Evaluating Economic Employer Doctrine Principles under Chinese Secondment Rules
China reclassifies foreign secondment wage recharges as taxable service fees whenever the local entity operates as the true economic employer under Bulletin 19.
PRC Labor Contract Law Article 57
Meaning
Statutory definitions establish the qualifications and the registered capital requirements for entities providing labor dispatch services. Under prc labor contract law article 57, an agency must secure a specific license and maintain a high net worth to guarantee workers’ rights during temporary assignments. This ensures that staffing firms have the financial depth to cover wages and social security should a client default.
License Mandate
Companies operate within legal boundaries only if they obtain an administrative permit from the local social insurance bureau. Prc labor contract law article 57 explicitly requires these firms to have at least two million yuan in fixed capital before they engage in hiring contracts.
Service Limitation
Dispatching firms function as the technical employer of record while the worker performs tasks for a different host enterprise. The application of prc labor contract law article 57 limits these arrangements to temporary or auxiliary positions to prevent permanent employee displacement.
Regulatory Barrier
Monitoring agencies check compliance to stop unlicensed middlemen from taking excessive fees from laborers. If a dispatching unit fails to meet the criteria found in prc labor contract law article 57, it loses its right to perform payroll or insurance functions on behalf of factory workers.