Outsourcing
The Employment Contract Law specifically regulates the engagement and placement of employees by staffing firms. The placement of employees by staffing firms may generally only be done for temporary, auxiliary or substitute positions. Note however that the only way in which a representative office can engage local staff in China is through a staffing agency.
Staffing firms are responsible for the employment-related obligations to their employees. The enterprise with which the employee is placed also has specific obligations, including:
- implementing the national labor standard and provide corresponding working conditions and labor protection measures;
- informing the placed employees of the working requirements and wages;
- paying overtime payments and performance bonuses, and providing welfare in connection with the working position;
- providing training that is necessary for the working position; and
- if continuously using the placed employees, implementing a regular wage adjustment mechanism.
A contract between a staffing firm and its employee must specify where the employee will be placed, their position and the term of the placement.
When placing employees, the staffing firm is required to enter into a staffing agreement with the enterprise with which the employees will be placed. The staffing agreements must specify the job positions in which employees are placed, the number of persons placed, the term of placement, the amounts and methods of payments of labour compensation and social insurance premiums, and the liability for breach of the agreement. Neither the staffing firm nor the employer may charge fees to the placed employees.
The legislation specifically requires companies to determine the term of the placements based on the actual requirements of the job position. The use of several short-term placement agreements to cover a continuous term of work is prohibited.
Placed employees are entitled to join the labour union of either the staffing firm or the enterprise in which they are placed. Placed employees are also entitled to equal pay for equal work, as compared with employees engaged directly by the enterprise to perform work in the same or a similar position.
The legislation prescribes specific circumstances in which the enterprise may return a placed employee to the staffing firm, enabling the staffing firm to terminate the employment contract. Note that, the enterprise can not return a placed employee to the staffing firm on the grounds of redundancy.
Contracting
A genuine independent contractor relationship will be governed by the Civil Law and the Contract Law rather than employment-related laws. However, if a service contract for an independent contractor is used to avoid the protections that are afforded to employees, the contract may be considered void.