The Standing Committee of the National People’s Congress reviewed amendments to the Employment Contract Law on June 26th, which would restrict the use of labor secondment arrangements (also called “labor dispatch” in China). Many employers use secondees in place of direct hires to reduce their administrative burden, keep formal headcount and salary costs low, and minimize the impact of China’s labor law requirements.
The draft amendments will require seconded employees to be paid “equal pay for equal work”.
Further, Article 66 of the Employment Contract Law restricts use of seconded employees to “temporary, auxiliary and substitute” positions. However, this article has not been strictly enforced and secondments now make up 40% to 60% of staff in some industries in China. The draft amendments restrict use of secondees by 1) clarifying that “temporary” means no more than six months, 2) limiting “substitute” secondments to periods of time when another employee is unable to work or is on leave, and 3) defining “auxiliary” to mean not engaged in the employer’s principal business. The draft amendments also increase maximum fines for violations to RMB 10,000 per secondee.
Given the current wide use of secondees for positions that are not strictly “temporary, auxiliary or substitute”, it is not clear how thoroughly these amendments (when formally promulgated) will be implemented in practice.