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- Human Resources and Payroll in China 2016-2017 (5th Edition)
2.2 Dispatch
Labor dispatch is an alternative option for FIEs looking to hire Chinese staff. While the preparatory
work for setting up entities in China may require the assistance of Chinese staff, it is necessary for
foreign investors to obtain their local entity’s business license before formally hiring employees
Additionally, as mentioned previously, a Representative Office cannot hire staff directly, and their
employees must be seconded from dispatch agencies.
Labor dispatch is generally regulated by Section 2 of the PRC Labor Contract Law. On January 24,
2014, China’s Ministry of Human Resources and Social Security (MOHRSS) promulgated the “Interim
Regulations on Labor Dispatch” (MOHRSS Order No. 22, hereinafter referred to as the “Interim
Regulations”), which is the first comprehensive labor dispatch regulation at the country’sMinisterial level.
Key information about dispatch can be found below.
Dispatched Agency
To establish a labor dispatch agency, the following requirements should be satisfied:
• a registered capital of no less than RMB 2 million.
• the fixed business premises and facilities correspond to the business.
• the labor dispatch management system complies with the provisions of laws and
administrative regulations.
• any other criteria stipulated by laws and administrative regulations.
Additionally, the labor dispatch agencymust have a license issued by the local Labor Bureau.Without
such a license, the business registration of the labor dispatch agency cannot be completed.
Applicable Scope of Labor Dispatch
According to the Interim Regulations, labor dispatching arrangements are only applicable for the
following three types of positions:
Temporary position
: A position with a duration of no more than six months.
Auxiliary position
: A position that provides auxiliary services to the main or core business of the
employer.
Replaceable position
: A position that can be performed by a dispatched employee in place of
a permanent employee during the period when such an employee is away from work for study,
vacation or other reasons.
The applicable position type must be specified within the applicant’s dispatch contract.
“ With the regulatory framework surrounding labor dispatch now fundamentally changed, companies must be aware of alternative methods of hiring temporary workers to avoid labor disputes and government penalties. ” Allan Xu Manager Business Advisory Services Dezan Shira & Associates Shanghai Office