China Releases Administrative Measures for Labor Dispatching Licenses

Apr. 24 – China’s National People’s Congress adopted the “Decision on Revising the Labor Contract Law of the People’s Republic of China (Order No.73 of the PRC President)” on December 28, 2012, which provides that no entities or individuals are allowed to engage in the labor dispatching business without an administrative license, and that applications for such licenses shall be filed with the relevant labor authorities.

In response, China’s Ministry of Human Resources and Social Security released the “Administrative Measures for Labor Dispatching Licenses (Draft for Comments) (hereinafter referred to as the ‘Measures’)” on April 19, 2013. The Measures contain 35 articles and regulate the following areas:

• Regulatory duties and jurisdictions concerning the administrative licensing of labor dispatching business
• Requirements and application materials for administrative licensing of labor dispatching businesses
• Procedures, requirements and terms for administrative licensing of labor dispatching businesses
• Establishment of branch offices for labor dispatching entities
• Supervision and inspection of labor dispatching businesses
• Legal liabilities and transitional provisions

Detailed information on the Measures can be found below.

Establishing Requirements

The standards for establishing a labor dispatching entity are as follows:

• A labor dispatching entity shall have a registered capital of no less than RMB2 million
• A labor dispatching entity shall have permanent business premises and facilities that are suitable to conduct its business
• A labor dispatching entity shall have a management system for labor dispatch that is compliant with the relevant laws and administrative regulations
• A labor dispatching entity shall satisfy other conditions as prescribed by the relevant laws and administrative regulations

Moreover, foreign-invested enterprises are not allowed to establish wholly-owned foreign labor dispatching enterprises in China, they can only establish joint venture labor dispatching enterprises in cooperation with domestic labor dispatching entities.

Application Materials

Entities intending to engage in the labor dispatching business shall submit the following materials to the competent authorities:

• Application form for the labor dispatching license
• Business license or the “Notice of Preliminary Approval of Enterprise Names”
• Articles of association
• Capital verification report or financial audit report
• Certificate for the use of business premises and information on office facilities and equipment
• Identification paper of the enterprise’s legal representatives and the relevant professional certificates of enterprise’s staff
• Information on the enterprise’s labor dispatching management system
• Other documents required by the relevant administrative departments of human resources and social security

Legal Liabilities

For entities and individuals providing labor dispatching services without a license, the labor authorities may confiscate all illegal gains and impose a fine of no less than one time, but not more than five times, the illegal gains on such entities. Where there are no illegal gains, a fine of no more than RMB50,000 may be imposed.

For labor dispatching entities violating the Labor Contract Law, if they fail to correct the violations within the time period specified by the relevant labor bureau, they may be fined between RMB5,000 and RMB10,000 per dispatched employee, and labor dispatching entities may have their business licenses revoked.

Labor dispatching entities may face a fine up to RMB30,000 under the following circumstances:

• Changing administrative licensing items without approval
• Forging, altering, reselling, leasing or lending the labor dispatching license, or illegally transferring such license in other ways
• Concealing relevant information or providing false materials to apply for or obtain the labor dispatching license
• Obtaining the labor dispatching license through illegal ways, such as deception or bribery
• Failing to provide an annual labor dispatching report within the designated time or providing a false annual labor dispatching report

Application of the Measures

The Measures are scheduled to take effect on July 1, 2013.

For labor contracts and labor dispatching agreements lawfully entered into after the release of the Measures (April 19, 2013), but before July 1, 2013, they shall be performed in accordance with the Measures.

For entities engaged in the labor dispatching business prior to July 1, 2013, they are allowed to take up the new labor dispatching business only if they obtain the administrative license pursuant to the Measure before June 30, 2014.

The Measures are currently seeking public opinions and comments, and such feedback can be submitted via the methods below through May 19, 2013.

• Website: Log on to www.chinalaw.gov.cn, and submit comments through the “Opinion Collecting System” on the left side of the website homepage
• E-mail: lifachu@mohrss.gov.cn
• Address: Policy and Regulation Division, Ministry of Human Resources and Social Security, No.3, East Pingli Rd, Dongcheng District, Beijing. Postcode 100013.