Employment Contract Law: loopholes revealed

The amendments to China's 2008 Employment Contract Law have closed some loopholes but simplistic definitions and vague wording have created new ones. Questions also remain over how aggressively the new Law will be enforced

 

 Labour dispatch workers fuel China's workforce

Since the PRC Employment Contract Law (中华人民共和国劳动合同法) was promulgated in 2008, the use of dispatch agencies and workers has soared. The main purpose of the amendments, which take effect on July 1 this year, is to remove loopholes that have led to widespread abuse.

 

But the amendments have attracted criticism for lacking clarity and not being sufficiently practical.

“Personally, this amendment is a little too far away from the current situation in China. You cannot just pass a law and expect all companies to change overnight after such a long time,” said Zhou Bo of Fangda Partners.

Companies choose labour dispatch workers because of the flexibility. It is much easier to terminate a labour dispatch worker than a direct hire, as employers are required to do so on statutory grounds – a threshold much harder to meet.

Labour dispatch workers have been widely used by multinational companies and state-owned enterprises, for long-term and regular positions which are contrary to the Law's intention.

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Key amendments

Before the amendments, Article 66 stated: “In general, placement shall apply to temporary, ancillary or substitute positions.”

The use of the word “general” left the law open to abuse, as positions that did not fall into the three categories were technically still covered. The amendments have changed “general” to “only”, which in theory restricts the use to three categories.

 
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