China Labor Dispatch: 2026 Rules and Compliance for Foreign Employers

When foreign companies scale up in China — whether running a factory in Foshan, a trading desk in Guangzhou, or a tech team in Shenzhen — they frequently need extra hands without immediately adding permanent headcount. Labor dispatch (laowu paiqian) is one of the most common ways to do that. But it is also one of the most strictly regulated. China’s Labor Contract Law and the Interim Provisions on Labor Dispatch impose tight limits on where, how, and how many dispatched workers you can use, and getting it wrong can expose both the agency and your company to joint liability, back pay, and fines.

What Is Labor Dispatch in China?

Labor dispatch is a triangular employment relationship. A licensed dispatch agency signs a labor contract with a worker, pays that worker’s wages and social insurance, and then “dispatches” the worker to perform duties at your company under your day-to-day direction and supervision. Your company signs a separate dispatch service agreement with the agency and pays it a service fee.

This is different from direct hiring — where your entity is the employer — and from an independent contractor arrangement, where no employment relationship exists at all. In a dispatch arrangement, the agency is the legal employer of record, but your company controls the worker’s daily tasks, working hours, and workplace. That split between “legal employer” and “actual user” is exactly why Chinese regulators treat labor dispatch as a high-risk area and impose detailed rules on both parties. For a full breakdown of how this differs from other staffing models, see our guide on independent contractor versus employee misclassification in China.

Which Positions Can Use Dispatched Workers?

The single most important rule is that labor dispatch is supplementary staffing, not a substitute for a permanent workforce. Under Article 66 of the Labor Contract Law, dispatched workers may only be used in three types of positions:

• Temporary positions — lasting no more than six months.
• Auxiliary positions — non-core, support roles that are peripheral to your main business (for example, front-desk reception or general cleaning in a manufacturing company).
• Substitutable positions — filling in temporarily for a permanent employee who is on leave, such as maternity or long-term sick leave.

Using dispatched workers in core, ongoing production or management roles — say, a permanent quality-control engineer in a Dongguan factory — is not permitted. The law’s intent is that dispatch should never become your default way of staffing a permanent function. Many foreign companies misunderstand this and treat dispatched workers as a cheaper “try-before-you-buy” channel, which is precisely the pattern regulators scrutinize most closely.

The 10% Headcount Cap

Beyond position restrictions, there is a strict numerical ceiling. Since 2016, dispatched workers may not exceed 10% of a host company’s total workforce. Total workforce is calculated as your directly hired employees plus your dispatched workers. If your company has 90 permanent employees, you may use no more than 10 dispatched workers; if you have 45 permanent staff, the ceiling is 5.

Companies that exceeded the cap were given transitional periods to comply, but those grace periods have long since expired for new arrangements. Exceeding the 10% cap can lead to administrative correction orders and, if not remedied, fines. The cap applies per entity, so a foreign investor operating multiple subsidiaries in Guangzhou and Shenzhen must assess each entity’s headcount separately — a point we cover in our HR and payroll services work for multi-entity clients.

Your Compliance Obligations as the Host Company

Even though the agency is the legal employer, your company carries substantial legal responsibility. Key obligations include:

• Use a licensed agency. A valid dispatch agency must hold an administrative labor dispatch license and have registered capital of at least RMB 2 million. Doing business with an unlicensed intermediary can invalidate the arrangement and leave you as the de facto employer.
• Sign a proper dispatch agreement. The service agreement must specify positions, headcount, term, labor remuneration, social insurance contributions, and how each party handles work injuries.
• Guarantee equal pay for equal work. Dispatched workers performing the same duties as your direct employees must receive the same pay methodology — no lower base rates for dispatched staff doing identical work.
• Assume joint and several liability. If the agency fails to pay wages or social insurance, or violates other labor rights, the worker can claim against your company directly. You are jointly liable with the agency.
• Report and register properly. Dispatch arrangements must comply with local labor bureau registration and reporting requirements, which vary by city.

Because you remain responsible for daily supervision, workplace safety, and equal treatment, labor dispatch is not a way to shed employer duties. It only reallocates which party holds the employment contract — not whether the worker’s rights are protected. For employers weighing their options, our article on how to hire staff without setting up a company through an Employer of Record compares a related but distinct model.

Labor Dispatch vs Direct Hire vs Employer of Record

Choosing the right staffing model depends on your legal structure, headcount needs, and risk tolerance. The table below summarizes the key differences.

Common Compliance Mistakes to Avoid

Foreign companies in Guangdong frequently trip over the same issues. Avoid these patterns:

• Using dispatch for core roles. Staffing a permanent production or management position with dispatched workers is the fastest route to a correction order.
• Ignoring the 10% cap. Growth can push you over the limit without anyone noticing — audit headcount whenever you add dispatch workers.
• Paying dispatched staff less than direct employees. Equal pay for equal work is a hard legal requirement, not a guideline.
• Using an unlicensed broker. Always verify the agency’s labor dispatch license before signing.
• Treating dispatch as a way to avoid social insurance. The obligation simply shifts to the agency, and your company remains jointly liable. For details on contribution duties, see our guide on whether foreigners must pay social insurance in China.

If you are building out a local team for the first time, start with a clear staffing plan that separates core roles (direct hire) from genuinely short-term or support roles (dispatch), and review our guide to hiring employees in China before you begin recruiting.

Frequently Asked Questions