Closing the Loophole

　　Amended Labor Contract Law enters into force aiming to better protect therights of dispatched workersA television reporter in Beijing known byhis pseudonym Lu Li has produced quitea few feature stories on safeguardingworkers’ rights. He is producing a news reporton a dispatched worker who was laid off afterworking for the same employer for more thantwo decades. The employer did not pay herseverance， nor had it ever bought her any socialinsurance.

　　A labor dispatch or staff leasing arrangementis similar to a temp agency. The dispatchservice provider hires workers and dispatchesthem to units with which it has negotiated laboragreements.This employment model has been used inmany industries to slash labor costs.

　　Indirect employment of dispatched workerscan circumvent some obligations businesseswould otherwise be required to fulfill in directhiring， thus exploiting a regulatory loophole inthe Labor Contract law， according to Lu.

　　Lu learned that many companies neglectpaying social insurance tax for dispatchedworkers， although the government mandatesemployers of regular workers to pay five kindsof insurance including endowment， health， unemployment，occupational injury and maternityinsurances， as well as a fund for low-interesthousing loans. These non-wage benefits altogetherrepresent about 40 percent of laborcosts for some organizations， he said.

　　Worksite employers are not required to signemployment contracts with dispatched workers，so they lack job security and can be firedwithout good reason. Nor can they enjoy thesame training， promotion and honors as regularstaff， Lu said， hence they do not have a sense ofbelonging.

　　In an eastern province， the average wagesof dispatched workers in such industries as telecommunications，electricity and banking arereportedly only 38 percent that of regular staff.

　　“Generally speaking， the phenomenon ofunequal pay for equal work is quite prevalent，”Lu said.

　　Unequal pay for equal work resulting fromdispatch labor abuse， like the unequal valuefor identical lives in personal injury insuranceindemnity， deeply undermines the basic rules ofmarket economy and social justice， said ZhengGongcheng， a Standing Committee memberof the National People’s Congress (NPC)， thenational legislature.

　　“The persistence of unequal pay for equal work poses greater social risks. The abuse oflabor dispatch runs against the original purposeof the Labor Contract Law and seriously underminesits legal effectiveness，” said Zheng， also aprofessor at the Social Security Research Centerof the Beijing-based Renmin University of China.

　　China’s first Labor Contract Law， whichbecame effective on January 1， 2008， aims toprotect the legitimate rights and interests ofworkers. Lu is a beneficiary of the law. Beforebecoming a TV reporter， he was dispatched towork abroad and earned only one fourth whatthe worksite employer had paid the employmentagency.

　　This violates the Labor Contract Law， whichstipulates that staffing firms may not pocketpart of the labor compensation that the worksiteemployers pay to dispatched workers inaccordance with the placement agreement.Lu reported his staffing agency to a supervisinggovernment department， and obtained thepayment he was due.

　　“TheLabor Contract Law plays an importantrole in developing a harmonious employmentrelationship and maintaining social stability，”said Liu Jichen， Director of the Department ofLegal Affairs of the All-China Federation of TradeUnions. He said that ambiguities in dispatchlabor agreements render the system vulnerableto abuse.

　　A 2010 survey on dispatch labor conductedby the All-China Federation of Trade Unionsshowed that there are 60 million dispatchedworkers in China， accounting for nearly 20 percentof the country’s workforce.

　　“Unchecked expansion of dispatch laborwill not only directly hurt workers’ legitimaterights， but also undermine the labor contractsystem and employment relations as well as socialstability，” said Zhou Xiaozheng， a professorat the Legal Sociology Research Institute of theRenmin University of China.

　　On December 28， 2012， the 11th NPCStanding Committee adopted an amendmentto the Labor Contract Law after two readings.The amendment aims at strictly regulating dispatchlabor to protect the rights and interestsof dispatched workers. The amended law wentinto force on July 1.

　　Legislative highlights

　　The amendment underlines the point thatworkers hired through labor dispatch serviceproviders should receive the same treatment asdirect recruits.

　　The original Article 63 states， “Dispatchedworkers shall enjoy the right to obtain thesame pay as that received by regular staff ofan employer for equal work. In case there is noworker in the same post in the employer， theremunerations thereof shall be determined byreferring to the payment in the place wherethe employer is situated， and to workers at thesame or a similar post.”

　　That article was revised to add that employersshould adopt the same “labor remunerationallocation methods” for dispatched workers andregular employees in the same position.

　　In addition， the revised article says thatremuneration for dispatched workers specifiedin the contract between labor dispatch serviceproviders and worksite employers must conformto the above clause.

　　Another highlight of the amendment is thatit stipulates that employers should primarily hireworkers directly， rather than via labor dispatchservice providers.

　　It also requires employers to strictly controlthe number of dispatched workers， and makesure that dispatched workers do not exceed acertain percentage of the total number of workers.The specific ratio should be determined bythe Ministry of Human Resources and SocialSecurity.

　　The amended law stipulates that dispatchlabor is a supplementary form of employmentand may only be used for temporary， auxiliary orsubstitute positions.

　　The amended law defines a temporaryposition as one that will not last for more thansix months， an auxiliary position as one not forthe principal business of the employer and asubstitute position as one to replace any regularemployee who cannot work for some perioddue to full-time training， leave， or other reasons.

　　The amendment has also raised thethreshold for setting up labor dispatch serviceproviders. The required minimum registeredcapital has been raised from 500，000 yuan($79，000) before the revision to 2 million yuan($317，000) now.

　　Execution and impact

　　The implementation of the amended LaborContract Law has greatly impacted labor dispatchservice providers.

　　An owner of a Beijing company said on thecondition of anonymity that previously， the salariesof dispatched workers managed by his firmwere paid by worksite employers， and everymonth， he drew 250 yuan ($40) out of everyworker’s salary as commission.

　　Now，since the amended law mandatesequal pay for equal work， his company can onlycharge every dispatched worker a one-timeintermediary fee of 400 yuan ($65). “After that，I can make no more money from a dispatchedworker，” he said.

　　The amended law will prompt labor dispatchservice providers to reshuffle or merge，said Rao Dejun， General Manager of employmentcompany Zhongshan Chitone ExecutiveSearch. He said that the raised registered capitalthreshold is too high for many companies in theindustry.

　　Worksite employers have mixed reaction to

　　the amended law. Lu Jilie， Assistant to Presidentof Guangdong Galanz Group Co. Ltd.， one ofChina’s largest home appliances makers， saidthat the new law will not affect his group sinceboth directly recruited and dispatched workersare paid piecemeal， which conforms to theequal pay for equal work principle.

　　Dispatched workers only account for asmall share of all workers in the Galanz Group.“In fact， dispatch labor is very limited in savingcosts for a company. We do not wish to boostcompany’s bottom line through saving on laborcosts either，” Lu said.

　　“A normal company should train its ownworkers， for they can create higher value for thecompany than temporary workers. The amendedlaw will not only protect workers’ rights， butalso prompt firms to change hiring practices，”he said.

　　However， some companies are fumbling forways to circumvent the new law. For example， afew labor-intensive enterprises reportedly havedecided to outsource some jobs previouslyperformed by dispatched workers， and their payand work duties will remain the same.

　　“Job outsourcing is a way to dodge theequal pay for equal work principle while it is similarto labor dispatch in lowering labor cost，” saidZheng Jianhe， a labor lawyer with the NanjingOffice of Beijing’s JunZeJun Law Offices.

　　To make sure that the amended law isproperly enforced， the Ministry of HumanResources and Social Security will build an effectivelong-term mechanism to oversee dispatchlabor， said a ministry official.

　　By Tang Yuankai