In 2014, the Ministry of Human Resources and Social Security issued the Interim Provisions on Labor Dispatching ("Provisions"), which required that dispatch employees be limited to temporary, auxiliary, or substitute positions and comprise no more than 10 percent of the total number of employees of the employer. The Provisions provided for a two-year grace period to comply with the 10 percent limitation, which expired on February 29, 2016. Several cities and provinces have issued notices in the past few months to reiterate the deadline, including Sichuan, Suzhou, and Guangdong, and it is expected that local labor authorities will carry out more frequent inspections to ensure compliance with the limitation during the first half of 2016.
In addition to either returning excess dispatch employees to the dispatch company or directly hiring dispatched employees, many employers have moved from a dispatch to a service outsourcing model. However, employers need to be careful to structure outsourcing arrangements so that they are not considered to be engaging dispatched employees themselves and are subject to the Provisions.
There is no clear definition of "outsourcing" under Chinese law. The Meeting Minutes of the Shanghai Municipal Human Resources and Social Security Bureau and the Shanghai High People's Court on Several Issues Concerning the Application of Law in Labor Dispatching 2014 stipulate that outsourcing is a new concept in the market and that some forms of "outsourcing" may constitute "dispatch." Whether this is the case will depend on various factors, including the application of employing companies' internal policies to such workers and management power over work conducted by such workers. The greater the management control over outsourced workers for the purposes of fire control, work safety, product quality, or workplace order, the more likely that there will be a deemed dispatch arrangement.
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