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Development of China's Labor Service Dispatching Industry: Issues and Solutions


By Lai Youwei, General Office of DRC

Research Report No 219, 2012 (Total 4221)

I. Overall Development of China's Labor Service Dispatching Industry

Labor service dispatching is otherwise known as human resource dispatch, talent dispatch, talent leasing or employee leasing. It is a market allocation of human resources aimed at enterprises' flexible employment and is basically characterized by "recruitment by service dispatching companies without using the recruits" and "employers not involved in recruitment". Service dispatching companies are the real employers and undertake responsibilities as employers, including recruiting employees, handling admission procedures and signing labor contracts with employees; giving out salaries and social benefits to employees; handling social insurance and housing fund for employees; and attending to employees' work-related injuries and fatal accidents.

As a new type of labor relation, labor service dispatching has not long existed in China, yet it has developed rapidly. The Beijing Foreign Enterprise Service Group Co. Ltd. (FESCO) established in 1979 is involved in policy personnel dispatch, and FESCO's services are mainly aimed at working staffs of foreign enterprises in China and foreign affairs personnel sent by China to other countries. In mid-1980s, some professional intermediary agencies began to get involved in labor service dispatching business. In mid- and late-1990s, a large number of people were laid off in China, redundant laborers appeared in large numbers in rural areas and the number of university graduates began to increase considerably. Under such circumstances, having adapted to the enterprises' demand for flexible employment, labor service dispatching industry brought in large numbers of laid-off workers from state-owned enterprises and took in migrant workers, partly easing the then employment pressure. Since 2000, particularly since the implementation of the Labor Contract Law on January 1, 2008, the rear-service departments of some state-owned enterprises and institutions and some foreign enterprises began to employ labor service dispatched workers in large numbers, and the number of labor service dispatched workers increased rapidly.

At present, there have been no accurate and authoritative statistics about the total number of Chinese labor service dispatched workers, and the number has been mostly figured out according to statistical samples. The total number of labor service dispatched workers figured out for 2009 by the Ministry of Human Resources and Social Security was 27 million, while the number came to 20 million before the implementation of the Labor Contract Law. Investigation results from provinces (regions and municipalities) and from nationwide industrial unions show that the number of labor service dispatched workers has increased rapidly in recent years. Results from the questionnaire-based investigations conducted by the Research Office of All-China Federation of Trade Unions on the realization of employment and economic rights and interests among workers of countrywide enterprises reveal that in 2011 the number of Chinese labor service dispatched workers totaled about 37 million, making up 13.1% of the national total, and that the number of service dispatching workers employed by state-owned enterprises made up about 16.2% of total workers of all state-owned enterprises. In China, labor service dispatched workers are mainly migrant workers, urban laid-off workers, university and secondary technical school graduates and other urban personnel, working mainly in the front line of production with high intensity. By industry distribution, the labor service dispatched workers are scattered in all trades and professions. A large number of labor service dispatched workers are employed by the secondary industry, while the tertiary industry, especially some emerging industries requiring higher professional skills also employ labor service dispatched workers. At present, industries employing big numbers of labor service dispatched workers include construction-related installation, telecommunications, postal service, finance, insurance, petrochemical, port, power, tobacco, oil, water conservancy, transportation and food, of which the proportion of labor service dispatched workers employed by telecommunication industry has reached 40% or above.

II. Reasons for the Rapid Development of Labor Service Dispatching Industry

Following reasons have given traction to the rapid development of China's labor service dispatching industry. Some reasons are reasonable, while others are irrational.

1. Labor service dispatching industry can help increase employment for special social groups

Currently, China's service resources for public employment are scattered and the management system is obstructed. The integration of personnel market and labor market has stayed ineffective in China, and segmentation of regional markets exists in varying degrees, making it difficult to effectively meet the swift-growing demand for employment services. Due to their inability to find jobs and their access to less job information, some laid-off and unemployed people and rural laborers find it difficult to find or start their jobs on their own. Therefore, departments concerned organize them to realize employment by way of labor service dispatching, which is an important channel to solve the problem of employment. In addition, many university and secondary technical school graduates have fostered the concept of finding jobs in various channels, and they would get an employment first before selecting a job so as to accumulate work experience through labor service dispatching and lay a sound foundation for finding ideal jobs in the future. Not settled for a single job in a formal employing unit, some well-educated people who are competent in finding jobs acquire employment through labor service dispatching to do what they like, to increase their personal income or to enjoy more leisure. For these people, the labor service dispatching industry with a new type of industrial relation is playing a good part of vital immediate significance in boosting employment and improving professional skills and working abilities of the dispatched personnel. Standardizing the labor service dispatching industry should be oriented toward improving the abilities of labor service dispatching companies, tightening supervision over employing units and safeguarding the legitimate rights and interests of labor service dispatched workers.

2. Labor service dispatching meets some enterprises' need for recruiting workers

Enterprises, large or small, are faced with limited human resources and amount of information. Obviously, it is impossible to try to capture or possess various types of personnel for the development of enterprises. Therefore, personnel-related support must be constantly acquired from outside for the development of enterprises, particularly for small and medium-sized enterprises. Labor service dispatching is actually a concept of development aimed at "seeking service ability instead of ownership". By means of this flexible way of employment, enterprises can realize the immediate supply of trained personnel they need from labor service dispatching market. For employers, entrusting labor service dispatching companies to supply labor service dispatched workers and signing labor contracts with them is a shortcut. Not knowing too much about China's policies and laws and to mitigate risks and bring down the operating cost, some foreign-funded enterprises do not set up human resources management offices but contract out this assignment to labor service dispatching companies for the employment of labor service dispatched workers in great numbers. Garment and food enterprises are evidently featured by recruitment of workers on a seasonal basis, and in this way they can ensure production during peak seasons. Therefore, labor service dispatching can effectively meet the employing needs of some enterprises and can reduce the operating costs, thus bringing tangible benefit to enterprises. State-owned, privately-operated or foreign-funded enterprises all have internal impetus to use labor service dispatched workers.

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