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China – Labour dispatch laws impacting banks

05 September 2013

In its recent financial statement, the China Construction Bank (CCB) reported that it had terminated 1,977 dispatch workers during the first half of 2013, according to finance.china.com. In the past year, CCB has reduced its workforce by 6,597 dispatch workers. At the end of June 2013, CCB had an estimated 1.94 million dispatch workers employed by the company.

As a direct result of the new labour dispatch law, implemented on 1 July 2013, salaries, bonuses, and other staff costs rose by CNY 20 million (USD 3.2 million), an increase of +6% over the first six months of last year.

CCB’s Public Relations Department have reported that, in accordance with the latest legal requirements, pay equality between dispatch and permanent staff will be achieved gradually. The number of dispatch workers employed by CCB will, however, continue to be reduced in the future. According to information from CCB, the company reduced its dispatch worker force by 9,128 in 2010, by 9151 in 2011, and by 8247 in 2012.

Labour dispatching is a common problem in the banking sector, according to finance.china.com. If a large number of labour dispatch worker’s contracts are converted into permanent contracts,there will be significantly increased labour costs for banks. If banks were to stop using dispatch workers, there would be insufficient permanent staff to run the business.

Despite the increased costs associated with implementing the new legislation, Chinese newspaper Daily News revealed that during the first half of 2013, CCB’s net profit after tax CNY 119.7 billion (USD 19.4 million), an increase of +13% compared with a year ago. 

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