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Reforming the Labor Dispatch Model

May 07, 2013

By ERIKA COLLINS, GORDON FENG, & MICHELLE GYVES

On July 1, 2013, an amendment (the “Amendment”) to the PRC Employment Contract Law aimed at further regulating the staffing business (the so-called “labor dispatch” model in the PRC) will take effect. Under the labor dispatch model, a staffing agency hires and is the legal employer of a person (a dispatch employee or an agency worker) but leases that person to another entity (the user entity) to perform services. Employers with or considering operations in the PRC should be aware of the following changes when the Amendment comes into effect:

  • New Restrictions on Staffing Agencies

  • Restrictions on Positions for Dispatch Employees

  • Restrictions on the Number of Dispatch Employees

  • Equal Pay for Equal Work for Dispatch Employees

  • Enhanced Penalties for Non-Compliance
    Despite the vagueness of certain aspects of the Amendment, companies would be prudent to undertake efforts aimed at compliance.
    In particular, companies should have a plan to restructure their current workforce in China if it consists of a large portion of dispatch workers.

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