Industry Information

According to the "Interim Rules on Human Resource Dispatch," which officially came into effect on March 1, 2014, enterprises are given a two-year transition period to adjust the employment ratio for human resource dispatch. Since the transition period ended on February 29, 2016, some local governments have continuously carried out special inspections and rectifications on human resource dispatch. As for the original meaning,Human resource dispatchFor employers, besides strictly enforcing the Labor Contract Law and the Interim Rules on Human Resource Dispatch and signing labor contracts with regular positions, more companies consider adopting "human resource outsourcing," still separating actual employment from employee labor.

Q1: If only the 'Human Resources Dispatch Contract' is changed to a 'Human Resources Outsourcing Contract,' can it evade legal responsibilities?

A1: Simply changing the contract name does not achieve the intent to evade legal responsibilities. Human resource dispatch and human resource outsourcing differ in many aspects.

With the strict implementation of the Labor Contract Law and the Interim Rules on Human Resource Dispatch, factories have faced significant restrictions on employing dispatched workers, especially requiring that the number of dispatched workers be controlled within 10% of the total workforce. Based on this, more and more factories are adopting "human resource outsourcing" to replace traditional human resource dispatch. Many staffing agencies have also transitioned to providing outsourcing or job outsourcing services.

However, simply changing the contract name does not achieve the intent to evade legal responsibilities; human resource dispatch and human resource outsourcing differ in many aspects. If labor methods cannot be thoroughly changed, when labor disputes arise, the employing enterprise must still bear legal responsibilities. These responsibilities include:

1. Fines are imposed based on the number of people

According to Article 92, Paragraph 2 of the Labor Contract Law: If a human resources dispatch agency or employing unit violates relevant human resource dispatch rules under this law, the labor administration department shall order rectification within a specified period; If corrections are not made within the time limit, a fine of not less than 5,000 yuan and not more than 10,000 yuan per person shall be imposed.

2. Joint and several compensation responsibilities

A true human resources outsourcing contract is a purely commercial relationship between the parties, where one party completes the entrusted matters for the other and independently handles the related duties arising from the employment and employment process; Although a human resources dispatch contract legally attributes employees to the dispatching party, its ultimate economic responsibilities still belong to the actual employing unit, resulting in a fundamental difference between the two. If a nominal human resources outsourcing contract is determined to be a substantive human resources dispatch contract, according to Article 92, Paragraph 2 of the Labor Contract Law: if the employing unit causes harm to the dispatched worker, the human resources dispatch agency and the employing unit shall bear joint and several compensation obligations.

3. Administrative Notice

According to Article 22 of the Interim Rules for Human Resources Dispatch: If an employing unit violates the rules of Article 3, Paragraph 3 of these rules (regarding "temporary," "auxiliary," and "substitution" rules), the administrative department of human resources and social security shall order rectification and issue a formal notice; If it causes harm to dispatched workers, they shall bear compensation responsibilities according to law.

When selecting HR outsourcing services, it is necessary to pay attention to key points

Q2: To prevent the above legal hazards, what key points should be considered when choosing to transition to human resource outsourcing?

A2: When changing employment methods, companies should pay attention to the following key points and adopt approaches closer to human resource outsourcing as much as possible.

1. The contract terms and structure should differ from those of human resource dispatch

In practice, many dispatch companies only modify the contract name after changing their service to provide human resource outsourcing services, while still using the original contract version of the dispatch contract. This method of human resource outsourcing is easily identified as human resource dispatch. For general outsourcing contracts, the agreed content mostly includes: outsourced service content, service prices and billing methods, requirements for outsourced personnel, and labor risk assumptions, etc., but do not include labor remuneration, welfare benefits, or economic compensation, which inevitably differs from human resource dispatch contracts.

2. Employment risks should be handled by a human resources outsourcing company

Under the human resources outsourcing method, all employment risks are borne by the human resources outsourcing company. Legally, the contracting enterprise does not have an inherently compensatory duty to outsourced employees. However, during the process of shifting labor from human resource dispatch to human resource outsourcing, if the labor risks are indeed agreed upon according to the outsourcing method, the cost and risk borne by the outsourcing company will be greater, and the corresponding service fees will be higher than those under the previous human resource dispatch method. This requires enterprises to weigh and select based on their own labor costs.

For example, you can agree with the human resources outsourcing company that the contracting company will share part of the insurance costs for the company; If an outsourced employee suffers an accidental injury or death at the workplace and the compensation amount exceeds a certain limit, the human resources outsourcing company can negotiate with the contracting enterprise to bear the excess portion according to a fixed proportion, etc.

3. Arrange on-site handling with the human resources outsourcing company

Handling personnel employment is a very important criterion for distinguishing between human resource dispatch and human resource outsourcing. If the human resources outsourcing company can organize personnel on-site to handle and verify the outsourced personnel, or assist the contracting enterprise in handling and verification, it will be more advantageous for the contracting enterprise when determining human resource dispatch and outsourcing.

These procedures and inspections can allocate part of the employment matters to the contracting enterprise without affecting the normal employment of the contracting enterprise, such as: onboarding interviews, basic training, extended leave, and resignations for outsourced personnel.

4. Employee salaries should be calculated and paid separately

Employee remuneration under human resource dispatch adopts the principle of "equal pay for equal work" with employees of employing enterprises, which is decided by the employing unit. In the case of human resource outsourcing, the remuneration of outsourced personnel is not directly connected to the contracting enterprise and should be calculated and paid by the outsourcing company itself.

In practice, it is usually important to note that the compensation system of the contracting enterprise should be distinguished from that of the human resources outsourcing company, and should not strictly follow the contracting company's compensation system; Do not directly pay salaries, benefits, or bonuses to outsourced employees.

5. Based on the total amount, all payments will be made by service fee

Under human resource outsourcing, the contracting company and the outsourcing company should settle based on service content, operational effectiveness, or total working hours, with the outsourced service fee paid accordingly. As for the labor costs of outsourcing human resources and the cost of providing services, these should be calculated by the outsourcing company itself.

A common practice is that the contracting company calculates service fees based on the total workload of outsourced personnel (such as working hours, output results, etc.) against the human resources outsourcing company, rather than settling based on individual employees' working hours or results. The contracting enterprise then settles and pays the salary and benefits of the outsourced personnel according to its own standards, combining the attendance status provided by the contracting enterprise and feedback from on-site personnel dispatched by the human resources outsourcing company.

From the above comparative analysis, it can be seen that:

Under human resource dispatch conditions, employees and employing enterprises have closer employment and handling linkages, which is more similar to employment methods under labor links.

Under the human resources outsourcing method, contractual contact between the contracting enterprise and the outsourcing company is more common. The outsourcing enterprise needs to implement more specific procedures for the outsourced personnel and complete the expected operational results and content of the contracting enterprise.

When changing labor methods, factories can refer to the above key points to review and review enterprise handling methods and cooperation with outsourcing companies, avoiding risks that could have been avoided in actual employment.

Q3: What risks might be hidden behind choosing a low-cost human resources outsourcing company?

A3: In the case of human resource outsourcing, the outsourcing company needs to cooperate with the subcontracting company to handle more procedures, bear the risks and responsibilities of employment, and calculate the labor costs and expenses themselves. In such circumstances, if the selection of HR outsourcing companies continues to be price-driven as before, there may be risks.

As analyzed above, as human resource dispatch shifts to outsourcing, the contracting company's control over employees is actually weakening, making the daily handling and services of outsourcing companies more prominent.

In the past, when choosing a human resources dispatch company, the services offered by these agencies were limited, so companies mainly considered the agency's recruitment ability, worker quality, and labor costs. Therefore, when multiple dispatch companies are competing, they often choose the one with the lower price.

However, under the situation of human resource outsourcing, the outsourcing company needs to cooperate with the subcontracting company to handle more procedures, bear the risks and responsibilities of employment, and calculate the labor costs and expenses themselves. In such cases, if you continue to choose HR outsourcing companies based on price as before, the following risks may arise:

1. Decline in service quality

With outsourced service costs squeezed, outsourcing companies are likely to decline service quality, reduce on-site staff, and fail to complete cooperation with the client company in a timely manner, thereby placing a daily burden on the contracting enterprise.

2. Delaying, withholding, or evading social security housing fund

Under human resource outsourcing, the contracting enterprise cannot monitor the salary payments and social insurance contributions of outsourced employees. The outsourcing company may exploit the time gap between the contracting enterprise's settlement and the wage payment of outsourced personnel, misappropriating funds or conducting capital operations, and may even exploit or evade social security provident funds to achieve illegal surpluses. If this causes harm to the interests of outsourced personnel, mass incidents involving workers, strikes, etc., it may cause losses for the contracting company.

3. Outsourced workers are of low quality and lack stability

If an outsourcing company successfully bids by lowering prices, they can only achieve profits through massive recruitment due to thin profits. As the "labor shortage" in coastal cities becomes increasingly prominent, outsourcing companies frequently adopt false promises and other methods for recruitment, inevitably resulting in low-quality and unstable outsourced workers.

Q4: Regarding the employment method of "nominally outsourcing but actually dispatching," how should the judicial and legal aspects be handled?

A4: Most judicial cases determine that outsourced companies bear joint and several compensation responsibilities, while administrative law also adopts special rectification and administrative sanctions to standardize enterprise employment.

From judicial cases, labor disputes arising from "nominally outsourcing but actually dispatched" mostly occur in cases such as employee resignation disputes and work-related injury disputes. In such cases, to maximize their rights, employees often list the contracting company that actually employs them as defendants, claiming that the three-party connection is human resources dispatch rather than outsourcing.

In such cases, the court will define the nature of the employment. The criteria referenced are the five key points mentioned in Q2. If the employment contact is ultimately determined to be a human resources dispatch, according to Article 92, Paragraph 2 of the Labor Contract Law, the court will require the contracting company to bear joint and several compensation responsibilities for economic compensation, work injury-related benefits, and compensation. However, if the contracting enterprise violates the "Three Characteristics" job rules, it should be handled by the administrative authority, which does not affect the court's determination of human resource dispatch.

From the legal perspective, since the revision and implementation of the Labor Contract Law in 2013, local labor law sections have continuously launched special rectification campaigns targeting "human resource outsourcing" or "human resource dispatch." For example, in the special campaign launched by the Huzhou Human Resources and Social Security Bureau in March 2017 to "rectify the order of human resources outsourcing contracting," the bureau focused on "human resources outsourcing" and "human resources dispatch," implementing the "three checks and three checks" approach, namely:

1. Check the agreement

The primary acknowledgment is "whether the outsourcing elements and qualifications are met." For example: methods for handling employment, number of workers, contract duration, labor fee targets and payment methods, and agreed approaches for handling disputes and work injuries.

2. Locate the venue

First, acknowledge whether it meets the essential requirements and requirements for outsourcing handling. For example: checking whether the contractor has office space, whether labor is assigned to handle employment, whether employment processing is factual or factual, and the workers' salaries and social insurance payment status.

3. Research information

The primary acknowledgment is to "check whether labor protection laws and regulations are being complied with." For example: the number of labor contracts signed, salary payment status, social insurance contributions, attendance for assignments, overtime status, etc.

For enterprises that are found to be "nominally outsourced but actually dispatched," administrative and legal penalties will be imposed more severely. Those classified as illegal labor will also be banned.

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