Allowing one employee to be employed by two entities in China can constitute joint employment, which exposes you to several liability for wage, benefit, and liability claims. The law does not give recognition to joint employment, but there is a legal test for imposing liability based on whether two employers share ownership, management, or control. Workers’ compensation claims may be denied by the government and must instead be paid by the employer. In this article, we will explain the legal test and consequences of joint employment liability, then provide best practices for adopting a structure to control risks.
Contents
- Legality of Joint Employment
- Joint Employment vs Typical Employment
- Test for Joint Employment
- Consequences of Joint Employment
- Compliance Recommendations
Legality of Joint Employment
The China Employment Contracts Act give recognition to joint employment. Legal employment arrangements under the Act include only direct employment and supply workers arrangements, respectively full/part-time employment and staffing arrangements. Under the Employment Contracts Act, a legal employment relationship involves only one employer and one employee; dual or multiple employment relationships are therefore not acknowledged. This mirrors the Chinese marriage law monogamy requirement.
Supreme Court Employment Dispute Adjudicative Guidelines #2 (Judicial Interpretations No. 12 2025) § 3, issued on July 31, 2025, sets out the legal test for joint employment, and identifies which parties are responsible for compensation and benefits when an employee is employed alternately or simultaneously by multiple affiliated entities.[1] Joint employment matters previously addressed only in local regulatory guidance and judicial precedents are now included in the Supreme Court’s judicial interpretations.
Despite poor legal recognition, some employers and their affiliates alternately or simultaneously manage employees, assign them work, or pay their compensation benefits, or social benefits while the employee performs work for multiple affiliated entities. The joint employment doctrine emerged from judicial precedents viewing these blurred employer responsibilities among affiliated entities.
Joint employment is defined as the objective “fact where an employee is employed alternately or simultaneously by multiple affiliated entities.”[1] We interpret this definition to mean joint employment is a fact not afforded recognition under the China Employment Contracts Act. It is not a legally recognized arrangement under current law. In a joint employment relationship, there is a single employee but multiple employers. The employment contract is signed and social security contributions are paid by one employer, but two or more affiliated entities jointly perform the contract.
This complicates assigning responsibility for employee management, work arrangements, and wage payment because the affiliated entities together play the role of employer. The employee may alternate between or work simultaneously for the affiliated employers. Such affiliation may be evidenced by shared ownership, operations, finances, staff, or management, making it difficult to identify each entity as an independent employer and resulting in a de facto overlap of personnel. As employer boundaries are blurred, the courts test employer status with factors such as the execution of employment contracts, employee management, work arrangements, job duties, wage payment, and social security contributions.
Joint Employment vs Typical Employment
Both joint employment and dual or multiple employment involve one employee and two or more employers. But in joint employment, the employers are affiliates, and each employer does not independently establish a separate employment relationship with the employee. By contrast, in dual or multiple employment, the employers are generally unaffiliated; even if they are, each employer’s intent to establish an employment relationship with the employee is separate. Employee work, management, scheduling, compensation, and benefits are each separate.
In joint employment, it is difficult to distinguish which employer is responsible for the employee’s claims in employment litigation because the multiple employers are commingled in terms of the nature and extent of the work, the authority to control the employee, and the payment of compensation. By contrast, in dual (or multiple) employment relationships, the employers act independently, so it is easy to determine which employer the employee is performing work for, as well as the job responsibilities and compensation.
Staffing is a legally recognized employment arrangement under the China Employment Contracts Act and Contract Staffing Temporary Rules. The staffing agency and staffing client each has its rights and obligations under the staffing agreement and applicable law. In a staffing arrangement, the staffing agency is the employer but does not receive the workers’ services, while the staffing client receives services but is not the employer. Parties in this arrangement together form a complete employment relationship. This arrangement is not considered joint employment. It may be used only for temporary, non-core, or auxiliary positions, and is capped at 10% of the total workforce.
In contrast, joint employment is not a legal employment arrangement but a de facto engagement of the employee, who works alternately or simultaneously for the employers, where the parties’ rights and obligations are unclear. There is a superficial employment relationship between each employer and the employee, but the relationships are not performed independently.
Joint employment is a fundamentally different legal relationship from outsourcing, secondment, and placement arrangements. Under Chinese law, outsourcing generally means that the employee is clearly employed by the outsourcer, not the service recipient, which avoids risks involved in dual employment relationships and joint employment. In secondment and placement arrangements, although the employee is temporarily assigned to work for another entity, their employment relationship, social security, and compensation remain the responsibility of the original employer. However, when the new entity directly controls the employee’s compensation, job assignments, and performance management, the arrangement may effectively result in joint employment and increase legal risks.
Shared employment is an employment arrangement that emerged during the COVID-19 pandemic in 2020 in China. After the outbreak, some companies’ workers were idle due to disrupted operations, while others experienced a surge in business. Shared employment is temporarily used by companies to address workforce imbalances during extraordinary circumstances. According to the MOHRSS Shared Employment Guidance Circular, the ministry supports shared employment because it helps resolve labor surpluses and shortages, efficiently allocates labor, and stabilizes employment.[2] Shared employment is similar to secondment and assignment, except that the companies involved are typically unaffiliated and engage in cross-industry, cross-system collaboration in response to the pandemic.
Under the shared employee arrangement, the employment and social security relationships between the employee and their original employer remain unchanged. The participating companies enter into a collaboration agreement to provide for the parties’ rights and obligations and reduce litigation risk. This agreement may specify the working conditions and compensation. Under this arrangement, employment responsibilities are clearly allocated. Employees are only temporarily assigned to work for the client. Once the arrangement ends, employees return to their original employer and continue to perform their original employment contracts. Therefore, the shared employee arrangement does not constitute joint employment.
If you need help making the right decision in China’s complex employment regulatory environment, ask CBL for help connecting you with an attorney from our network of experts.
Test for Joint Employment
The test for joint employment involves two factors, whether joint employment exists and how employment responsibilities are allocated.
The Supreme Court Employment Dispute Adjudicative Guidelines #2 § 3 sets out two factors for determining whether joint employment exists:
- Whether there is an affiliation among the employers, including but not limited to equity, business, finances, management, administrative systems, and office locations.
- Whether the employee is alternately or simultaneously employed by the affiliated employers.[1]
For example, affiliated employers alternately or simultaneously enter into or renew employment contracts, assign work, make appointment or termination decisions, manage, and pay compensation and benefits to the employee.
The typical staffing approach under the China Employment Contracts Act does not allow a relationship with multiple employers. Consequently, the legal test recognizes only a single employer, even if multiple employers are involved. The Supreme Court Employment Dispute Adjudicative Guidelines #2 § 3 applies a primacy of contract doctrine.[1] The party to a written employment contract is the employer; if there is none, the employment relationship will be identified based on how the employment relationship is managed, weighing factors such as working time, job duties, payment of compensation and benefits, and social security contributions. In the absence of a written employment contract, the entity with the most authority to control the employee is the employer.
Consequences of Joint Employment
Joint employment blurs employment relationships, making it hard to identify the employer in lawsuits, burdening employees in litigation and frustrating enforcement. It also affects employers’ compliance efforts by hindering systematic employee management.
Several liability among Affiliates may be sought by employees for unpaid wages, benefits, and other obligations between joint employers.[1] This several liability is not joint and several liability, and is similar to joint marital debt in marriage law. Additionally, while the judicial interpretations provide only several liability for wages and benefits, it could extend to things like time off, social security, severance, and damages.
Joint employment may create barriers to workers’ compensation eligibility and benefits, as employees are enrolled in social security under only one employer’s name. However, it is unclear which employer the employee was working for when the work-related injury occurred, with the result that the injury might not be considered work-related. The employee may be unable to receive benefits from the workers’ compensation fund and may have to seek damages from all affiliates.
Impediments to employment contract termination or expiration. Joint employment may make it unclear which entity is responsible for termination or expiration and whose policies to follow. The grounds for termination may apply to only one employer, which may constitute wrongful termination. For example, in a judicial precedent, one of the affiliates decided to dissolve early while the others continued operations. The dissolving entity terminated the employee under China Employment Contracts Act § 44(e). The employee argued that the dissolution of one affiliate did not terminate the employment relationship under the joint employment where multiple affiliates functioned as the employer. The court upheld the employee’s claim, ruled the termination unlawful, and ordered the employment contract to continue.
Compliance Recommendations
Joint employment is not advisable from a corporate compliance perspective because it is illegal under China’s employment law. Consider the following strategies to maintain compliance:
- Affiliated companies should clearly define employee roles and establish independent management, administrative, and payroll systems. If you need to use a payroll agent, ensure you have a payroll service agreement and obtain employee consent. For secondment, placement, or shared employee arrangements, enter into written agreements and specify that the employment responsibility allocation, social security payment allocation, and wage payment allocation remain unchanged.
- If an employee temporarily works part-time for an affiliate, have the employee enter into a separate part-time employment agreement specifying the job duties and compensation for that role. Where permitted by law, consider obtaining separate workers’ compensation or employer liability insurance coverage for the part-time work. For corporate family management, policies governing subsidiaries and branches should be adopted through inclusive processes at the subsidiaries and branches. Consider using a management service agreement if you are using centralized financial management of subsidiaries and branches.
- Affiliates should agree on the allocation of responsibilities for compensation and benefits and obtain written employee consent to limit potential several liability if joint employment is unavoidable.
If you need help making the right decision in China’s complex employment regulatory environment, ask CBL for help connecting you with an attorney from our network of experts.
FURTHER READING
Get more insights about Chinese employment law:
- Part-Time Work in China is Tightly Regulated
- Legal Temp Agency Workers in China (Labor Dispatch & Outsourcing)
FOOTNOTES
[1] Supreme Court Employment Dispute Adjudicative Guidelines #2 (Judicial Interpretation No. 12 of 2025), (最高人民法院关于审理劳动争议案件适用法律问题的解释(二)), (Supreme Court, Jul. 31, 2025), (in Mandarin)
[2] MOHRSS Shared Employment Guidance Circular, (人力资源社会保障部办公厅关于做好共享用工指导和服务的通知 (人社厅发〔2020〕98号)), (Ministry of Human Resources and Social Security, Dec. 29, 2020), (in Mandarin)