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PRC introduces restrictions on use of staffing agencies

BritCham / CBBC
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The Ministry of Human Resources and Social Security has issued a new set of regulations which will affect companies’ use of staffing agencies to hire employees.
The Interim Regulations on Labour Dispatch (as this practice is known) came into force on 1 March 2014 and will affect companies whose staff are hired in the agency’s name. Staffing agencies are used by some companies as a buffer to protect the company from legal liability for its staff, or as a means of paying lower salaries and benefits.
Representative offices are exempt from the new regulations, since they are not allowed to hire staff directly.
This is the first legislation that the Chinese Government has passed to discourage labour dispatch, although it is known to have disapproved of the practice for some time. The new regulations are intended to instil equality of pay and conditions and to tighten legal accountability.
The changes mean that henceforth the proportion of agency staff may not exceed 10 per cent of the total workforce, which is much lower than had been predicted.
Further, only three kinds of staff may be employed via agencies: temporary (up to six months), substitute (e.g. maternity cover) and auxiliary. “Auxiliary” describes those staff engaged in “non-core business”, although no definition of the latter is given. Instead companies must decide through internal consultation what constitutes core and non-core business. 
A loophole exists regarding temporary staff, as the original requirement that staffing agencies give staff contracts of at least two years has not been removed. This means companies can only return staff if there are legal grounds, namely a “major change” in contractual conditions or “mass lay-off” (20 employees or 10 per cent of total staff).
Companies have a two-year grace period - until 28 February 2016 – to prepare, although during that time they are not allowed to hire agency staff unless they comply with the new regulations of types and proportion of staff. Companies that aim to meet the 10 per cent threshold by 2016 must file a restructuring plan with the local labour bureau.
Fines for non-compliance range from RMB 5,000 to RMB 10,000 per agency employee.
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