• PRC Employment Contract Law Amended
  • January 28, 2013
  • Law Firm: Norton Rose Canada LLP - Montreal Office
  • On 28 December 2012 the Standing Committee of the National People's Congress promulgated amendments (the Amendments) to PRC Employment Contract Law (ECL). These are the first amendments to the ECL since it was brought into effect on 1 January 2008.

    The Amendments mainly focus on labour dispatching arrangements (meaning the mechanism by which employees are employed by professional labour dispatching agents who in turn assign them to enterprises which have the need of labour force) in the following ways:

    • by imposing stricter requirements on establishing labour dispatching companies. The minimum registered capital of a labour dispatching company is increased from RMB500,000 to RMB2,000,000. More importantly, the labour dispatching companies must receive a permit from the labour authority. Without a permit no entity may conduct labour dispatching business;

    • by re-emphasising the rights of dispatched employees to fair remuneration. The Amendments elaborate on the general principle that dispatched employees are to enjoy the same remuneration as other employees in comparable positions by requiring that enterprises determine the remuneration of dispatched employees in the same way as for employees directly employed; and

    • by clarifying the type of positions to which employees may be dispatched. The ECL stipulates that the dispatching arrangement may only apply to the positions which are temporary, ancillary or replaceable. Lack of clarity has enabled employers to avoid their obligations under the ECL. To remedy the problems, the Amendments provide clearer definitions to several terms as follows:

    a. Temporary positions - meaning positions of no more than six months;
    b. Ancillary positions - meaning positions that are non-core business which provide supporting services to the core business positions;
    c. Replaceable positions - meaning positions for employees who need time off from work due to study or leave, and who therefore have to be replaced for a certain period of time.

    In addition, the Amendments stipulate that the total number of dispatched employees in an enterprise should not exceed a set proportion of the total work force of that enterprise. The portion will be determined by the labour authority in due course.

    The Amendments introduce tighter restrictions on dispatching arrangements and are expected to have a significant impact on many state-owned enterprises and foreign-invested enterprises. The Amendments will take effect on 1 July 2013, which is meant to give market players six months to adapt to the new requirements.