Medea Huang, Associate, Advisory Services, BSR

In China, “dispatch agencies,” or third-party labor suppliers who recruit, hire, and employ laborers on behalf of other companies, are common. These agencies are technically the direct employer of dispatched employees, even if their tasks are performed for another company. Although dispatched workers are meant to be temporary, they sometimes end up as long-term employees, and their status makes them particularly vulnerable to lower pay for work equal to that of direct hires.

On July 1, 2013, amendments to China’s labor contract law will come into effect to better protect this category of workers. These amendments, which will close loopholes in the 2008 law, will mean more than “business as usual” for dispatch agencies and companies operating in China.

Core amendments of the revised law include:

  1. Compensation for dispatched employees must be equal to that of full-time, formal employees within the company.
  2. Dispatched employment must be on a temporary, auxiliary, or substitute basis.
  3. Both the dispatch agency and employer are liable and subject to fines if the employer violates the revised law.

The new rules requiring that dispatch employees be compensated equally and employed on a temporary, auxiliary, or substitute basis will be especially relevant for companies in the manufacturing industry. These amendments will require innovative changes within company hiring, compensation, and labor structures.

BSR will be providing more perspective on this law and the steps companies can take in the coming months.