An amendment to the Labor Contract Law (Chinese) will limit the use of 'labor contracting agents' by companies to "temporary, supplementary or back-up jobs". The change, which has been adopted by the National People's Congress Standing Committee, is due to take effect on 1 July 2013 according to national press agency Xinhua.
The Labor Contract Law is one of China's main sources of employment legislation. It came into force in 2008 and is administered by the Ministry of Human Resources and Social Security. Among other provisions, the law requires employers to pay employees' health insurance and social security contributions, and includes protection for employees on probation and working overtime.
According to Xinhua, the amendment was proposed in June to prevent employers hiring long-term workers through agencies. According to Ministry figures, China had 37 million agency workers in 2011.In practice, companies can pay these workers much less than those recruited directly as they are categorised as 'dispatched employees'.
The amendment reiterates a right for agency workers, or "dispatched workers", to receive "equal pay for the same work" carried out by a company's "formal employees". Employers must "adopt the same remuneration distribution measures of its formal employees at the same position for such dispatched worker".
Employers will also be required to hire the majority of their workforce directly, rather than via contractors, and to strictly control the number of 'leased workers' they hire. The amendment also clarifies those roles that can be filled by agency workers. 'Temporary' jobs are those lasting no longer than six months, while 'back-up' jobs are those that can be taken over while permanent workers are on maternity, study or holiday leave.
The amendment also creates new administrative rules for labor contracting agencies. The minimum amount of registered capital that an agency must hold has been increased to 2 million yuan, while agencies will also be required to obtain administrative approval before they can begin arranging employment contracts.
At a press conference to introduce the changes Kan He, vice chair of the committee's legislative affairs commission, told Reuters that the changes were intended to "prevent abuse".
"The regulations control the total numbers and the proportion of workers that can be contracted through agencies and companies cannot expand either number or proportion at whim," he said. "The majority of workers at a company should be under regular labor contracts."