Proposal to Review Labor Dispatch Regulations

By Weng Shiyou
Published: 2008-12-26
From News, page 3, issue no. 399, December 22, 2008
Translated by Liu Peng
Original article
: [Chinese]

China's policymakers have proposed tightening enforcement of the Labor Contract Law to reign in the use of interim workers by some companies as a means to avoid paying staff benefits.

The National People's Congress, the country's top legislature, had on Christmas Day published a paper assessing the implementation of the Law - which came into effect in January 2008 - and proposing measures to enhance its effectiveness and fix loopholes.

The Congress said irregularities existed in the deployment of interim workers by staffing firms and companies. It proposed to review the system of such employment and tighten supervision to prevent infringement of labor rights.

Available data revealed that the number of interim workers, dispatched by staffing firms to various companies, has in this year increased by seven million to 27 million people. These workers usually enjoyed lesser social security benefits and wages.

Controversy over the exploitation of interim workers erupted recently after a group of college students went undercover to gather "evidences" and later published an "investigative report" online, alleging the world's biggest beverage maker Coca-Cola for abusing loopholes in the Law to cut costs by hiring through staffing firms. The latter denied the accusations.

Some analysts concerned that pushing for stricter regulations at a time when the economic outlook was gloomy would add more pressures on companies already squeezed by reduced profits and cash flows.

Abnormal Boom 
Interim workers in China generally received lower wages and social security benefits compared to official staff.

By hiring interim workers, companies could skip signing an indefinite-term contract, as demanded by the Law, with them and thus avoid certain social security obligations required for employees.  

The practice was said to be rampant in the labor-intensive manufacturing sector, where interim workers filled most of the bottom ranking jobs. An industry player claimed some foreign companies also filled their higher managerial posts through staffing firms. 

The EO learned that interim workers made up about 10% of staffing in some state-owned enterprises that came under the supervision of the central government; in some telecommunication companies, the figure soared to about 50%. By comparison, interim workers usually formed about 3% of companies' workforce in developed countries.

Interim workers were also employed by some Chinese public institutions; an employee in one of them told the EO that all the new staff in his institution signed labor contracts with a staffing firm instead of the institution.

These new workers earned 1,100 yuan in basic salary and 900 yuan of allowance; but they had to set aside 100 yuan monthly to the staffing firm as management fee, said the above source.

The source added that his new co-workers had been complaining about unfairness, as they performed the same tasks as similar ranking full status staff but earned less due to the extra fee.

Furthermore, some staffing firms were actually subsidiaries or sister companies to their "clients" who requested interim workers; this practice by right was forbade by the Law.

"The law is meant to protect and promote workers' rights and benefits, instead it has led to a surge in the deployment of interim workers and impaired their interests," said an industrial relations scholar. 

Unclear Regulations 
Though the Law had clauses that touched on the deployment of interim workers, fuzzy definitions and unclear regulations had instead opened up opportunities for abuse, some experts on labor issues claimed.

Realizing this, the State Council had on Sept 18 issued implementation regulations to supplement the Law.

The Regulations stated the term labor dispatch (of interim worker) "generally" applied to temporary, auxiliary and replaceable posts; no further explanation was made available.

The EO learned that when the Regulations were in the drafting process, legal experts had proposed more specific deifinitions, such as to limit labor dispatch to posts unrelated to main business operations; or posts that lasted for less than six months; or to fill vacancies left open by staff on sabbatical and maternity leaves. 

These suggestions were not adopted, and some observers believed that by abandoning these specifics, the government was actually offering concessions to companies and indirectly caused the boom in hiring interim workers.

Some industry players believed the problem also lied in the low threshold for opening a staffing firm. According to law, staffing firms shall be established in accordance with the relevant regulations of the Company Law and shall have a registered capital of no less than 500,000 yuan.

The ease in setting up such firms had purported led to varying qualities and some below par firms were abusing legal loopholes for profiteering.

However, industry observers were also worried that if the government imposed overly strict measures to reign in abuse of interim workers, it could deliver a severe blow to all staffing firms regardless good or bad. 

"Hiring interim workers shouldn't become the main form of employment channel in China," said Li Tianguo, director of Employment Relations under Human Resource and Social Security Ministry.

He suggested issuing special licenses for staffing firms to better control and supervise the quality of these companies.

Take Japan for example, according to a law enacted in 1986, it limited the dispatch of interim workers to 14 industries, and later the number was enlarged to 26. The law was amended in 1999, when the restriction was only imposed on special industries, such as shipment, construction and security service.

Li noted that the Chinese government could set limit on working timeframe to prevent abuse of interim worker dispatch, adding German, Japan and France had all set a ceiling limit of working hours for interim workers.