REGULATIONS ON WORK PLACEMENT IN CHINA


7 July 2020 | Human Resources, Work placement | Written by Dr. Richard van Ostende | Reading time: 7 minutes


INTRODUCTION

Work placement in China has been mainly regulated via China’s Labor Contract Law, detailed implementation regulations and Interim Provisions for Labor Dispatch. In this article the structuring of work placement arrangements between the hiring company, staffing firm and dispatched employee is discussed, as well as restrictions applicable to work placement, remuneration and return of dispatched workers.


STRUCTURING OF PLACEMENT CONTRACTS

Placement contract between own company and staffing company

Placement contracts are concluded between the staffing firm and the hiring company, which is called the accepting entity. The placement contract stipulates the job positions in which the dispatched employees are to be placed, the number of persons that will be placed, the placement term, the amount and method of payment of remuneration and social insurance contributions to be paid by the accepting entity as well as the provisions on liability for beach of the agreement.

Both parties agree on a placement term, which is based on the actual requirements of the position. To protect the position of employees it is prohibited by law to conclude multiple short-term placement contracts to cover a continuous term of labour usage.

Staffing firms shall inform their employees on the contents of the placement contracts concluded with the accepting agency.


Employment contract between staffing company and dispatched employees

The staffing firm will enter into a formal employment relationship with the employees that will be dispatched to the accepting entity. For staffing firms, it is mandatory to conclude fixed-term employment contracts with a minimum duration of not less than two years. More information on the different types of employment contracts can be read in our article here.


As stipulated by law the employment contract shall include the following items:

  • Name, domicile and legal representative or main person in-charge of the employer.

  • Name, residential address and number of the resident ID card or other valid identity document number of the employee.

  • Term of the contract.

  • Scope of work and place of work.

  • Working hours, rest, and leave.

  • Labor compensation.

  • Social insurance.

  • Labor protection, working conditions and protection against occupational hazards; and

  • Other issues required by laws and regulations to be included into the contract.

In addition, work placement contracts must specify at which company the employee will be dispatched, his position and the placement term.


RESTRICTIONS TO INDIRECT RECRUITMENT

Types of positions

Under the Labor Contract Law companies are only allowed to engage indirect hires through staffing firms for positions meeting one of the following requirements listed below:

  • Temporarily employees, which includes staffs to be engaged for a maximum period of six months or less.

  • Substitute employees, to replace direct hired employees for a certain period of time who are temporarily unable to work; and

  • Auxiliary employees, positions in non-core business activities which support service core-businesses.

Regarding auxiliary positions, at present no definition for non-core business activities exists. According to regulations companies must decide internally, upon consultation with its employees of their representatives and trade union, on its definition.


Maximum number of dispatched employees

The regulations further stipulate that the total number of indirect hires dispatched at a company are not allowed to exceed 10% of the total number of employees, which includes both direct and indirectly recruited employees.

Exception to the maximum number of dispatched employees is made for Representation Offices as Representation Offices do not have a legal entity status in China and therefore are not permitted to hire staff directly. Representation Offices must continue to engage its Chinese staff through staffing agencies. Foreign nationals working at Representation Offices must be employed through an entity established outside Mainland China territory and be seconded to work in China.


REMUNERATION OF DISPATCHED EMPLOYEES

Dispatched workers are entitled pay equal to the pay of the employees of the accepting entity for the same work performed. If the accepting entity does not have any employee for the same position, the remuneration shall be determined based on the remuneration paid to employees in the same or in similar positions at the place where the accepting entity is located.

If a staffing firm places an employee with an accepting entity in another region, the employee’s remuneration and working conditions shall be in line with the standards of the place where the accepting entity is located.

Staffing firms must pay remuneration to their employees on a monthly basis. During the periods that the employees cannot be placed, staffing firms must pay their employees remuneration on a monthly basis at the minimum wage rate of the place where the staffing firms are located.

It is forbidden for staffing firms to retain parts of the remuneration paid by the accepting entity to the workers and both the staffing firms and accepting entity shall not demand any fees from the employees.


RETURN OF DISPATCHED EMPLOYEES TO THE STAFFING FIRM

Under the following circumstances an accepting entity may return the dispatched employee to the staffing firm, which may terminate its labor contract with him in accordance with the relevant provisions of the Labor Contract Law.

When the dispatched employee

  • Fails to meet the requirements for employment during the probation period.
  • Materially breaches the accepting entity’s rules and regulations.
  • Causes substantial loss to the accepting entity due to his serious dereliction of duty or
  • engagement in graft for personal gain.
  • Establishes an employment relationship with another employer simultaneously which
  • materially affects the completion of his task with the original employer, or he refuses to rectify the situation after being cautioned by the employer.
  • Causes the employment contract with the staffing company to be invalid
  • through fraud, coercion, or exploitation of the other party’s disadvantageous position, a where party causes the other party to conclude or amend the labor contract against the latter’s true intent.
  • the labor contract absolves the employer from legal liability and denies the employee his rights; or
  • the labor contract is in violation of the mandatory provisions of laws or administrative regulations.
  • Is subject to criminal liability in accordance with the law.


An accepting entity may return the dispatched employee to the staffing firm, which may terminate the labor contract under any of the following circumstances by giving the employee 30 days’ prior written notice or one month’s wages in lieu of notice:

  • Where the employee is unable to resume his original work nor engage in other work
  • arranged for him by the Employer after the expiration of the prescribed medical treatment period for an illness or non-work-related injury.
  • Where the employee is incompetent and remains incompetent after training or adjustment
  • of his position


SOURCES

  • National People’s Congress. (2007). Labor Contract Law of the People’s Republic of China (adopted at the 28th Session of the Standing Committee of the 10th National People’s Congress of the People’s Republic of China on June 29, 2007).

  • National People’s Congress (2012). Decision of the Standing Committee on the Revision of the Labor Contract Law of the People’s Republic of China (“Revision”)

  • Ministry of Human Resources and Social Security. (2013). Interim Provisions for Labor Dispatch. Order [2013] No. 22.


The information in this article is intended for general information on the subject matter. The content of this article is not intended to replace professional advice on the subject matter in relation to your specific circumstances.

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