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A television reporter in Beijing known by his pseudonym Lu Li has produced quite a few feature stories on safeguarding workers’ rights. He is producing a news report on a dispatched worker who was laid off after working for the same employer for more than two decades. The employer did not pay her severance， nor had it ever bought her any social insurance.
A labor dispatch or staff leasing arrangement is similar to a temp agency. The dispatch service provider hires workers and dispatches them to units with which it has negotiated labor agreements.
This employment model has been used in many industries to slash labor costs.
Indirect employment of dispatched workers can circumvent some obligations businesses would otherwise be required to fulfill in direct hiring， thus exploiting a regulatory loophole in the Labor Contract law， according to Lu.
Lu learned that many companies neglect paying social insurance tax for dispatched workers， although the government mandates employers of regular workers to pay five kinds of insurance including endowment， health， unemployment， occupational injury and maternity insurances， as well as a fund for low-interest housing loans. These non-wage benefits altogether represent about 40 percent of labor costs for some organizations， he said.
Worksite employers are not required to sign employment contracts with dispatched workers， so they lack job security and can be fired without good reason. Nor can they enjoy the same training， promotion and honors as regular staff， Lu said， hence they do not have a sense of belonging.
In an eastern province， the average wages of dispatched workers in such industries as telecommunications， electricity and banking are reportedly only 38 percent that of regular staff.
“Generally speaking， the phenomenon of unequal pay for equal work is quite prevalent，”Lu said.
Unequal pay for equal work resulting from dispatch labor abuse， like the unequal value for identical lives in personal injury insurance indemnity， deeply undermines the basic rules of market economy and social justice， said Zheng Gongcheng， a Standing Committee member of the National People’s Congress （NPC）， the national legislature.
“The persistence of unequal pay for equal work poses greater social risks. The abuse of labor dispatch runs against the original purpose of the Labor Contract Law and seriously undermines its legal effectiveness，” said Zheng， also a professor at the Social Security Research Center of the Beijing-based Renmin University of China. China’s first Labor Contract Law， which became effective on January 1， 2008， aims to protect the legitimate rights and interests of workers. Lu is a beneficiary of the law. Before becoming a TV reporter， he was dispatched to work abroad and earned only one fourth what the worksite employer had paid the employment agency.
This violates the Labor Contract Law， which stipulates that staffing firms may not pocket part of the labor compensation that the worksite employers pay to dispatched workers in accordance with the placement agreement. Lu reported his staffing agency to a supervising government department， and obtained the payment he was due.
“The Labor Contract Law plays an important role in developing a harmonious employment relationship and maintaining social stability，”said Liu Jichen， Director of the Department of Legal Affairs of the All-China Federation of Trade Unions. He said that ambiguities in dispatch labor agreements render the system vulnerable to abuse.
A 2010 survey on dispatch labor conducted by the All-China Federation of Trade Unions showed that there are 60 million dispatched workers in China， accounting for nearly 20 percent of the country’s workforce.
“Unchecked expansion of dispatch labor will not only directly hurt workers’ legitimate rights， but also undermine the labor contract system and employment relations as well as social stability，” said Zhou Xiaozheng， a professor at the Legal Sociology Research Institute of the Renmin University of China.
On December 28， 2012， the 11th NPC Standing Committee adopted an amendment to the Labor Contract Law after two readings. The amendment aims at strictly regulating dispatch labor to protect the rights and interests of dispatched workers. The amended law went into force on July 1.
Legislative highlights
The amendment underlines the point that workers hired through labor dispatch service providers should receive the same treatment as direct recruits.
The original Article 63 states， “Dispatched workers shall enjoy the right to obtain the same pay as that received by regular staff of an employer for equal work. In case there is no worker in the same post in the employer， the remunerations thereof shall be determined by referring to the payment in the place where the employer is situated， and to workers at the same or a similar post.”
That article was revised to add that employers should adopt the same “labor remuneration allocation methods” for dispatched workers and regular employees in the same position. In addition， the revised article says that remuneration for dispatched workers specified in the contract between labor dispatch service providers and worksite employers must conform to the above clause.
Another highlight of the amendment is that it stipulates that employers should primarily hire workers directly， rather than via labor dispatch service providers.
It also requires employers to strictly control the number of dispatched workers， and make sure that dispatched workers do not exceed a certain percentage of the total number of workers. The specific ratio should be determined by the Ministry of Human Resources and Social Security.
The amended law stipulates that dispatch labor is a supplementary form of employment and may only be used for temporary， auxiliary or substitute positions.
The amended law defines a temporary position as one that will not last for more than six months， an auxiliary position as one not for the principal business of the employer and a substitute position as one to replace any regular employee who cannot work for some period due to full-time training， leave， or other reasons.
The amendment has also raised the threshold for setting up labor dispatch service providers. The required minimum registered capital has been raised from 500，000 yuan（$79，000） before the revision to 2 million yuan（$317，000） now.
Execution and impact
The implementation of the amended Labor Contract Law has greatly impacted labor dispatch service providers.
An owner of a Beijing company said on the condition of anonymity that previously， the salaries of dispatched workers managed by his firm were paid by worksite employers， and every month， he drew 250 yuan （$40） out of every worker’s salary as commission.
Now， since the amended law mandates equal pay for equal work， his company can only charge every dispatched worker a one-time intermediary fee of 400 yuan （$65）. “After that， I can make no more money from a dispatched worker，” he said.
The amended law will prompt labor dispatch service providers to reshuffle or merge， said Rao Dejun， General Manager of employment company Zhongshan Chitone Executive Search. He said that the raised registered capital threshold is too high for many companies in the industry.
Worksite employers have mixed reaction to the amended law. Lu Jilie， Assistant to President of Guangdong Galanz Group Co. Ltd.， one of China’s largest home appliances makers， said that the new law will not affect his group since both directly recruited and dispatched workers are paid piecemeal， which conforms to the equal pay for equal work principle. Dispatched workers only account for a small share of all workers in the Galanz Group.“In fact， dispatch labor is very limited in saving costs for a company. We do not wish to boost company’s bottom line through saving on labor costs either，” Lu said.
“A normal company should train its own workers， for they can create higher value for the company than temporary workers. The amended law will not only protect workers’ rights， but also prompt firms to change hiring practices，”he said.
However， some companies are fumbling for ways to circumvent the new law. For example， a few labor-intensive enterprises reportedly have decided to outsource some jobs previously performed by dispatched workers， and their pay and work duties will remain the same.
“Job outsourcing is a way to dodge the equal pay for equal work principle while it is similar to labor dispatch in lowering labor cost，” said Zheng Jianhe， a labor lawyer with the Nanjing Office of Beijing’s JunZeJun Law Offices.
To make sure that the amended law is properly enforced， the Ministry of Human Resources and Social Security will build an effective long-term mechanism to oversee dispatch labor， said a ministry official.