China tightens loophole on hiring temporary workers

BEIJING Fri Dec 28, 2012 6:59am EST

A worker welds steel bars at a construction site for a new train station in Ningbo, Zhejiang province, December 6, 2012. REUTERS/China Daily

A worker welds steel bars at a construction site for a new train station in Ningbo, Zhejiang province, December 6, 2012.

Credit: Reuters/China Daily

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BEIJING (Reuters) - China amended its labor law on Friday to ensure that workers hired through contracting agents are offered the same conditions as full employees, a move meant to tighten a loophole used by many employers to maintain flexible staffing.

Contracting agencies have taken off since China implemented the Labor Contract Law in 2008, which stipulates employers must pay workers' health insurance and social security benefits and makes firing very difficult.

"Hiring via labor contracting agents should be arranged only for temporary, supplementary and backup jobs," the amendment reads, according to the Xinhua news agency. It takes effect on July 1, 2013.

Contracted laborers now make up about a third of the workforce at many Chinese and multinational factories, and in some cases account for well over half.

Some foreign representative offices, all news bureaus and most embassies are required to hire Chinese staff through employment agencies, rather than directly.

Under the amendment, "temporary" refers to durations of under six months, while supplementary workers would replace staff who are on maternity or vacation leave, Kan He, vice chairman of the legislative affairs commission of the National People's Congress standing committee, said at a press conference to introduce the legislation.

The main point is that contracting through agencies should not become the main channel for employment, he said, acknowledging that the definition of backup might differ by industry.

"In order 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," Kan said.

"The majority of workers at a company should be under regular labor contracts."

Although in theory contracted or dispatch workers are paid the same, with benefits supplied by the agencies who are legally their direct employers, in practice many contracted workers, especially in manufacturing industries and state-owned enterprises, do not enjoy benefits and are paid less.

Employment agencies have been set up by local governments and even by companies themselves to keep an arms-length relationship with workers. Workers who are underpaid, fired or suffer injury often find it very difficult to pursue compensation through agencies.

China would increase inspections for violations, Kan said, including the practice of chopping a longer contract into several contracts of shorter duration to maintain the appearance of "temporary" work.

Korean electronics giant Samsung Electronics Co. said in November that it would require its 249 supplier factories in China to cap the number of temporary or contracted workers at 30 percent of regular full-time employees.

It announced the corrective measure after Chinese labor activists reported violations of overtime rules and working conditions as well as under-age workers at Samsung suppliers. Samsung says its own audit did not find workers under China's legal working age of 16.

(Reporting by Lucy Hornby; Editing by Nick Macfie)

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Comments (3)
MikeBarnett wrote:
This is one more effort by the government to raise the income of its citizens so they can become customers and pay more in taxes. This will have numerous benefits throughout the economy. It will reduce social tensions because people will know that they can advance if they work smarter and harder.

My partners and I served in Special Forces for about 30 years each, and we acquired investment capital and advanced college degrees. Mine is a PhD in mechanical engineering with a focus on metalurgy. We left the US in 1999 when we learned that US business leaders were telling lies about profits. We went to Asia and slowly moved to China because it was becoming the biggest economy. We worked under the US government in the past, so we don’t mind working with China’s government. We have worked 50 to 60 hours per week for all of our years and don’t mind new challenges because it gives us new things to accomplish. That is the attitude that Chinese workers have as long as they get paid fairly. We do that in our companies because it works; it makes our workers loyal customers for our products; and we don’t worry about law enforcement later because we’ve done the right thing from the start.

This new law will make it better for all companies when they consider secondary benefits from their and other company workers who can afford their products. If you make products that another company uses for its manufacturing, that other company’s workers can become your customers if they have fair pay. Henry Ford made the Model-T and sold it for a price that allowed his workers to buy it. This gave him a guaranteed market in hard times. We do the same and encourage other entrepreneurs to consider this business strategy for long-term success.

Dec 29, 2012 4:15pm EST  --  Report as abuse
MikeBarnett wrote:
One additional point. Reuters has an article entitled “China consumers driving economic rebound: survey” dated 12-26-2012 in which they point out that Chinese shoppers are spending more. The article states that consumer spending grew 14.9% in November of 2012 over the same month in 2011. I posted a comment on the story, but I haven’t yet been able to find the version of the story in which my comment appeared.

Dec 29, 2012 4:27pm EST  --  Report as abuse
MikeBarnett wrote:
Correction: 2nd paragraph, line 2, “metalurgy” should be “metallurgy.” I was a heavy weapons sergeant, and it took a long time to correct the creative spelling and rambling paragraphs in my dissertation. I prefer mathematics, chemistry, and physics.

Dec 29, 2012 4:52pm EST  --  Report as abuse
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