Labour dispatch in China: flexibility and security in employment

ABSTRACT

Across the globe, atypical, or nonstandard, employment can be found in many places. Since China began to undertake economic reforms four decades ago, dispatch workers have become a significant component of its workforce. Although China has a legal framework in place for regulating the labour-dispatch industry, the past decade witnessed instances of enterprise noncompliance and unfair treatment of dispatch workers. Accordingly, this study highlights the current situation of labour dispatch in China, outlines the current regulatory framework, and ascertains whether regulatory reforms are warranted to deal with issues arising from the tripartite relationship between the labour-dispatch entity, the labour-service user, and the dispatch worker.

KEYWORDS:

• Labour dispatch
• nonstandard employment
• Chinese labour law
• employment flexibility
• employment security

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 For example, in about 150 countries, the average use of temporary workers in registered private-sector firms is 11%, even though there are significant divergences in the use of temporary labour by firms. More specifically, one out of four employees in Australia is casual. International Labour Organization (ILO), Non-Standard Employment around the World: Understanding Challenges, Shaping Prospects (ILO 2016), xxii–xxiii.

2 ibid 2–3.

3 ibid 157–59.

4 ibid 247.

5 ibid 247. The over-representation of women in nonstandard employment in some countries may be the subject of another inquiry; however, this study does not cover a gender issue, whether nonstandard employment increases women's participation in the workforce, or conversely, whether nonstandard employment results in discriminatory impacts on women.

6 Employment Protection Legislation (EPL) is a key labour market institution, and the ILO EPlex indicators are used to assess the level of employment protection afforded by national legislation. International Labour Organization, Employment Protection Legislation: New Approaches to Measuring the Institution (INWORK Issue Brief No. 8, 2016).

7 The private employment agency industry emerged in North America and parts of Europe in the 1950s and 1960s. ILO (n 1) 31. In the United States, temporary agency workers accounted for 10% of all employment growth in the 1990s, while 2% of the workers in EU-15 were on temporary agency contracts by 2000. ILO (n 1) 87–88.

8 Labour dispatch (劳务派遣) is different from labour outsourcing (劳务外包). In the latter case, a firm gives parts of its business or a certain type of work to a contractor to run or carry out. The contractor controls and manages its workers and bears all the associated risks during the performance of work. In the former case, dispatch workers are managed by, and follows instructions from, the labour-service user who is not the ‘employer’ under the law. In China, some enterprises also use labour outsourcing. Whether labour dispatch will be replaced by labour outsourcing is not within the scope of this study. It is evident that enterprises may choose to continue labour dispatch instead of shifting to labour outsourcing based on their respective circumstances.

9 See Regulations on the Administration of Foreign Labour Cooperation (对外劳务合作管理条例) (promulgated 4 June 2012 by State Council, People's Republic of China).

10 Ke Sufang (柯素芳), ‘An Analysis of the Current (2018) Situation of China's Labour-Dispatch Market and the Development Trend, Clear Drawbacks in the Industry, Trend of Shifting to Labour Outsourcing’ (2018年中国劳务派遣市场现状与发展趋势分析 行业弊端明显，转向服务外包是趋势) <https://www.qianzhan.com/analyst/detail/220/190111-9505862b.html> accessed 11 January 2019; Li Weiyang (李伟阳), ‘One Enterprise, Two Systems: The Evolution of the Employment System and the Organization and Management of Labour Dispatch Work’ (一个企业，两种制度: 用工体制演变及劳务派遣工的工作组织与管理) (2021) 6 Chinese Personnel Science (中国人士科学) 41, 43; Chen Xia and Yu Haiying (陈霞, 于海英), ‘A Brief Analysis of the Questions and Strategies regarding the Development of the Labour Dispatch System’ (浅析劳务派遣制度发展的问题与对策)（2020）10 Management Study (管理研究) 77, 77.

11 <www.chyxx.com> (产业信息网), ‘The Number of People Employed in the Labour-Dispatch Industry in 2017 and An Analysis of the Market Size’ (2017 年中国劳务派遣行业用工人数，市场规模分析) <https://www.chyxx.com/industry/201904/726793.html> accessed 3 April 2019.

12 Ke (n 10); Li (n 10) 43.

13 ibid.

14 <www.chyxx.com> (n 11).

15 Ke (n 10); Genghua Liu, Private Employment Agencies and Labour Dispatch in China, (ILO SECTOR Working Paper No. 293, 2014) 16 (given the high employment pressure and massive labour migration, deregulation and flexibilization were the driving forces of China's labour market); Zhang Jing (张静), ‘An Analysis of the Current Situation of the Labour Dispatch Employment System in China and Recommendations for Law Governance’ (中国劳务派遣用工制度的现状分析与法律治理建议) (2020) 5(1) Legal System and Society (法制与社会) 29, 29 (labour dispatch was a reasonable choice to transfer rural labour surplus to the city).

16 Ke (n 10); Zhang (n 15) 29; Li (n 10) 43, 46–47; Chen and Yu (n 10) 77. Dispatch workers were not on a state-owned enterprise's employee roll, so hiring restrictions or limits on the total amount of wages did not apply. Li (n 10) 46. Another study, which focused on compliance by enterprises of different ownership, reported that only the wages of ‘formal’ workers in state-owned enterprises entered the ‘wage quota’, and that the wages of temporary workers were regarded as operational fees, in which case enterprises might lower labour costs and raise profitability. Xiaojun Feng, ‘Regulating Labour Dispatch in China: A Cat-and-Mouse Game’ (2019) 33 (1) China Information 88, 94. In other words, Chinese enterprises use dispatch workers to provide numerical flexibility.

17 Li (n 10) 46.

18 Labour Contract Law of the People's Republic of China (中华人民共和国劳动合同法) (adopted 29 June 2007 and amended 28 December 2012 by National People's Congress Standing Committee, People's Republic of China) (hereinafter Labour Contract Law).

19 <www.chyxx.com> (n 11). Although the Ministry of Human Resources and Social Security estimated that there were about 37 million dispatch workers in 2011, the figure provided by the All-China Federation of Trade Unions was 60 million. Liu (15) 8. The 37 million dispatch workers constituted 13.1% of the total number of staff and workers in Chinese enterprises. Li (n 10) 43.

20 Implementation Regulations of the Labour Contract Law of the People's Republic of China (中华人民共和国劳动合同法实施条例 (promulgated 18 September 2008 by State Council, People's Republic of China) (hereinafter Implementation Regulations).

21 Provisional Rules on Labour Dispatch (劳务派遣暂行规定) (promulgated 24 January 2014 by Ministry of Human Resources and Social Security, People's Republic of China) (hereinafter Provisional Rules).

22 Implementation Measures on the Administrative Licence of Labour Dispatch (劳务派遣行政许可实施办法) (promulgated 20 June 2013 by Ministry of Human Resources and Social Security, People's Republic of China) (hereinafter Administrative Licence Measures).

23 Since 2012, there have not been official, systematic statistical surveys of labour dispatch nationwide; however, local governments have undertaken the collection of data under their respective jurisdictions. For example, the Shenzhen City Bureau of Human Resources and Social Security has called for tenders to conduct statistical research on labour dispatch under its jurisdiction. See Shenzhen City Bureau of Human Resources and Social Security (深圳市人力资源和社会保障局), ‘Public Notice on Inquiry about the Cost of Statistical Investigation of the Whole City's Labour Dispatch in 2021’ (2021年度全市劳务派遣统计调查工作询价公告) (18 January 2021) <http://hrss.sz.gov.cn/gkmlpt/content/8/8402/post_8402119.html?jump=false#1694> accessed 25 June 2022.

24 E.g. Ke (n 10); <www.chyxx.com> (n 11).

25 <www.chyxx.com> (n 11).

26 E.g. Bazhong Xinyu Human Resources Service Platform (巴中新宇人力资源服务平台) <http://www.bzxyhr.com/EN_Default.aspx>; accessed 18 June 2022; TSS Talents (泰素斯人才集团) <http://www.tsshr.com/> accessed 18 June 2022.

27 E.g. China Labour Dispatch Net (中国劳务派遣网) <www.labour168.cn> accessed 18 June 2022.

28 Ke (n 10). ‘Complete’ refers to the case where the labour-dispatch entity undertakes all the matters towards the dispatch worker. ‘Shifted’ refers to the case where the labour-dispatch entity and the labour-service user are respectively responsible for certain matters. ‘Downsized’ refers to the case where the workers of an enterprise are ‘sold’ to the labour-dispatch entity, and the labour-dispatch entity sends the workers back to work for it. ‘Probationary’ refers to the case where a worker on probation belongs to the labour-dispatch entity and, after probation, becomes a worker of the labour-service user. ‘Project-based’ refers to the case where the dispatch worker is sent for a specific project. ‘Collective’ refers to the case where a state-owned enterprise or institution sends some or all of its redundant workers to a third party. ibid.

29 ibid.

30 <www.chyxx.com> (n 11); Liu (n 15) 12; Chen and Yu (n 10) 78.

31 <www.chyxx.com> (n 11); Chen and Yu (n 10) 78.

32 Liu (n 15) 14 and 17; <www.chyxx.com> (n 11); Li (n 10) 46; Chen and Yu (n 10) 77.

33 <www.chyxx.com> (n 11).

34 ibid; Liu (n 15) 16–17 (the major clients for the labour-dispatch industry in the Anhui Province are state-owned enterprises); Chen and Yu (n 10) 77.

35 <www.chyxx.com> (n 11).

36 ibid; Wan Zhonglin and Li Hongyan (万钟林, 李红艳), ‘An In-Depth Analysis of Our Country's Labour Dispatch Employment System: Based on an Investigation of the Labour Service Market in the Pearl River Delta Region’ (深析我国劳务派遣用工制度 — 基于珠三角地区劳务市场的调查) (2021) 2 Hebei Qiye (河北企业) 133, 133.

37 Provisional Rules, art 1.

38 ibid.

39 Labour Contract Law, art 66.

40 ibid art 12.

41 ibid art 17.

42 ibid art 14.

43 ibid art 66.

44 Civil Code of the People's Republic of China (中华人民共和国民法典) (adopted 28 May 2020 by National People's Congress, People's Republic of China) (hereinafter Civil Code).

45 Labour Contract Law, art 57; Administrative Licence Measures, art 6. Given that a labour-dispatch business must undergo company registration, a labour-dispatch entity should be established in the form of a company. In China, there are the limited liability company and the company limited by shares. Besides, an individual may form a one-person limited liability company. Thus, a labour-dispatch business cannot be run as a partnership. However, it will be helpful for the government to clarify whether a labour-dispatch business can be established as a partnership.

46 Labour Contract Law, art 57; Administrative Licence Measures, art 7. The amount of registered capital was RMB 500,000 prior to the 2012 amendment of the Labour Contract Law. ‘RMB’ stands for the Chinese currency of renminbi (yuan or dollar).

47 Administrative Licence Measures, art 12. A 10-day extension is allowed if it is necessary. ibid.

48 ibid art 14.

49 ibid art 19.

50 ibid art 13.

51 For example, the labour-dispatch entity is required to pay economic compensation (severance pay) when it terminates a labour contract by giving a 30-day advance notice. Labour Contract Law, arts 40 and 46; Provisional Rules, art 17.

52 Labour Contract Law, art 58.

53 ibid (referring to article 17 of the Labour Contract Law).

54 ibid; Provisional Rules, art 5.

55 Implementation Regulations, art 30.

56 Provisional Rules, art 6.

57 ibid art 16.

58 Provisional Rules, art 17 (referring to article 16 of the Provisional Rules).

59 Labour Contract Law, art 58; Provisional Rules, art 12.

60 Labour Contract Law, art 61.

61 Provisional Rules, art 18. If the labour-dispatch entity has a branch in the place where the labour-service user is located, the branch should enrol the dispatch worker in the local social insurance scheme. If the labour-dispatch entity does not have a branch, it should ask the labour-service user to enrol the dispatch worker. ibid art 19.

62 ibid art 8.

63 Labour Contract Law, art 59; Provisional Rules, art 7.

64 Labour Contract Law, art 60; Provisional Rules, art 8.

65 Labour Contract Law, art 59.

66 ibid.

67 ibid art 62.

68 ibid art 67.

69 ibid art 66; Provisional Rules, art 3.

70 Labour Contract Law, art 66; Provisional Rules, art 3.

71 Provisional Rules, art 3.

72 Labour Contract Law, art 66.

73 Provisional Rules, art 4. The restriction to temporary, auxiliary, and substitute posts as well as the maximum ratio of dispatch workers do not apply to the representative offices of foreign enterprises, the representative offices of foreign financial organs, and international seafarers hired by employers of sailors. ibid art 25.

74 Labour Contract Law, art 62.

75 Provisional Rules, art 9.

76 Labour Contract Law, art 65 (referring to articles 39 and 40 of the Labour Contract Law).

77 ibid.

78 Provisional Rules, art 12 (referring to articles 40 and 41 of the Labour Contract Law). Even so, where changes in objective circumstances make it necessary to return a dispatch worker, the labour-service user cannot do so when the dispatch worker is receiving medical treatment for illness or non-worked-related injury, is on maternity leave, and so forth. ibid art 13 (referring to article 42 of the Labour Contract Law).

79 Labour Contract Law, art 63. ‘Equal work’ does not refer only to the same work post, but also to the amount of work and time for the same performance outcome.

80 ibid.

81 ibid art 60.

82 ibid art 60.

83 ibid art 64.

84 ibid art 65 (referring to articles 36 and 38 of the Labour Contract Law).

85 Provisional Rules, art 14.

86 Labour Contract Law, art 92.

87 Provisional Rules, art 10.

88 ibid.

89 Civil Code, art 1191.

90 Provisional Rules, art 15 (referring to article 12 of the Provisional Rules).

91 ibid.

92 Administrative Licence Measures, art 25.

93 ibid art 33.

94 Labour Contract Law, art 92; Administrative Licence Measures, art 31.

95 Labour Contract Law, art 74.

96 Administrative Licence Measures, art 22.

97 ibid art 23.

98 Labour Contract Law, art 92.

99 ibid; Administrative Licence Measures, art 32. The amount of fine was RMB 1000 to RMB 5000 per person before the 2012 amendment of the Labour Contract Law.

100 Labour Contract Law, art 79.

101 Chen and Yu (n 10) 78–79; Wan and Li (n 36) 133.

102 Wan and Li (n 36) 133; Chen and Yu (n 10) 79.

103 Liu (n 15) 20; Chen and Yu (n 10) 79; Zhang Lijuan (章丽娟), ‘Study of the Labour-Dispatch System under New Situation’ (新形势下劳务派遣制度研究) (2020) 10(1) Legal System and Society (法制与社会) 32, 33.

104 Zhang (n 103) 33 (registration for tax avoidance purposes).

105 Feng (n 16) 100.

106 Chen and Yu (n 10) 79.

107 Zhang (n 103) 33.

108 Feng (n 16) 100.

109 Liu (n 15) 18; Zhang (n 15) 29. In a series of cases where the dispatch workers were drivers for an automotive logistics company, the courts held that the post was not temporary, auxiliary, or substitute. See, e.g. Zhao Heping and Jiangsu Hengxinyuan Service Outsourcing Ltd v. Jiangsu Anji Automotive Logistics Ltd (赵和平和江苏恒馨源服务外包有限公司 v. 江苏安吉汽车物流有限公司) (2017) (Jiangsu Province Nanjing City Intermediate People's Court 江苏省南京市中级人民法院) 苏01 民终915 号, 17 April 2017.

110 Liu (n 15) 21; Zhang (n 15) 29.

111 Liu (n 15) 21 (some dispatch workers had been in the same job for more than two years, and more than 80% of the employees of an enterprise in the Anhui Province were dispatch workers); Zhang (n 15) 29 (some management and core posts were filled by dispatch workers); Wan and Li (n 36) 133 (the percentage of dispatch workers in some enterprises in the Pearl River Delta Region constituted more than 50%).

112 Li (n 10) 45–46. For example, 55% of the dispatch workers in an enterprise had worked for 10 years. ibid 46. In addition, one personnel manager remarked that the law did not prescribe how many times a labour-dispatch contract could be renewed before it must be converted into an open-ended contract. ibid 46.

113 Feng (n 16) 97–98.

114 Ke (n 10).

115 Li (n 10) 49–50 (the dispatch workers in one enterprise received only half of the wages of regular workers, and the base wages of the dispatch workers in another enterprise had not been adjusted for years).

116 Liu (n 15) 23; Feng (n 16) 96.

117 Feng (n 16) 95; Zhang (n 15) 30; Chen and Yu (n 10) 79.

118 State Council Information Office of the People's Republic of China (中华人民共和国国务院新闻办公室), ‘Ministry of Human Resources and Social Security: Equal Pay for Equal Work in Labour Dispatch Does Not Include Welfare and Social Insurance’ (人社部: 劳务派遣同工同酬不包括福利和社保) (2 September 2013) <http://www.scio.gov.cn/zhzc/8/4/document/1345141/1345141.htm> accessed 20 June 2022.

119 Feng (n 16) 95. It is notable that in most cases, the congress of staff-and-workers mainly represents regular workers.

120 Zhang (n 15) 30.

121 In a state-owned enterprise in Changsha, the festive bonuses for dispatch workers were RMB 200, but the amounts for regular workers were RMB 20,000–50,000. Feng (n 16) 95. Some enterprises might pay the same wages, but not bonuses, over time pay, or allowances. Zhang (n 15) 30. All three enterprises in one study provided regular workers with a birthday allowance, but not for dispatch workers. Li (n 10) 50. Dispatch workers were not given bonuses for outstanding performance. Wan and Li (n 36) 133.

122 Chen and Yu (n 10) 79.

123 ibid.

124 Li (n 10) 48.

125 ibid 44.

126 See, e.g. Chen Yeming v. Shanghai Zhongyu Human Resources Ltd and Shanghai Shangya Investment Management Ltd (陈业铭 v. 上海中裕人力资源有限公司和上海尚雅投资管理有限公司) (2020) (Shanghai City Pudong New District People's Court上海市浦东新区人民法院) 沪0115民初38878 号, 19 August 2020 (the labour-service user was not jointly and severally liable for economic compensation, but it was liable for failing to pay for unused leave and performance bonuses, where the labour-dispatch entity had unlawfully terminated the labour contract); Xu Erjun and Jiangsu Hengxinyuan Service Outsourcing Ltd v. Jiangsu Anji Automotive Logistics Ltd (许尔军和江苏恒馨源服务外包有限公司 v. 江苏安吉汽车物流有限公司) (2017) (Jiangsu Province Nanjing City Intermediate People's Court 江苏省南京市中级人民法院) 苏01民终690 号, 17 April 2017 (the labour-service user which returned the dispatch worker to the labour-dispatch entity was not jointly and severally liable for economic compensation where the labour-dispatch entity's renewal of the labour contract was not lawful and the original labour contract had expired); Dalian Chunyu Labour Dispatch Ltd and China Post Express Logistics Joint Stock Co v. Lin Chao (大连春雨劳务派遣有限公司和中国邮政速递物流股份有限公司 v. 林超) (2018) (Liaoning Province Dalian City Intermediate People's Court 辽宁省大连市中级人民法院) 辽02民终5933 号, 18 September 2018 (the labour-service user which returned the dispatch worker to the labour-dispatch entity was not jointly and severally liable for economic compensation where the labour-dispatch entity had terminated the labour contract unlawfully).

127 Ma Xiangdong and Huainan Donghua Labour Service Ltd v. Huainan Mining (Group) Ltd Geological Exploration Engineering Department (马湘东 v. 淮南东华劳务有限公司和淮南矿业(集团)有限责任公司地质勘探工程处) (2017) (Anhui Province Huainan City Tianjiaan District People's Court安徽省淮南市田家庵区人民法院) 皖0403民初4586, 16 April 2018.

128 ibid.

129 ibid.

130 ibid.

131 Li (n 10) 51.

132 ibid.

133 Ke (n 10).

134 Wan and Li (n 36) 134.

135 Chen and Yu (n 10) 79.

136 ibid.

137 International Private Employment Agencies Convention, 1997 (No 181), arts 11–12 <https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_INSTRUMENT_ID:312326> accessed 30 June 2022; Private Employment Agencies Recommendation, 1997 (No 188), arts 5–6 <https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:::NO:12100:P12100_ILO_CODE:R188:NO> accessed 30 June 2022.

138 As of 2023, the International Private Employment Agencies Convention was not on the list of China's ratifications<https://www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_ID:103404> accessed 17 November 2023.

139 Zhang (n 103) 34.

140 Chen and Yu (n 10) 80.

141 Zhang (n 103) 34; Chen and Yu (n 10) 80.

142 Chen and Yu (n 10) 80–81.

143 Zhang (n 15) 29–30.

144 Provisional Rules, art 27.

145 Zhang (n 15) 30.

146 State Council Information Office (n 118).

147 ILO (n 1) xxiii.

148 See also Zhang (n 103) 34.

149 For example, there are rules regarding the joint liability between the labour-dispatch entity and the labour-service user with respect to wages and social security entitlements in Argentina, France, India, Italy, the Netherlands, etc. ILO (n 1) 276.

150 Zhang (n 103) 34.

151 D Weil, The Fissured Workplace: Why Work Became So Bad for So Many and What Can Be Done to Improve It (Harvard University Press 2014).

152 ILO (n 1) 218–19 (labour market segmentation may result in unequal risk-sharing between standard and nonstandard workers in terms of unemployment and income security, and the high volatility of employment and unemployment in segmented labour markets will increase the volatility of public budgets).

153 European Commission, ‘Employment, Social Affairs and Inclusion’ (2021) <https://ec.europa.eu/social/main.jsp?langId=en&catId=102> accessed 10 December 2021.