Government to regulate labour dispatch workers
June 23, 2012 | BY
clpstaff &clp articles &New Regulations could lead to a crackdown on temporary workers in China and increase HR costs for foreign and domestic businesses
However, the availability and ease of employing these workers is set to change as policy makers are discussing draft Regulations from the National People's Congress that are expected to lay out clear definitions of what constitutes temporary use of labour dispatch workers, penalties for failure to comply with wages and length of employment.
“Companies should closely watch the legislative activities, review internal labour dispatch workers' policy, restrict the use of dispatch workers on non-temporary, auxiliary or substitute positions and consider outsourcing to cover the positions that labour dispatch workers are currently working on,” said Gordon Feng, chair of Paul Hastings's Shanghai labour and employment practice.
Labour dispatch workers have played a key role in China's economic boom. Multinationals and domestic companies both utilise temporary workers, who for many industries are the driving force behind their success.
When the PRC Employment Contract Law (中华人民共和国劳动合同法) came into force in 2008, the government hoped to regulate an already booming industry and protect the rights of temporary workers.
Article 64 of the Law states that temporary workers have the right to the same pay as full-time employees. In addition, Article 66 affirms that: “In general, placement shall apply to temporary, ancillary or substitute positions.”
In practice, temporary workers receive lower wages to their full-time counterparts despite this being in violation of the Law. The definition of what constitutes a temporary timeframe is also unclear, with dispatch workers typically working for the same company for extended periods.
According to Zhou Bo at Fangda Partners, who specialises in Labour and Employment, the NPC is considering the Regulations “to protect the rights of the numerous unfairly treated dispatch workers”. It comes as “many pro-employee scholars and party members have been lobbying to tighten the control on the use of labour dispatch,” he added.
Without penalties or enforcement, companies have been able to bypass the Law. If the new Regulations, which have not yet been made public, are promulgated, stricter supervision from the authorities and fines will regulate the country's temporary workers.
The attraction for enterprises is not only low wages, but also the need to keep headcount down. As dispatch workers are not full-time employees, they ensure staff numbers do not rise, often keeping head office and shareholders content.
“Many foreign-invested enterprises strictly restrict the increase of their headcount globally. For example, some companies require that any new headcount must be approved by the global chief financial officer, making it extremely difficult to hire additional permanent employees,” said Feng.
Another pull for employers is the minimal administration work involved. Agencies manage the workers and their contracts, which reduce the workload for human resources. Excessive use of dispatch workers also highlights problems with inadequate HR practices in China.
China is now promoting modern service sectors such as consulting in order to move away from its status as a manufacturing hub. This Law could provide new opportunities in HR consulting as companies become more involved in direct recruitment.
It is unclear when the Regulations will be released and to what extent authorities will enforce them. Insiders have predicted they could be promulgated by the end of the year.
PRC Employment Contract Law (中华人民共和国劳动合同法)
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