Further Guidance On Distinguishing Between Labor Dispatch And Outsourcing

The Interim Provisions on Labor Dispatch were published by the Chinese Ministry of Human Resources and Social Security on January 24, 2014, and came into effect on March 1, 2014 ("Interim Provisions"). The Interim Provisions require that no more than 10 percent of a company's total workforce can be engaged through labor-dispatch arrangements (akin to independent contract workers in common law countries). Companies that are not currently compliant with the Interim Provisions must adjust their employment structure to comply with the 10 percent cap by March 1, 2016. 

In order to comply with this cap requirement, many foreign invested enterprises ("FIEs") are contemplating outsourcing work originally undertaken by dispatch workers to third-party service providers. FIEs should be careful outsourcing work in this way as the Interim Provisions prohibit some forms of outsourcing and provide limited guidance on how to distinguish between legitimate outsourcing and prohibited