New measures on labour dispatch licensing issued

On 20 June 2013, the Ministry of Human Resources and Social Security issued the Implementation Measures on Administrative Licensing for Labour Dispatch, which will took effect from 1 July 2013. Based on the newly amended Labour Contract Law, the labour dispatch licensing measures reiterate the preconditions for entities to engage in the labour dispatch business – e.g. RMB2 million (US$325,000) as the minimum registered capital – as well as specify the procedures and documents necessary to apply for a labour dispatch licence. Unlike the earlier draft of the measures issued for public comment in April 2013, the final issued labour dispatch licensing measures no longer contain a provision restricting foreign investment in the labour dispatch sector (the earlier draft had a provision stating that only Sino-foreign joint ventures were permitted in this sector).

Importantly, the measures provide more clarity regarding the transitional and grandfathering rules contained in the amended Labour Contract Law. Effective from 1 July 2013, staffing agencies established before that date may only engage in new labour dispatch business after obtaining the required licence. It is unclear how this fits in with the amended Labour Contract Law, which allows existing staffing agencies to obtain the licence by 30 June 2014, in order to engage in new labour dispatch business, since this grace period provision is missing from the labour dispatch licensing measures.

As an exception, employment contracts and labour dispatch service agreements signed before 1 July 2013 can still be performed until their expiration date. However, as of 1 July 2013, the employment contracts and labour dispatch service agreements signed between 28 December 2012 – the date when the amended Labour Contract Law was originally issued – and 30 June 2013 must be performed in compliance with the amended Labour Contract Law (i.e. dispatched employees may be used only for temporary/auxiliary/substitute positions, equal pay for equal work, etc.).

Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mail at: Zhang Danian (Shanghai) danian.zhang@bakermckenzie.com