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

Introduction

Paradoxically, atypical, or nonstandard, employment is a common feature around the world.¹ Broadly defined, ‘atypical’ employment refers to existing or emerging forms of employment other than ‘standard’, ‘regular’, or ‘typical’ employment that normally entails fixed work schedules, monthly salaries or hourly wages, annual and sick leaves, vocational training and career advancement, social security contributions, dismissal for cause, and a sense of belonging and identity. According to the International Labour Organization (ILO), the expansion of nonstandard forms of employment, such as on-call work, casual work, and part-time work, results from the interconnectedness of firms through global supply chains; technological advances; the shifting of manufacturing to developing countries; the growth of the service sector; the increased role of women in the workforce; international migration; the desire for greater flexibility in work and personal life; and the incentives or gaps in labour market regulation.² Indeed, enterprises utilize nonstandard employment to address short-term labour needs, evaluate new workers before offering them an open-ended employment contract, fill periphery posts so that regular workers can focus on ‘core’ functions, serve as a buffer to shield core workers from any potential downsizing as a result of fluctuations in demand, avoid unionization or weaken unions, or even make temporary employment as the mainstay of their operations.³ Even so, it is noteworthy that the reasons for the existence or growth of nonstandard employment vary from country to country and from enterprise to enterprise.

As defined by the ILO, ‘decent work’ is

work that is productive and delivers a fair income, with a safe workplace and social protection, better prospects for personal development and social integration, freedom for people to express their concerns, organize and participate in the decisions that affect their lives and equality of opportunity and treatment for all women and men.⁴

In most instances, nonstandard employment is characterized by a higher degree of ‘decent work deficits’.⁵ For this reason, a well-functioning Employment Protection Legislation (EPL)⁶ must be established to balance the need to protect the rights and interests of nonregular workers and the ability of enterprises to adjust employment based on market demands.

Until now, the existence of atypical or nonstandard employment in various parts of the world has generated two major issues – whether nonregular workers are marginalized in terms of employment conditions and whether nonregular workers should be normalized as an integral component of the labour force. On the one hand, the inquiry into the marginalization of nonregular workers stems from the concern over whether their rights and interests are adequately protected. In other words, atypical employment is viewed dubiously or negatively as a potential means of labour exploitation. On the other hand, the exploration of the normalization of the nonregular workforce reflects the increasing popularity of a flexible and inclusive workforce. As the development or promotion of atypical employment is viewed positively, the inquiry focuses on what needs to be done to equalize the rights and interests of nonregular workers vis-à-vis regular workers. Although these two seemingly opposite groups start from different perspectives, the common thread between them is the question of whether there exists an effective regulatory system for the protection of both regular and nonregular workers, the advancement of nonstandard employment, and the operations of the labour market.

Being a nonstandard form of employment, labour dispatch, which is called temporary agency work or labour hire in some jurisdictions, has existed for decades.⁷ Labour dispatch is an employment arrangement involving three parties (the labour-dispatch entity, the labour-service user, and the dispatch worker) and entailing two types of contract (an employment contract between the labour-dispatch entity and the dispatch worker and a commercial contract between the labour-dispatch entity and the labour-service user). This tripartite relationship creates a wide range of policy considerations and legal issues, such as the regulation of the labour-dispatch industry, the employment conditions of dispatch workers, the employment security of regular workers, the sustainability of enterprises, and the respective liabilities of the labour-dispatch entity and the labour-service user.

In China, after two score years of economic reforms, labour dispatch now has a significant presence in its labour market. Against this backdrop, the present study attempts to ascertain whether regulatory reforms are warranted to deal with employment issues arising from the tripartite relationship between the labour-dispatch entity, the labour-service user, and the dispatch worker.⁸ Towards this aim, the first section below highlights the historical development and contemporary situation of labour dispatch in China. The second section then outlines China's current policies on labour dispatch and the concomitant legal framework. With a basic understanding of the legal framework, the third section discusses regulatory challenges and industrial practices in relation to labour dispatch in China. Considering the challenges and practices, the fourth section explores the policy implications and pressing regulatory reforms. In the end, the fifth section draws conclusions.

I. Historical development and present situation

In the late 1970s, China commenced economic reforms and opened its door to the outside world. The economic reforms and open-up generated various labour reforms, including the introduction of labour dispatch to China. There were two situations in which labour dispatch was utilized. Externally, Chinese workers were dispatched overseas to work for foreign enterprises or institutions under ‘foreign labour cooperation’.⁹ Internally, dispatch workers were sent to fill the staffing needs of foreign enterprises or representative offices in China.¹⁰ Meanwhile, many Chinese state-owned enterprises were inefficiently run and had accumulated a large quantity of redundant workers, which necessitated rationalization measures.¹¹ In the 1990s, China launched the reform of state-owned enterprises, which caused a large number of workers to be ‘removed from their posts’ (xiagang), namely, laid off.¹² Apart from encouraging redundant workers to engage in entrepreneurial activities, labour dispatch was promoted to create employment opportunities and to solve the problem of labour surplus.¹³ Indeed, labour dispatch enabled state-owned enterprises to retain core workers and have peripheral business activities performed by dispatch workers.¹⁴

In the 2000s, the growth of labour dispatch accelerated due to both societal and enterprise-based factors. At the macro level, labour dispatch grew because the marketization of China's economy gained momentum, private enterprises mushroomed under governmental promotion, and a large quantity of rural workers migrated to urban areas.¹⁵ At the micro level, enterprises opted for labour dispatch because it could lower labour costs by dispensing with recruitment-related expenditures; could decrease employment-related risks and liabilities; allowed enterprises to flexibly adjust the number of workers based on operational needs; and enabled enterprises to overcome the limits on recruitment and control the total amount of wages.¹⁶ Besides, individuals decided to work as dispatch workers because some wanted to accumulate work experience for the future, and some worked as dispatch workers in the hope of being converted into regular employees.¹⁷ With the passage of the Labour Contract Law in 2007,¹⁸ which contains a specific section on labour dispatch, an inchoate regulatory framework for labour dispatch was formally established. In the ensuing years, labour dispatch expanded rapidly in China as, for example, in 2011, dispatch workers in China had grown to 37 million, and the number of labour-dispatch entities was 15,000.¹⁹

At the end of 2012, the Labour Contract Law was amended, which raised the threshold amount of registered capital of a labour-dispatch entity; clarified temporary, auxiliary and substitute work; emphasized the principle of ‘equal pay for equal work’; mandated the establishment of a labour-dispatch management system; and prescribed a maximum ratio of dispatch workers in the labour-service user's total workforce (as discussed below). The 2012 amendment was designed to tighten up the labour-dispatch industry and safeguard the rights and interests of dispatch workers. Thereafter, the Implementation Regulations of the Labour Contract Law,²⁰ the Provisional Rules on Labour Dispatch,²¹ and the Implementation Measures on Administrative Licence of Labour Dispatch²² were promulgated to provide more details for the regulation of the labour-dispatch industry. Coupled with the 2012 statutory amendment, these legal instruments have refined the previously rudimentary regulatory framework for labour dispatch in China.

In recent years, official reports and statistics on labour dispatch nationwide are not readily available.²³ Thus, the current situation of labour dispatch in China is ascertained mainly from unofficial sources.²⁴ Since the enhancement of the regulatory framework, the growth of dispatch workers has fluctuated, while the number of labour-dispatch entities has steadily grown. For instance, from 2013 to 2017, the number of dispatch workers was 45 million, 42 million, 38 million, 35 million, and 36 million, respectively, but the number of labour-dispatch enterprises has grown yearly from 22,000 to 35,000.²⁵ Moreover, given the diffusion of the Internet, many human resource enterprises or platforms use their websites to promote labour dispatch services and to recruit dispatch workers.²⁶ Indeed, labour-dispatch online platforms provide information services for the labour-dispatch industry with such aids as Big Data and Cloud Computing.²⁷

Basically, labour dispatch in China can be categorized based on its nature (complete, shifted, downsized, probationary, project-based, and collective) and duration (long-term, short-term, and phased).²⁸ In this light, labour dispatch in China is quite diverse, depending on the staffing needs of labour-service users and the time period for which dispatch workers are required.²⁹ In general, dispatch workers consist of urban-bound rural workers, laid-off workers, and graduates from junior colleges or vocational schools who find it difficult to secure regular employment.³⁰ Even so, it has been reported that professionals have been dispatched to fill high-ranking posts.³¹ Indeed, the work experiences of dispatch workers are diverse and unalike because they assume a variety of posts in both manufacturing and service industries, such as operators, secretaries, salespersons, account managers, drivers, security guards, market analysts, movers, and other types of frontline workers in such industries as manufacturing, transport, hospitality (hotels and restaurants), tourism, post and telecommunications, financial services (banks), construction, cleaning, household, and IT services.³²

With respect to distribution, labour dispatch has developed in such cities and provinces as Beijing, Tianjin, Shanghai, Guangdong. Jiangsu, Zhejiang, Fujian, Guangxi, Heilongjiang, Liaoning, Jilin, Jiangxi, Hunan, and Shandong.³³ Foreign-invested enterprises and large state-owned enterprises are regular labour-service users of dispatch workers.³⁴ In addition, some export-oriented enterprises and telecommunications enterprises have a bigger demand for dispatch workers.³⁵ For example, large corporations, such as Shenzhen Huawei, Samsung, Foxconn, and Panasonic (Matsushita), have a large number of dispatch workers.³⁶ As a result, labour dispatch is a significant form of atypical employment in China.

II. Labour policy and regulatory framework

Succinctly, China's fundamental labour policies are to protect the lawful rights and interests of workers³⁷ and to foster harmonious and stable labour relations,³⁸ thereby enhancing labour productivity and enterprise sustainability for economic construction. In China, the primary form of employment is the establishment of an employer-employee relationship through the conclusion of a labour contract,³⁹ which may have a fixed term or an indefinite term (like ‘permanent’ or open-ended employment) or can span the duration of a specific project.⁴⁰ A labour contract must stipulate such employment conditions as wages, working hours, duration, job post, and work site.⁴¹ A fixed-term worker may request the conclusion of a labour contract without a fixed term if he or she has signed a fixed-term contract twice consecutively, or if he or she has worked consecutively for 10 years.⁴² In this connection, labour dispatch is only a supplementary form of employment for the purposes of completing temporary or auxiliary work or for short-term replacement.⁴³

At present, China's regulatory framework for labour dispatch consists of the relevant provisions in the Labour Contract Law and its Implementation Regulations, the Provisional Rules on Labour Dispatch, the Implementation Measures on Administrative Licence of Labour Dispatch, and article 1191 of the Civil Code.⁴⁴ The following discussion, therefore, highlights the major provisions pertinent to the labour-dispatch entity, the labour-service user, the dispatch worker, and the administration and enforcement of the regulatory system.

A. The labour-dispatch entity

To establish a labour-dispatch business, an individual or entity must first obtain an administrative licence and then undergo company registration.⁴⁵ A labour-dispatch entity must have at least RMB 2 million of registered capital, a fixed place and facilities for business operations, a labour-dispatch management system, and any other conditions as prescribed by law or administrative regulation.⁴⁶ Once the applicant has submitted all the required materials, the determination of granting or denying an administrative licence will be made within 20 working days.⁴⁷ An administrative licence is valid for three years,⁴⁸ and upon the approval of an extension, should be exchanged for a new one.⁴⁹ If the application for an administrative licence is denied, the applicant may seek an administrative reconsideration or file an administrative lawsuit.⁵⁰

Under the law, the labour-dispatch entity is the ‘hiring unit’ (employer). Consequently, in addition to the specific provisions on labour dispatch, the general provisions on the obligations of a ‘hiring unit’ in the Labour Contract Law should be applicable.⁵¹ First and foremost, the labour-dispatch entity must sign a labour contract with the dispatch worker.⁵² Apart from the mandatory provisions (such as wages and social insurance), the labour contract must stipulate the labour-service user, the duration of dispatch, and the post to be filled by the dispatch worker.⁵³ Indeed, the labour-dispatch entity must sign a written, fixed-term labour contract of at least two years with the dispatch worker.⁵⁴ Moreover, the labour-dispatch entity cannot hire dispatch workers on a part-time basis,⁵⁵ even though the labour-service user may agree with the dispatch worker on one probation period.⁵⁶ A labour contract will come to an end where: (1) the labour-dispatch entity has been declared bankrupt; (2) its business licence has been revoked; (3) it has been ordered to close down; (4) it decided to dissolve earlier; or (5) its term has expired and decided not to continue the business.⁵⁷ In that case, the labour-dispatch entity must pay the dispatch worker economic compensation.⁵⁸

During the contract term, the labour-dispatch entity must provide monthly remuneration to the dispatch worker, and if the dispatch worker does not have any job assignment, must still pay monthly remuneration in accordance with the locally prescribed minimum wages.⁵⁹ If the labour-dispatch entity sends a worker to a labour-service user outside its locality, the amount of remuneration and other employment conditions are to be provided in accordance with the labour standards of the place where the labour-service user is located.⁶⁰ Furthermore, the labour-dispatch entity must enrol the dispatch worker in the social insurance scheme of the place where the labour-service user is located and pay the social insurance premiums⁶¹ as well as establish a training system to provide job-related knowledge and safety education.⁶²

At the same time, the labour-dispatch entity must sign a labour-dispatch contract with the labour-service user, stipulating such terms as the number of dispatch workers; the posts to which workers are dispatched; the term of labour dispatch; the amounts of remuneration and the means of payment; the amount of social insurance premiums and the means of payment; working hours, leave, and vacation; the treatment of the dispatch worker in the case of work-related injury, childbirth, or illness; work safety and training; the standards for labour-dispatch service fee and the means of payment; and the liabilities for breach.⁶³ Once a labour-dispatch contract is signed, the labour-dispatch entity should inform the dispatch worker of the content of the job to be filled, the employment conditions, the place of work, occupational hazards, and so forth; urge the labour-service user to provide the dispatch worker with labour protection and work safety measures; and facilitate the resolution of disputes between the labour-service user and the dispatch worker.⁶⁴ In other words, the labour-dispatch entity must disclose the terms of the labour-dispatch contract to the dispatch worker in advance, watch out for the safety of the dispatch worker, and assist in resolving disputes between the labour-service user and the dispatch worker.

B. The labour-service user

In recruiting dispatch workers, the labour-service user must decide on the term of labour dispatch based on actual needs.⁶⁵ Notably, the labour-service user must not divide a continuous term of employment in order to enter into several short-term labour-dispatch contracts.⁶⁶ Moreover, the labour-service user must not re-dispatch dispatch workers to another hiring unit⁶⁷ or must not establish a labour-dispatch unit to dispatch workers to itself or its subordinates.⁶⁸ Apparently, these restrictions aim at preventing the abuse of labour dispatch and ensuring the protection of regular workers.

As a rule, the labour-service user may fill posts only in ‘three categories’ – temporary, auxiliary, or substitute posts – with dispatch workers.⁶⁹ Temporary posts are those which do not last for more than six months; auxiliary posts are those designed to serve the core-business posts of the labour-service user; and substitute posts are those held by the regular employees of the labour-service user who are on leave due to study or vacation.⁷⁰ Where a labour-service user decides to fill auxiliary posts with dispatch workers, it should discuss the matter with the congress of staff-and-workers or all the staff and workers and consult on an equal footing with the trade union or the representatives of staff and workers.⁷¹ In any case, the number of dispatch workers must not exceed a prescribed proportion of the total workforce of the labour-service user, which is to be determined by the labour-administration department of the State Council.⁷² At present, the number of dispatch workers cannot exceed 10% of the labour-service user's total workforce, which is the sum of the number of workers who have signed labour contracts and the number of dispatch workers.⁷³

With respect to obligations, the labour-service user is to (1) apply the labour standards of the State and provide the relevant working conditions and labour protection; (2) inform the dispatch worker of the job requirements and remuneration; (3) provide overtime pay, performance bonus, and welfare benefits related to the job; (4) impart the necessary job training to the dispatch worker; and (5) establish normal wage adjustment mechanisms in the case of continuous employment.⁷⁴ In particular, the labour-service user must not discriminate against the dispatch worker in relation to welfare benefits.⁷⁵ These obligations, therefore, reflect the mandate of fair treatment and the disapprobation of displacing regular workers by dispatch workers.

Nonetheless, the labour-service user may return the dispatch worker to the labour-dispatch entity under one of the following circumstances: (1) the dispatch worker is proven to be unqualified during the probation period; (2) the dispatch worker has seriously violated its work rules; (3) the dispatch worker has caused the labour-service user significant harm due to serious dereliction of duty or jobbery; (4) the dispatch worker has simultaneously established an employment relationship with another hiring unit, which seriously affects the completion of job duties or the dispatch worker refuses to rectify upon request; (5) the labour contract is void as a result of duress, fraud, or taking advantage of a plight; (6) the dispatch worker is being pursued with criminal liability; (7) the dispatch worker is unable to resume the original work or any other work arranged by the labour-service user after medical treatment for illness or non-work-related injury; or (8) the dispatch worker is not qualified for the job after receiving training or being assigned to another post.⁷⁶ If the labour-service user returns the dispatch worker to the labour-dispatch entity, the latter may terminate its labour contract with the dispatch worker.⁷⁷ Other than reasons relating to the dispatch worker, the labour-service user may return the dispatch worker to the labour-dispatch entity if it is declared bankrupt or undergoes reorganization; its business licence has been revoked; its production or business operations experience serious difficulties; and the objective circumstances at the time when the labour-dispatch contract was made have changed significantly, making it impossible to perform the contract, and no agreement has been reached to amend the contract.⁷⁸

C. The dispatch worker

The dispatch worker has the right of ‘equal pay for equal work’, namely, receiving the same pay as that of a regular employee of the labour-service user who performs the same kind of work.⁷⁹ If the labour-service user does not have workers holding the same kind of post, remuneration shall be determined with reference to the remuneration received by workers holding the same or similar posts in the place where the labour-service user is located.⁸⁰ In this regard, the labour-dispatch entity may not deduct a dispatch worker's remuneration paid by the labour-service user.⁸¹ Both the labour-dispatch entity and the labour-service user may not charge the dispatch worker any fees.⁸² Apart from remuneration and fee, the dispatch worker has the right to join or organize a trade union in the labour-dispatch entity or in the labour-service user.⁸³

Prior to the expiry of the labour contract, the dispatch worker may terminate it based on mutual consent or due to one of these circumstances: (1) failure to provide labour protection or working conditions, (2) failure to pay remuneration on time and in full, (3) failure to pay the social insurance premiums, (4) unlawful work rules impairing the worker's rights and interests, (5) contract being void as a result of duress, fraud, or taking advantage of a plight, (6) coercion to work by means of violence, duress, and unlawful restraint of personal freedom, or (7) an order to perform work which will jeopardize personal safety.⁸⁴ In addition to these circumstances, the dispatch worker may terminate a labour contract by giving a written notice 30 days in advance or, in the case of probation, three days' advance notice.⁸⁵

Where the labour-service user has caused harm to the dispatch worker, the labour-dispatch entity and the labour-service user will be jointly and severally liable for compensation.⁸⁶ Indeed, if the dispatch worker sustains work-related injuries while working for the labour-service user, the labour-dispatch entity is to file a work-injury claim, and the labour-service user should assist in its investigation and verification.⁸⁷ Although the labour-dispatch entity is responsible for work-injury insurance, it can agree with the labour-service user on the method of indemnity.⁸⁸ If the dispatch worker has caused harm to others in the execution of job duties, the labour-service user will bear liability, and if the labour-dispatch entity is also at fault, it will bear corresponding liability.⁸⁹

Furthermore, where the dispatch worker is returned because the labour-service user has been declared bankrupt, its business licence has been revoked, its term of business operations has expired, the term of labour-dispatch contract has ended, or the objective circumstances have significantly changed to make the performance of contract difficult and the labour-dispatch entity would like to maintain or enhance the conditions stipulated in the labour contract for a new assignment, the labour-dispatch entity may terminate the labour contract if the dispatch worker does not agree.⁹⁰ However, if the labour-dispatch entity wants to lower the conditions stipulated in the labour contract, but the dispatch worker disagrees, the labour-dispatch entity must not terminate the labour contract, unless the dispatch worker decides to terminate the labour contract.⁹¹ These provisions, therefore, enable a returned worker to maintain previous employment conditions without the risk of being terminated.

D. Administration and enforcement

Since it is necessary to obtain an administrative licence to operate a labour-dispatch business, the labour-administration department is empowered to serve as the gatekeeper. If an applicant uses improper means (such as fraud or bribery), conceal the facts, or submit false materials in obtaining an administrative licence, the labour-administration department will revoke the licence, and the applicant may not re-apply within one year.⁹² In addition, the labour-administration department may impose a maximum fine of RMB 30,000, depending on the severity of the breach.⁹³ If an individual or entity operates a labour-dispatch business without an administrative licence, the labour-administration department can order it to cease such unlawful conduct, confiscate its illegally obtained income, and impose a fine amounting to one to five times the illegal income, or RMB 50,000 or less if there is no illegal income.⁹⁴

In regulating the labour-dispatch market, the labour-administration department is to supervise and investigate how the labour-dispatch entity and the labour-service user comply with the relevant statutory provisions and administrative rules on labour dispatch.⁹⁵ For instance, prior to March 31 every year, the labour-dispatch entity must submit a report detailing the previous year's business operations, including such matters as the number of dispatch workers, union participation, remuneration, payment of social insurance premiums, the labour-service users and the terms of labour dispatch, labour-service users’ compliance with legal obligations, the establishment of subsidiaries or branches, and financial audits.⁹⁶ Thereafter, the labour-administration department is to verify the annual report and input the verified outcomes into the ‘enterprise trustworthiness record’.⁹⁷ In addition, where the labour-dispatch entity or the labour-service user violates the labour-dispatch provisions under the Labour Contract Law, the labour-administration department can order it to rectify within a period of time.⁹⁸ If the labour-dispatch entity or the labour-service user does not rectify the breach within the specified time period, the labour-administration department can impose a fine of RMB 5000 to RMB 10,000 per person and revoke the administrative licence of the labour-dispatch entity.⁹⁹

As a result, the administration and enforcement of labour dispatch in China are conducted by means of licensing, government inspection, and annual reporting. Moreover, any organization or individual may report violations of the statutory and administrative provisions on labour dispatch, and the labour-administration department is to verify and handle such violations without delay and reward those who have filed meritorious reports.¹⁰⁰ Thus, apart from the government's own initiatives in cracking down unlawful conduct in relation to labour dispatch, the public may also report instances of illegal behaviour.

III. Regulatory challenges and industrial practices

Over a decade ago, the Labour Contract Law was amended to strengthen the regulatory framework of labour dispatch. Based on studies and adjudicated cases in recent years, it is notable that there exist various regulatory challenges facing labour dispatch in China. This section, therefore, highlights how labour dispatch has operated in practice with respect to the labour-dispatch entity, the labour-service user, and the dispatch worker.

A. The labour-dispatch entity

Although the amended Labour Contract Law has raised the registered capital of a labour-dispatch entity to RMB 2 million and mandated the establishment of a labour-dispatch management system, these enhanced market entry requirements have not generally improved the quality of labour-dispatch entities. This is because the quality of labour-dispatch entities in China is uneven.¹⁰¹ For example, although there are large, well-managed labour-dispatch entities, the labour-dispatch market is replete with small labour-dispatch entities, some of which have shabby business premises.¹⁰² Moreover, some labour-dispatch entities secured loans to meet the monetary threshold for registration, but the capital was subsequently withdrawn to repay the loan.¹⁰³ Some labour-dispatch entities did not actually engage in labour dispatch after they had obtained business licences.¹⁰⁴ In fact, labour-dispatch entities could easily buy asset verification reports which local labour-administration departments generally had no capacity to authenticate.¹⁰⁵ To an extent, the poor quality of some labour-dispatch entities reflected that the threshold for market entry could still be low.¹⁰⁶

Similarly, the mandated yearly report and subsequent review have not resulted in the effective implementation and enforcement of legislative provisions and government policies. For instance, some labour-dispatch entities failed to do the review, while some did not cooperate during the end-of-year inspection.¹⁰⁷ Although the non-compliance of some labour-dispatch entities can be attributed to their respective reasons, one fundamental question is whether the labour-administration department is well resourced to handle labour-dispatch cases. Moreover, since there is no monitoring, after the initial registration of capital, of whether the labour-dispatch entity has sufficient funds to pay wages and social insurance premiums or to meet other types of liabilities, dispatch workers can be left unprotected. For example, one study reported that small labour-dispatch entities docked wages and insurance premiums.¹⁰⁸

B. The labour-service user

Although the Labour Contract Law clearly states that dispatch workers can fill only temporary, auxiliary and substitute posts, and at present, the maximum number of dispatch workers in a labour-service user is to be 10% of its total workforce, these three categories of work posts have been subject to different interpretations by labour-service users,¹⁰⁹ and the legally mandated percentage has not been strictly observed.¹¹⁰ For instance, studies revealed that labour-service users in various parts of China, such as the Anhui Province and the Pearl River Delta Region, had filled core or non-temporary posts with dispatch workers, and that the numbers of dispatch workers accounted for more than 10%.¹¹¹ In fact, one study in the Zhejiang Province found that the labour-service users kept on signing two- or three-year contracts with dispatch workers to enable them to use dispatch workers for a long time.¹¹² Moreover, to circumvent the 10% cap on dispatch workers, some enterprises resorted to disguised labour outsourcing, namely, enterprises signed labour outsourcing contracts with labour-dispatch entities to replace the original labour-dispatch contracts so that the dispatch workers could continue to work.¹¹³ Because the labour-service user may agree with the dispatch worker on one probation period, labour-service users can access cheap labour by using probationary dispatch workers and avoiding social insurance responsibility.¹¹⁴

Evidently, the principle of ‘equal pay for equal work’ is designed to protect dispatch workers from being exploited and to prevent regular workers from being displaced by workers who receive lower pay and fewer fringe benefits. However, discrepancy existed between the wages of regular workers and those of dispatch workers.¹¹⁵ The mandate of ‘equal pay for equal work’ has not been successfully implemented for several reasons. First, since an enterprise could take into consideration such factors as the employee's work experience and vocational skills, the differentiation in remuneration for employees holding the same work post was permitted.¹¹⁶ Second, to avoid the application of ‘equal pay for equal work’, some enterprises changed the work content or the job title slightly so that a dispatch worker appeared to assume a different post.¹¹⁷ Third, the principle of ‘equal pay for equal work’ does not cover social insurance, so enterprises are not required to contribute the same amounts of social security premiums for dispatch workers.¹¹⁸ Fourth, where a wage gap existed between regular and dispatch workers, the local labour-administration department would find out whether the enterprise's remuneration scheme had been approved by the congress of staff-and-workers and, if the answer was affirmative, no further action would be taken.¹¹⁹ Fifth, since the mandate of ‘equal pay for equal work’ was not clearly defined, its lack of operability had led to labour-service users' self-serving interpretations.¹²⁰ Indeed, even if dispatch workers received the same wages as those of regular workers, other types of entitlements or benefits, such as bonuses for outstanding performance and housing subsidies, might not be available to them or might be lower than those available to regular workers.¹²¹

Apart from remuneration, some labour-service users have neglected the work safety and vocational training of dispatch workers. Given that dispatch workers fill mostly temporary and replaceable jobs, some labour-service users, especially in the construction and manufacturing industries, ignored safety issues that might jeopardize the physical and mental health of dispatch workers, while others did not provide a working environment that met the relevant State standards.¹²² Besides, many labour-service users were not willing to spend money on the training of dispatch workers, which deprived the latter of the right to training.¹²³ For instance, one study found that most enterprises did not include dispatch workers in their training programmes and focused their resources on training regular workers.¹²⁴ As dispatch workers wandered outside an enterprise's training system, it would be difficult for them to enhance their vocational skills.¹²⁵

C. The dispatch worker

As previously mentioned, where a dispatch worker suffers ‘harm’ caused by the labour-service user, the labour-service user and the labour-dispatch entity will be jointly and severally liable. This relatively broad provision has generated at least three implementation and enforcement issues. First, the term ‘harm’ is not clearly defined, even though it apparently refers to physical injury at work. Thus, one issue is whether the labour-service user and the labour-dispatch entity should be jointly and severally liable for other types of ‘harm’. For example, a frequent question before the courts was whether the labour-service user should be liable for the labour-dispatch entity's failure to pay economic compensation in the case of ‘sending back’ and the subsequent unlawful renewal or termination.¹²⁶ Second, the respective duties of the labour-service user and the labour-dispatch entity are not clearly delineated, which may allow them to pass responsibility to each other and lead to dispute over who should be liable, while the injured worker does not know to whom he or she should turn. For instance, in the case of work-related injury, the labour-dispatch entity should file a work-injury claim, while the labour-service user should assist in the investigation and verification of the claim. However, there can be confusion over who should be responsible and what should be done, in which case the injured worker may have no recourse. In one case, the labour-service user returned a dispatch worker who had sustained injuries to the labour-dispatch entity, which then terminated its labour contract with the dispatch worker.¹²⁷ Subsequently, the dispatch worker tried to recover loss of wages, medical expenditure, and so forth.¹²⁸ However, since neither the labour-dispatch entity nor the dispatch worker had reported the injuries for the certification of the injury claim and for the appraisal of work ability during the prescribed period of time, the dispatch worker was not able to obtain compensation.¹²⁹ The only comfort to the dispatch worker was that since the termination of a worker who had sustained work-related injuries was illegal, the court held that the labour contract between the labour-dispatch entity and the dispatch worker continued rather than being terminated.¹³⁰ Third, where the labour-dispatch entity and the labour-service user are jointly and severally liable for ‘harm’ to the dispatch worker, and the labour-dispatch entity wants to seek indemnity from the labour-service user or vice versa, the question is how the respective liabilities of the labour-service user and the labour-dispatch entity should be assessed.

Although dispatch workers have the right to organize and join a trade union in the labour-dispatch entity or in the labour-service user, they may not have access to trade unions for assistance in cases of labour dispute. This is because the trade union in the labour-service user may not necessarily take the interests of dispatch workers into consideration. In one study, the trade unions in some labour-service users excluded dispatch workers from membership.¹³¹ Even if dispatch workers were not excluded from membership, they mainly received welfare and participated in cultural, recreational, and sports activities.¹³² Dispatch workers may form a trade union in the labour-dispatch entity; however, given the fact that dispatch workers are sent to work for a variety of labour-service users in many different places, they often do not have a sense of belonging¹³³ or may not want to pay union membership dues. Thus, less than 50% of the dispatch workers in one study had joined trade unions.¹³⁴

Importantly, many dispatch workers were not conscious of their legal rights, which allowed the labour-dispatch entity or the labour-service user to infringe their rights.¹³⁵ Although a small number of dispatch workers understood their rights, the cost of protecting their rights was too high because the labour-dispatch entity and the labour-service user prolonged the time taken to protect rights through loopholes or ‘passing the buck’.¹³⁶ Further, since the prerequisite for assertion of rights is that dispatch workers must understand their rights and be able to identify who should be liable for violations of their rights, infringement cases could have been under-reported. In other words, the effective implementation and enforcement of the law have been hindered by dispatch workers' lack of understanding of their rights and the prolongation of time by some labour-dispatch entities or labour-service users.

IV. Policy implications and regulatory reforms

In the 1990s, the ILO adopted two sets of labour standards, the Private Employment Agencies Convention, 1997 (No. 181) and the Private Employment Agencies Recommendation (No. 188) to acknowledge the operation of private employment agencies and to protect the rights and interests of agency workers.¹³⁷ Among other things, these two international instruments provide that workers have the rights of freedom of association and collective bargaining, that workers have access to social security benefits and vocational training, and that workers should be informed through written contracts specifying the terms and conditions of employment before commencing their job assignments. Although China has not yet ratified the Convention,¹³⁸ its current regulatory framework for labour dispatch does contain provisions similar to those under these two international instruments. Nevertheless, the occurrence of various instances of circumvention or violation in the past decade reflects that the current regulatory framework has room for improvement. Accordingly, this section first discusses the policy implications in the reform of labour dispatch and then explores what areas of reform can be undertaken to facilitate enterprise compliance and administrative enforcement.

First and foremost, the reasons for, and the consequences of, labour dispatch vary from country to country and from industry to industry. Even so, there are common, general policy considerations for the regulation of labour dispatch. An overarching consideration is that it is imperative to balance the respective interests of the regular worker, the dispatch worker, the labour-service user, and the labour-dispatch entity. In China, regular employment through the conclusion of an indefinite or fixed-term labour contract is deemed the standard form of employment, while labour dispatch is regarded as a supplementary form of employment. As such, the fact that dispatch workers in China are to fill only three types of work posts reflects the underlying policies of providing flexibility in human resource management, enabling enterprises to focus resources on core competencies, ensuring the retention of regular workers' jobs during leave or study, and creating employment opportunities for people who are unable to secure regular jobs or whose preferred lifestyles cause them to undertake labour dispatch. In other words, China's current regulatory framework aims at safeguarding the legitimate interests of all the stakeholders through a balanced approach.

Moreover, under the umbrella of a balanced approach, job security, fair treatment, enterprise sustainability, and occupational health and safety are the key issues for policy consideration. For both regular and dispatch workers, employment security is the major concern. Broadly defined, employment security does not refer only to the retention of a job, but also access to unemployment insurance, vocational training and re-training, and old-age pensions under a functioning social security system. On the one hand, although regular workers have access to social security and enterprise-specific training and can organize unions for collective bargaining, they should not experience the threat of being displaced by dispatch workers. On the other hand, dispatch workers should be entitled to receive equal treatment for the same kind and amount of work, be given opportunities to receive training and re-training for career development, and be covered by a safety net of social security in the case of unemployment or retirement. Against the interests of workers, it is equally important to ensure that enterprises can survive in a globally competitive environment by not engaging in over-regulation and by providing them with flexibility in human resource management. For all three stakeholders, occupational health and safety measures should be put in place to prevent work-related injuries or deaths and to minimize risks and liabilities. Given these policy considerations, what reforms are warranted for the way forward?

The issues arising from the existence and growth of labour dispatch can be dealt with through government intervention, industry self-regulation, or collective bargaining. Which one of these, or a combination of these, avenues should be pursued fundamentally depends on national circumstances and internationally recognized minimum labour standards. On the one hand, a well-established regulatory scheme should balance the interests of all the stakeholders, enable government officials to vigorously enforce and implement the law, and promote voluntary compliance by the labour-dispatch entity and the labour-service user. On the other hand, industry self-regulation may assist in monitoring the conduct of labour-dispatch entities, reduce administrative costs of the enforcement agencies, and incentivize voluntary compliance by labour-dispatch entities and labour-service users. At the same time, union representation and collective bargaining may fill statutory gaps or deal with issues arising from the specific circumstances of a labour-dispatch arrangement. Hence, in formulating regulatory reforms, it is sensible to consider what complementary roles legislative intervention, industry self-regulation, and union representation can play in promoting the sound development of the labour-dispatch industry and the effective protection of the rights and interests of dispatch workers.

To enhance the quality of labour-dispatch entities, the current monetary threshold for market entry can be raised, while the practice of securing a loan and withdrawing it subsequently must be investigated and held legally accountable. In doing so, under-funded or poorly managed labour-dispatch entities will be eliminated from the labour-dispatch market, and the rights and interests of dispatch workers will not be neglected by low-quality labour-dispatch entities. In this regard, one suggestion is to have the industry association rank the trustworthiness of labour-dispatch entities.¹³⁹ Additionally, it has been argued that given the varying local circumstances, the minimum amount of registered capital should be determined by the local government based on the level of economic development as well as the scope of business activities and the size of the labour-dispatch entity.¹⁴⁰ Although it is sensible to take local circumstances into consideration in formulating the minimum amount of registered capital, the consequential ‘location shopping’, local protectionism, and increased administrative costs may make it more difficult or inefficient to enforce the law.

Furthermore, it has been suggested that a reserve fund be established to protect dispatch workers from risks.¹⁴¹ For example, a per-capita deposit, which is to be adjusted annually, can be mandated in view of the labour-dispatch entity's size, the local or industry wage level, social security premiums, and so forth.¹⁴² The requirement of a reserve fund or per-capita deposit may prevent failing or spurious labour-dispatch entities from running away with dispatch workers' wages and social insurance premiums. In this way, dispatch workers will not be left unprotected. In any event, the labour-dispatch industry should be encouraged to adopt a Code of Practice, thereby establishing the minimum standards of labour-dispatch entities and formulating basic guidelines for dealing with issues across the industry, such as setting up a simple procedure for filing complaints based on the failure to pay wages on time.

With respect to the labour-service user, it is important to materialize the underlying labour policies, namely, labour dispatch is a supplementary form of employment, and the principle of ‘equal pay for equal work’ is to be implemented. Towards these aims, labour-service users must be prevented from misclassifying work status, filling non-auxiliary and non-temporary posts with dispatch workers, signing labour-dispatch contracts repeatedly to use the same dispatch workers for the same posts, and using dispatch workers above the maximum permissible ratio. It has been suggested that positive and negative examples of temporary, auxiliary, and substitute posts should be listed.¹⁴³ Nonetheless, it is not feasible to list all possible positive or negative examples of temporary, auxiliary, and substitute posts. Hence, labour-service users should be required to justify their use of dispatch workers by providing explanatory details (such as why the work posts in question are auxiliary or temporary) in their annual reports, and the labour-administration department should be empowered to conduct spot checks to follow through or verify what labour-service users have stated in their reports. Certainly, the industry in which the labour-service user operates can play a significant role in elucidating what ‘core’ business activities in the industry are and what ‘peripheral’ business activities are conducive to labour dispatch. Besides, where an enterprise uses labour outsourcing or contractor arrangement in disguise to engage dispatch workers, the Provisional Rules on Labour Dispatch will still apply.¹⁴⁴ Thus, the Provisional Rules should be further strengthened by outlining clear legal consequences so that the misclassification of work status will not impair the rights and interests of dispatch workers.

To materialize ‘equal pay for equal work’, the urgent task is to provide more detailed guidance on what constitutes ‘equal work’ as, for example, what factors must be used in assessing two apparently different, but substantially the same, posts. In doing so, labour-service users will not be able to create ingeniously ‘not the same work’ and to differentiate their treatments of regular and dispatch workers. Likewise, it is necessary to prevent ‘different pay for the same work’ and to consider whether the coverage of ‘equal pay’ should be expanded. In the case of ‘different pay for the same work’, one suggestion is that the labour-service user should bear the burden of proof in any dispute regarding the failure to comply with the principle of ‘equal pay for equal work’.¹⁴⁵ Although objections have been raised against the inclusion of social insurance under the principle of ‘equal pay for equal work’,¹⁴⁶ the exclusion of such coverage for dispatch workers will encourage enterprises to use dispatch workers for non-auxiliary and non-temporary posts. Nonetheless, the safety net of a comprehensive social insurance programme is essential to protecting the interests of both regular and dispatch workers. Moreover, although social security benefits are portable in China, social-insurance benefits and the corresponding contribution rates are governed by local minimum standards. Hence, one question is how to coordinate the transfer of social security benefits among different regions for the so-called floating population (migrant workers).

According to the ILO, there are significant occupational health and safety risks for dispatch workers because of poor induction, training, and supervision; communication breakdowns among multiple parties; and fractured or disputed legal obligations.¹⁴⁷ Thus, it is imperative that measures be undertaken to protect the health and safety of dispatch workers. Moreover, both the labour-dispatch entity and the labour-service user are jointly and severally liable for ‘harm' to the dispatch worker. As discussed above, one frequent issue before the courts is for what kind of ‘harm’ the labour-dispatch entity and the labour-service user should be jointly and severally liable. Therefore, it is necessary to clarify the respective responsibilities of the labour-dispatch entity and the labour-service user where the dispatch worker has suffered ‘harm’.¹⁴⁸ Relatedly, if the dispatch worker has caused harm to a third-party, the labour-service user will be liable, but if the labour-dispatch entity is at fault, it will bear corresponding liability. This provision generates at least two issues: does the word ‘corresponding’ refer to proportionality and does ‘fault’ mean both negligence and intentional tort? Consequently, this relatively broad provision entails further clarification.

Although the labour-dispatch entity is the employer of the dispatch worker, the labour-service user in China seems to have relatively lighter legal obligations, as compared to their counterparts in other jurisdictions.¹⁴⁹ In China, labour dispatch allows enterprises to reduce labour costs, shift legal liabilities and risks to labour-dispatch entities, ‘return’ dispatch workers, and avoid the use of workers whose fixed-term contracts can become open-ended after two consecutive renewals or 10 consecutive years of service. However, the obligations of an employer fall primarily on the shoulder of the labour-dispatch entity. Thus, the sharing of more responsibilities by the labour-service user may incentivize it to take a more active role in monitoring whether the labour-dispatch entity has infringed the rights and interests of the dispatch worker. In addition, given that the relationship between the labour-dispatch entity and the labour-service user is merely contractual, the former is not incentivized to report the latter's violations of the rights and interests of the dispatch worker, unless the infringement is blatant and very serious. Consequently, a more balanced approach in terms of the allocation of responsibility should be adopted to promote statutory compliance and worker protection.

Apart from substantive rules and measures, better regulatory oversight and increased legal consciousness are indispensable for the effective implementation and enforcement of the regulatory system. On the one hand, the labour-administration department should strengthen its post-registration supervisory role by monitoring the operations of a labour-dispatch entity to ensure that it has sufficient finances to run its business operations and pay the wages of dispatch workers and social security premiums. Besides, the labour-administration department should inspect the books and premises of the labour-service user regularly, order the labour-service user to rectify any violations of the law promptly, and impose follow-up reporting requirements in the case of repeated violations. For example, the labour-service user should be required to submit a simple, periodic report or answer an online questionnaire quarterly or biannually regarding its use of labour dispatch. To facilitate its work, the labour-administration department must be given sufficient supervisory and monitoring resources. On the other hand, dispatch workers must understand their legal rights and the obligations of the labour-dispatch entity and those of the labour-service user. In this regard, the trade union can play an important role in imparting legal knowledge of the pertinent rights and obligations to both the dispatch worker and the middle management.

As a matter of fact, the trade union can enhance its role in the tripartite relationship of the labour-dispatch entity, the labour-service user, and the dispatch worker. Although dispatch workers in China have the right to organize unions or to join an established union, high labour mobility makes it difficult for them to organize unions in the labour-dispatch entity, they may be excluded from the trade union established in the labour-service user, and they may be reluctant to pay union membership dues. To protect the rights and interests of dispatch workers, one suggestion is to have the trade union conduct collective bargaining for dispatch workers.¹⁵⁰ At the minimum, the trade union in a labour-service user should expand its focus to cover dispatch workers, play a more active role in monitoring the labour-service user's compliance with the law, report any violations of the law promptly, and assist dispatch workers by liaising between the labour-service user, the labour-dispatch entity, and the dispatch worker. Likewise, if a trade union can be established in a labour-dispatch entity, it can play a significant role in monitoring whether the labour-dispatch entity has fulfilled its obligations to pay wages on time, make social insurance payments, and report work-related injuries.

In the main, China's current regulatory framework necessitates detailed guidelines to materialize the legislative intent. If dispatch workers do not have their rights and interests sufficiently protected under the law, the enforcement of the pertinent legal rules should be strengthened, or alternatively, the current legal rules should be amended or new rules should be enacted to fill any statutory lacunae. For instance, the re-assessment of the current punishment scheme in relation to the labour-dispatch entity may be warranted, and the amounts of fine for repeated violations can be imposed and adjusted upward. In China, labour dispatch is a supplementary form of employment, so it can be argued that the enactment of a basic law on labour dispatch may not be necessary, and that administrative regulations and ministerial rules may be sufficient. Other than legislative intervention, industry self-regulation and union representation can play a significant role in maintaining industry standards, promoting regulatory compliance, and protecting the rights and interests of dispatch workers. Furthermore, it is imperative to raise the legal consciousness of dispatch workers, enterprises, labour-dispatch entities, and trade unions. In fact, it will facilitate enforcement if a dispatch worker can have inquiries answered by the labour-administration department through a hotline. The protection of regular workers and the protection of dispatch workers are not mutually exclusive. Whether or not dispatch workers can be integrated into China's workforce depends on the balancing of the interests of the regular worker, the dispatch worker, and the enterprise.

V. Conclusions

Nowadays, diversity and innovation are championed as the drivers of progression. It has been argued that the labour market is ‘fissured’¹⁵¹ due to the duality of standard and nonstandard employment. The bifurcation of the labour market may have negative repercussions on labour volatility and economic stability.¹⁵² Nonetheless, various forms of nonstandard employment have their respective merits in terms of the provision of flexibility for both the employer and the employee. Thus, the integration of nonregular workers into the total workforce not only provides avenues for workers to choose the form of employment suitable to their respective lifestyles and financial needs, but also allows enterprises to better manage and utilize human resources in a globally competitive environment. Indisputably, decent working conditions and employment security, whether through the job itself or in combination with a sound social security system, are of paramount importance, regardless of whether nonstandard employment is volitional or involuntary. According to the European Commission, ‘flexicurity’ is to strike an appropriate balance between numerical flexibility and employment security.¹⁵³ As a result, it is judicious to formulate policies and establish an effective regulatory framework to advance, and strike a balance between, the interests of the relevant stakeholders, such as regular workers, nonregular workers, business entities, institutional employers, and the government.

Across the globe, labour dispatch is a significant form of atypical employment. In China, dispatch workers constitute a non-negligible component of the total workforce, even though labour dispatch is deemed a supplementary form of employment. Nonetheless, the previous decade witnessed various incidences of statutory non-compliance and the unfair treatment of dispatch workers. These challenges can be attributed to a combination of factors. Although education is indispensable in enhancing the legal consciousness of the labour-dispatch entity, the labour-service user, and the dispatch worker in China, the protection of the rights and interests of both regular workers and dispatch workers as well as the sustainability of enterprises largely depend on an effective regulatory system. The present study of labour dispatch in China finds that legislative reforms are warranted to strengthen the legal protection of dispatch workers and promote the sound development of the labour-dispatch industry. In truth, the clarification of statutory provisions and the refinement of implementation rules will not only facilitate the compliance of both the labour-dispatch entity and the labour-service user, but also enable the effective administration and enforcement of the law by the government. Likewise, the labour-dispatch industry and the trade union also have a significant role in the development of an operative labour-dispatch market and the protection of both regular and dispatch workers. Of course, the vitality of labour dispatch and the employment security of dispatch workers in China also depend on an efficacious social security system. In this respect, it is notable that China has been taking considerable efforts to develop and build a functioning social security system. Given that flexibility and security in employment are desirable, it is hoped that the welfare of dispatch workers and the salutary development of the labour-dispatch industry in China will be on the prospective agenda of labour reforms.

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.