China: If the Dispatching and Labour-Using Entities Fail to Reach a Clear Agreement on the Issues, They Should Share the Responsibility for the Unpaid Housing Provident Fund Based on Their Respective Faults
Author: Carol Zhu and Lynsey Liu
A human resources company and a commercial company have entered into multiple labour dispatch agreements, stipulating that the commercial company is responsible for the wages and social insurance fees of the dispatched employees and pays a corresponding service fee to the human resources company. The human resources company dispatched employee Wang to work for the commercial company. During Wang’s employment, the human resources company did not contribute to his housing provident fund. After Wang reported to the Beijing Housing Provident Fund Management Centre, the human resources company paid CNY 5370 in housing provident fund contributions as required by the payment notice. The human resources company believes that this cost should be borne by the commercial company and sued the commercial company, demanding payment of the housing provident fund contributions for the dispatched employee.
After hearing the case, the People’s Court ruled that, although the labour services of the dispatched employees are actually received by the commercial company, which is responsible for the employees’ labour remuneration and social insurance fees, it cannot be directly determined in this case that the commercial company should necessarily bear the housing provident fund contributions for the dispatched employees in the labour dispatch relationship. As a professional institution, the human resources company should make comprehensive, detailed, professional, and responsible agreements with the labour-using entities on internal matters and should also bear certain business risks for matters not agreed upon with the labour-using entities. Therefore, the court ruled that both the human resources company and the commercial company were at fault for Wang’s non-payment of housing provident fund contributions and should jointly bear the corresponding expenses, ordering the commercial company to pay CNY 2865 to the human resources company.
Key Action Points
In practice, foreign enterprises’ representative offices in China are only permitted to hire labour dispatched employees through human resources companies. It is essential to adhere to the regulations for contributing to the social insurance and housing provident fund during the labour-using process. Furthermore, the representative office should enter into labour service contracts with human resources companies which clearly define the scope of responsibilities of the parties.
