Why China's Factories Are Turning to Temp Workers

China of late has been trying harder to protect its workers. These efforts date to 2008, when a law took effect requiring, among other things, that companies buy workers insurance, pay double wages for overtime, and pay severance depending on an employee’s years of service.

There’s a way to get around these regulations, though, and many Chinese and foreign companies are taking advantage of it. “Labor dispatch” companies recruit workers and send them as temporary staff to factories in need. Of China’s more than 300 million urban employees, an estimated one-fifth—or 60 million—are labor dispatch workers, up more than twofold since the promulgation of the stringent 2008 law, according to estimates by the All-China Federation of Trade Unions. The plant owners pay the dispatchers, who in turn are supposed to compensate the temps, who pay a fee of 200 yuan ($30) or so to the dispatchers for landing them a job. The number of temps is likely to grow another 30 percent to 50 percent this year as companies scramble to cut costs in the face of rising minimum wages, says Wang Kan, a professor at the Beijing-based Institute of Industrial Relations, a school run by China’s trade union. “All these workers are the same,” says Wang. “They are temporary employees with a lack of protections and no commitment from their employers.”