Three different things, often given the same name
Engaging people in mainland China comes down to three legally distinct models. Direct employment means your own entity signs the labour contract. Labour dispatch (劳务派遣) means the dispatch agency employs the person and your site directs their daily work. Service outsourcing means the provider both employs and directs its own people and is answerable for a defined result. The licensing, the headcount limits and the party carrying the risk differ across all three — and what decides which one you are in is never the contract title, it is who gives the instructions.
In mainland China, dispatch is a licensed activity, not a commercial preference
Article 57 of the Labour Contract Law requires anyone operating a labour dispatch business to obtain an administrative licence from the labour authorities, with registered capital of at least CNY 2 million. A separate licence, the HR service licence, covers employment agency and headhunting activity. These are two different permissions: being licensed for dispatch does not make a supplier licensed for placement, and vice versa. Verify each one, and confirm the licence holder is the same legal entity that will sign your contract.
Two limits buyers routinely discover during an audit
The Interim Provisions on Labour Dispatch (MOHRSS Order No. 22, in force 1 March 2014) place two constraints on the CLIENT company, not the agency.
- Role limits (Article 3, the "three natures"): dispatched workers may only be used in temporary, auxiliary or substitute positions. Temporary means a post lasting no more than six months; auxiliary means a non-core post supporting the main business; substitute means covering an employee who is temporarily unable to work due to study leave, holiday and similar.
- Headcount limit (Article 4): dispatched workers may not exceed 10% of the client's total workforce.
- Both limits bind the company receiving the workers — you — not the supplier providing them.
China has its own clause for "outsourcing in name, dispatch in fact"
If the contract says outsourcing but your managers assign the tasks, run the attendance and do the appraisals, Article 27 of the Interim Provisions is blunt: where an employer uses workers in the form of labour dispatch under the name of a contracting or outsourcing arrangement, these Provisions apply. The three-natures rule, the 10% cap and the associated liabilities come back — except you had not planned for them. This is structurally the same problem as disguised contracting (偽装請負) in Japan: both regulators look at the substance, not the label.
So for outsourcing to hold up, the boundary has to be real: the provider manages its own people, delivers against scope and service levels, and carries employer responsibility. Write that into the contract rather than explaining it during an inspection.
Hong Kong: no dispatch licence category, but other hard requirements
- Hong Kong has no equivalent of the mainland dispatch licence, but operating an employment agency requires a licence from the Labour Department under Part XII of the Employment Ordinance and the Employment Agency Regulations, plus compliance with the Code of Practice for Employment Agencies.
- MPF: employer and employee each contribute 5% of relevant income, subject to minimum and maximum relevant income levels and the prevailing contribution cap.
- Employees' compensation insurance is compulsory for every employer regardless of headcount, under the Employees' Compensation Ordinance.
- Hong Kong and the mainland are separate labour law systems. One contract template cannot serve both sides of a cross-boundary team.
What actually slows a Hong Kong plus mainland team down
When teams span Hong Kong and the mainland, the thing that trips projects up is rarely the statute. It is that employment contracts and the social insurance / MPF structures have to be maintained separately; that cross-boundary data transfer has to satisfy mainland personal information requirements; that the invoicing entity and currency need deciding at kick-off rather than at delivery; and that someone has to own which incidents, in which time zone. Putting those into the service level agreement costs less than resolving them later in a group chat.
A procurement checklist
- On the mainland, does the supplier hold a labour dispatch licence, an HR service licence, or both? What are the numbers?
- Is the licence holder the same legal entity that will sign?
- If this counts as dispatch, is your dispatched headcount still within 10%, and do the roles fall inside the three-natures test?
- If this counts as outsourcing, is direction genuinely on the provider's side? Is acceptance based on deliverables and service levels, or on hours worked?
- On the Hong Kong side: employment agency licence, MPF enrolment and employees' compensation insurance all in place?
- Does the rate include statutory employment cost, or is it quoted on top?
Where Tech Alliance fits
In mainland China we hold our own labour dispatch licence (沪人社派许字第00471号) and HR service licence ((Hu) Ren Fu Zheng Zi [2015] No. 1700000523). Holding both is what lets us choose the model that fits the project rather than recommend the one model we happen to be licensed for. In Singapore and Southeast Asia we provide recruitment, executive search, IT project services, HR consulting and service outsourcing. Where the work calls for a dispatch model, it is delivered by licensed entities in mainland China, Hong Kong and Japan. In Japan, dispatch and placement run under 派13-318670 and 13-ユ-317654 respectively.
This article is general information about engaging people in mainland China and Hong Kong and is not legal advice on any specific matter. The applicable rules change with the year and with local policy. Confirm each engagement with your own counsel or HR compliance adviser.