dispatched workers must
file with the competent district branch of the Shanghai HRSSB its
plan for the reduction of dispatched workers. The plan must be
submitted by 31 October 2014.
The plan for reducing the number of dispatched workers must
information regarding the current number and percentage of
dispatched workers in its total workforce; and
detailed measures and timelines for reducing the percentage of
dispatched workers to 10% or less.
The competent district branch of Shanghai HRSSB will issue a
filing receipt upon acceptance of such filing by the companies.
Take away point
By 31 October 2014, Shanghai-based companies that need to
reduce dispatched workers to 10% or less must formulate and file a
reduction plan with the Shanghai HRSSB.
Labour Dispatch and HR Outsourcing Distinguished
Since the Regulations, some companies reportedly have
transferred non-key dispatched workers to a human resource
outsourcing agency, and then contracted to engage the outsourced
workers through the human resource outsourcing agency (an
"Outsourcing Model"). The Regulations, however, state
that the Regulations apply to arrangements that are in substance
labour dispatch, irrespective of what the arrangement is
The Opinions now helpfully distinguish between the Outsourcing
Model and labour dispatch. The key distinguishing feature of the
Outsourcing Model is that companies may only indirectly manage the
relevant outsourced workers.
In practice, it is understood that the indirect management
permitted by the Opinions for the Outsourcing Model requires
A company should not exercise direct management over the
outsourced workers but should instead give instructions to the
relevant human resource outsourcing agency which employs the
outsourced workers; and
The human resource outsourcing agency will directly manage the
outsourced workers on employment-related matters and give the
outsourced workers daily work instructions based on the
instructions given by the company.
The labour dispatch model, on the other hand, allows the
dispatched workers to be directly managed by the company that
engages the dispatched workers.
Take away points
The Shanghai HRSSB will examine how workers are managed in
order to distinguish between the legitimate use of the Outsourcing
Model and fake outsourcing arrangements that are in fact labour
Companies should review the management of workers under any
outsourcing arrangement to ensure compliance with the Opinions and
the 10% limit on dispatched workers under the Regulations.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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