Rethinking the labour dispatch model

The Employment Contract Law first became effective on January 1 2008. The Law provided that labour dispatch workers are generally used for temporary, auxiliary and substitute jobs and introduced the principle of equal pay for equal work. However, the use of the word “generally” left much room for enterprises to use dispatch employees as they please. The ambiguity of equal pay for equal work also brought disputes over how to ensure dispatch employees can enjoy rights equal to regular employees.

Despite the intention of the Law to decrease the use of labour dispatch workers, it actually increased. Labour dispatch is so commonly used that it has reached a point of abuse. Some enterprises use labour dispatch as a way to control costs, which hurts the rights and benefits of dispatch employees. In this context, the Law was amended to further regulate the labour dispatch regime.

Positions defined

Under the current Law, dispatch workers are generally used for temporary, ancillary or substitute jobs. As a result of such a simplistic definition, this provision is more like a legal suggestion. In some business sectors, labour dispatch has become a main form of employment. According to statistics from 2011, there were more than 60 million dispatch employees in China across a range of businesses, not only FIEs and regional offices, but also state-owned and privately-owned enterprises.

To restrain such abuse of labour dispatch, the amendments expressly state that employing labour dispatch workers is a supplementary form of employment, which shall be used for temporary, ancillary, or substitute positions only. The amendments also specify definitions of these employment positions (see figure 1), which were never defined in the current Law.

The amendments also provide that the amount of dispatch staff in an accepting entity shall not exceed a certain proportion of its total workforce. This proportion shall be prescribed in the implementing rules to be subsequently issued by the authorities, in line with the specific situation of different industries and enterprise forms.

We anticipate the amendments will have a great impact on the current practices of accepting entities, especially those involved in bank, petroleum and petrochemical, telecom or power industries, which heavily engage in the use of dispatch employees.

It is important accepting entities revisit their dispatch arrangements and stop using dispatch employees in positions that are not temporary, ancillary or substitute. They may directly hire such staff or consider alternative solutions, like outsourcing parts of their business which engage a large number of dispatch employees under the previous regime.

Equal pay for equal work

Equal pay for equal work is already a principle for dispatch workers under the current Employment Contract Law. In practice, however, the legitimate rights and interests of dispatch staff are not sufficiently protected. Less favourable pay and employment benefits for these workers is still common.

The amendments reiterate that remuneration paid to dispatch employees shall be consistent with the equal pay for equal work principle. The amendments also provide that the same labour remuneration regime shall be applied among dispatch and regular employees.

In addition, the amendments further require that equal pay for equal work shall be specified in labour contracts and dispatch agreements. For those contracts or agreements already entered into, they can be performed until they expire, but provisions not conforming to the equal pay for equal work principle have to be modified.

Though the amendments do not specifically define equal work for equal pay, we read it as that all employees shall be treated equally, regardless of the form of employment.

Equal pay for equal work embodies the principle of non-discrimination against nationality, race, gender and religious beliefs. The term was originally provided in the PRC Labour Law (中华人民共和国劳动法) of 1994. The labour department's regulations once explained that equal pay for equal work means an employer shall pay equal remuneration among all employees, if they do the same work and achieve the same result.