Following the Provisional Regulations on Labour Dispatch, issued by the Ministry of Human Resources and Social Security, which took effect on 1 March 2014, a number of cities and provinces have issued local measures to administer the use of labour dispatch.
The labour dispatch regulations require companies that exceed the maximum cap on the use of dispatched employees – 10% of the total workforce – to reduce their use of dispatched workers to below the legal threshold within two years (i.e. by 28 February 2016), and to file a “workforce adjustment plan” with the local labour authorities.
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The Beijing labour authorities were the first to issue measures related to such workforce adjustment plans, on 10 March 2014. They require companies that use labour dispatch employees in excess of the 10% cap to file a “workforce adjustment plan” with the labour authorities by 31 August 2014. The Beijing measures provide some guidance on what should be in the plan, such as information on total workforce, number of direct hires, number of dispatched employees, percentage of dispatched employees, and plans to reduce use of dispatched employees.
The measures require that the labour bureau issue a recordal receipt within five working days upon receipt of a company’s plans. This may implicitly provide the labour bureau with a “quasi-approval” right with respect to the content of such plans. However, neither the labour dispatch regulations nor the Beijing measures specify any penalties or other consequences for not submitting a workforce adjustment plan by the deadline, so it remains to be seen how strictly this will be enforced.
The Beijing measures are probably being reviewed by other cities and provinces. A handful have already issued their own measures related to submission of a “workforce adjustment plan” by a certain deadline, including Hebei province (31 August 2014), Fujian (31 August 2014); Shaanxi (31 December 2014), and Guangdong (30 June 2014). However, most of these local measures do not provide as much guidance or detail as the Beijing measures, and none stipulate any penalties for not meeting the deadlines.
In some locations, such as Guangdong and Hunan provinces, the local notices require that labour authorities closely monitor the use of outsourcing arrangements and prevent “disguised” labour dispatch arrangements. Therefore, companies that plan to use outsourcing arrangements – i.e. arrangements for services rather than labour – should carefully review the business structure with their service vendors to ensure that the structure will not expose the company to legal risks.
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Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mail at: Zhang Danian (Shanghai) danian.zhang@bakermckenzie.com
