Answer: Whether it is legal for your company to conclude a labor outsourcing contract depends on whether your company implements the purpose of labor dispatch in the form of labor outsourcing. Although labor outsourcing and labor dispatch are both human resources companies sending personnel to the recipient to provide services, there are significant differences in purpose and mode between them.
The purpose of labor outsourcing is a kind of project outsourcing, that is, part of the company’s work or the whole project is handed over to the outsourcing service provider, and the remuneration is settled according to the whole project for the purpose of obtaining the work results. The purpose of labor dispatch is to use the dispatched employees and settle the remuneration according to the personnel.1Suzhou Industrial Park Yingruide Human Resources Management Service Co., Ltd., Zhang Dongling, etc. Confirmed the Civil Judgment of the Second Instance of Employment relations Disputes Civil Judgment of the Intermediate People’s Court of Suzhou City, Jiangsu Province (2023) Su 05 Min Zhong No.1257. ¡°There are obvious differences between labor dispatch and labor outsourcing in terms of control and management. In labor dispatch, the host employer directly commands and manages the daily work of the dispatched workers, and the dispatched workers are managed by the company rules of the host employer; while in labor outsourcing, the host company does not participate in the command and management of the workers, and the contractor directly commands and manages the workers.¡± Civil Ruling of Chongqing High Court (2019) Yu Min Shen No.990 on the Application for Retrial of the Right to Health Dispute between Chen Shouquan and Yang Fei of Lazars Network Technology (Shanghai) Co., Ltd. ¡°The main differences between labor dispatch and labor outsourcing are as follows: first, the core element of labor dispatch is the labor process, and the risks of whether the dispatched employees can achieve the expected work objectives and whether the work is successful or not are borne by the host employers; The core element of labor outsourcing is the work results. The contractor can obtain the corresponding outsourcing fees only when the work results conform to the contract agreement. The risk of success or failure of the labor results of the outsourced employees has nothing to do with the employer (the party contracting out the project). Second, the dispatched employees are directly managed by the host employer; in labor outsourcing, the outsourced employees are directly managed by the contractor. Third, the settlement method of labor dispatch is determined according to the number of dispatched employees, work hours, unit price, etc., and the contract object is generally “person”; labor outsourcing is generally settled according to the pre-determined labor unit price and the workload completed by the contractor, and the contract object is generally “matter”.
The way of labor outsourcing is that the company manages the project as a whole, and only puts forward the overall requirements for the outsourcing service provider; while the outsourcing service provider is responsible for the specific work process, and the staff is directly managed by the outsourcing services provider. Labor dispatch¡¯s staff is directly managed by the company (that is, the host employer).
Therefore, if your company does outsource the project or part of the operation as a whole, the labor outsourcing agreement is valid. If the purpose is to use the employees of the outsourcing company and your company directly manages these employees, it is called labor outsourcing but actually labor dispatch, and the labor outsourcing is considered as labor dispatch. If the labor dispatch is deemed invalid, your company need to assume the responsibility of the direct employer of the dispatched employees.
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Mr. Dong Wang has been in practice for over 20 years, specializing in business law, including employment law, commercial law, company law, and intellectual property law. Mr. Wang has earned respect and trust from his clients due to his professionalism, fidielty, and kindness.
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- 1Suzhou Industrial Park Yingruide Human Resources Management Service Co., Ltd., Zhang Dongling, etc. Confirmed the Civil Judgment of the Second Instance of Employment relations Disputes Civil Judgment of the Intermediate People’s Court of Suzhou City, Jiangsu Province (2023) Su 05 Min Zhong No.1257. ¡°There are obvious differences between labor dispatch and labor outsourcing in terms of control and management. In labor dispatch, the host employer directly commands and manages the daily work of the dispatched workers, and the dispatched workers are managed by the company rules of the host employer; while in labor outsourcing, the host company does not participate in the command and management of the workers, and the contractor directly commands and manages the workers.¡± Civil Ruling of Chongqing High Court (2019) Yu Min Shen No.990 on the Application for Retrial of the Right to Health Dispute between Chen Shouquan and Yang Fei of Lazars Network Technology (Shanghai) Co., Ltd. ¡°The main differences between labor dispatch and labor outsourcing are as follows: first, the core element of labor dispatch is the labor process, and the risks of whether the dispatched employees can achieve the expected work objectives and whether the work is successful or not are borne by the host employers; The core element of labor outsourcing is the work results. The contractor can obtain the corresponding outsourcing fees only when the work results conform to the contract agreement. The risk of success or failure of the labor results of the outsourced employees has nothing to do with the employer (the party contracting out the project). Second, the dispatched employees are directly managed by the host employer; in labor outsourcing, the outsourced employees are directly managed by the contractor. Third, the settlement method of labor dispatch is determined according to the number of dispatched employees, work hours, unit price, etc., and the contract object is generally “person”; labor outsourcing is generally settled according to the pre-determined labor unit price and the workload completed by the contractor, and the contract object is generally “matter”.