Why representative office placement does not work

There were 49,223 foreign representative offices in the PRC at end March 2013, according to statistics from the Bureau for Foreign Investment Registration of the State Administration for Industry and Commerce in Beijing. If you ask any chief representative about the placement of their Chinese workers, they will tell you it is a mess. They will also say that placement costs them a great deal of time and money, and that agencies are useless. Despite this, the institution of placement has been around for over 30 years (see figure 1 for an overview of placement in China). The revised PRC Employment Contract Law (中华人民共和国劳动合同法), which will enter into force this year, gives little hope for changing this situation.

Defining placement

Placement is a contractual relationship between three parties: the worker, the placement agent and the user of the placed worker. The worker is employed by an agent, who enters into a contract for the provision of labour service with the user and then places the worker with the user, where the worker will perform the work. This creates a triangular relationship; the first side rests on a contract of employment between the worker and the agent, and the second side on a contract of service between the agent and the user. The legal qualification of the third side, between the worker and the user, is ambiguous.