Revisions to China’s Labour Contract Law focus on abuse of employment agency system

27 June 2019

Revisions to the Labour Contract Law, under discussion at the National People’s Congress Standing Committee meeting this week, are aimed at stamping out abuses of the employment agency (劳务派遣) system in China and, government officials claim, firmly establishing the principle of equal pay for equal work.

Ever since the Labour Contract Law went into effect in 2008, there has been a steady rise in the number of employers using agency staff in order to avoid directly signing contracts with their employees, and thus sidestep the legal obligations associated with those contracts. Typically, agency workers receive lower pay and fewer benefits than regular staff in the same position.

Government officials “conservatively estimate” that there are around 27 million agency workers in China at present, primarily employed in large state-owned enterprises and public institutions and especially in the oil and telecoms sectors. And a report by China Labor Watch out today cites several manufacturers in the Apple supply chain for extensive use of agency labour.

In an attempt to close some of the most obvious loopholes in the current law, the draft revisions seek to provide a clearer definition of the three types of employee positions that can legally be filled by agency staff. According to the new draft, temporary (临时性) positions cannot exceed six months, auxiliary (辅助性) positions should specifically facilitate or assist the primary business, and substitute (替代性) positions can only be filled when regular employees take a leave of absence for study, vacation, etc. for a fixed period of time.

The draft also seeks to better regulate the employment agency system by requiring agencies to be licensed by the local labour authorities and by raising the minimum registered capital requirement for such agencies from 500,000 yuan to at least one million yuan.

In addition, the official All-China Federation of Trade Unions argued for a clause that would mandate an employment contract for any agency worker assigned to an enterprise for more than two years continuously.

The proposed revisions show that the central government is keenly aware of the widespread abuse of the agency system by major corporations and others, and is attempting to at least limit those abuses. However, the revisions still rely on already over-stretched local labour officials to enforce the law. And it seems highly unlikely that the local authorities will be able to ensure that every single use of agency labour conforms to the letter of the law.

Moreover, even with stricter definitions of temporary, auxiliary and substitute labour in place, employers will still find loopholes, for example, by hiring temporary staff for six months and then immediately rehiring them for another six months on a new agency contract.

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