Balancing the Benefits of Dispatch Labor

Labor groups marching in downtown Taipei on Labor Day (May 1) this year. One of their demands was the elimination of dispatched labor. Photo: CNA

As part-time or short-term jobs become more common, Taiwan is considering legislation to regulate non-conventional employment.

In Taiwan, as elsewhere across the globe, freelance and contingent work is on the rise as businesses shift their employment models away from the 9-to-5 jobs that have traditionally dominated labor markets. As of May 2016, according to survey data from the Directorate General of Budget, Accounting and Statistics (DGBAS), Taiwan had a total of 792,000 part-time, temporary, and dispatch workers – nearly seven times the number from a decade ago – accounting for just over 7% of Taiwan’s working population.

The growing popularity of part-time work has gone hand-in-hand with an increase in the use of dispatching services in which specialized agencies act as a bridge between client companies in search of part-time labor and personnel willing to work on a temporary basis. Dispatch workers hold employment contracts with their dispatching agency rather than the client company they perform services for. But the wide range of roles and responsibilities for dispatch workers, combined with their atypical employment status, make regulating their wages, benefits, and protections particularly challenging.

The workers often exist in a kind of legal limbo, with complex and ambiguous contracting details and little job security. They may find themselves buffeted back and forth between dispatching agencies and their client companies, uncertain of who is legally accountable for their wages, benefits, and other working conditions. Despite these challenges, certain portions of the population in Taiwan continue to actively seek dispatch positions in order to gain job experience, remain active after retirement, or simply make some extra cash.

For the client companies, dispatch laborers can fulfill a wide range of important needs. First and foremost, they give companies more flexibility in staffing throughout the year. “Many companies, particularly in manufacturing sectors that have a distinct high season and low season, need to use dispatch labor to manage their workforce,” says Singing Jao, Country General Manager of Volt Asia Enterprises, an international staffing provider.

Cindy Chen, the Taipei-based regional head of global staffing company Adecco, notes that the retail industry also faces the need for dispatch labor to meet manpower needs during special sales, promotion periods, and holidays. Dispatch labor also assists in covering special circumstances such as when regular employees are on maternity, parental, or sick leave. Companies pursuing short-term projects also rely on dispatching services to provide the extra help required for project implementation.

Beyond simply providing extra hands, dispatch laborers can also offer specialized skills required for many of these short-term projects. Chen cites the example of a Human Resources (HR) department preparing to implement a new evaluation system. If the department lacks the needed expertise internally, it might outsource the job to a company like Adecco, which would then assign an HR professional with the proper experience to assist the company on a short-term basis in implementing the project.

The use of such specialized services is often crucial for entrepreneurial companies in their early phases. For many tech companies in particular, the use of dispatched labor provides a quick and flexible means of adding workers as R&D progress enables the ramping up of production. Founders of early-stage startups, despite having extensive product knowledge, often lack managerial experience and find it difficult to take on the multiple roles required to lead a small enterprise. Utilizing dispatch services to hire experts for short-term positions can help to meet a startup’s managerial and business needs without imposing serious financial burdens.

Recent changes in the Labor Standards Law (LSL) have also generated more demand for dispatch services. “Nowadays, every industry and company needs some flexibility, especially now that we have more limitations in working hours,” notes Chen. “The new updates in the LSL are quite strict in their limitations on weekend working and overtime. The law, which was updated for the purpose of protecting local labor from too much overtime, creates a great need for the temporary workforce to cover the hours that regular staff are no longer allowed to work.”

Employee motivations

The reasons for employees to take on dispatch work vary by age, work experience, and industry. In recent years, dispatching agencies have sought to debunk the notion that the primary purpose of staffing companies is to provide “temp” jobs for people who can’t find long-term positions. Instead, they see dispatch labor as part of a broader trend toward freelance culture that has seen a spike in applications for part-time employment at both ends of the workforce age spectrum.

According to a survey released last month by the online 111 Job Bank, over 80% of college and high school students in Taiwan hoped to find part-time jobs during their upcoming summer vacation. Of those interested in summer jobs, 86% said their aim was to earn spending money or help pay tuition, while close to 75% wished to gain practical work experience. Adecco’s Cindy Chen notes that even during the school year, “students often take a part-time job for a few hours on weekends, and oftentimes those in their senior year who don’t have to focus as much on their studies will start a part-time job during the week to gain experience before entering the job market.”

She adds that recent graduates and those with only a few years of work experience may look for temporary positions to gain experience in international companies, hone industry-specific skills, and establish relationships with senior professionals. “In addition to young talent looking for temporary work to test out industries, many workers who might want to change their careers – but don’t really know whether they are suitable and qualified for other industries – might pursue temp work in order to prepare themselves and to clarify their future career goals,” Chen says.

At the same time, more and more senior members of the population are looking to participate in the labor market, and dispatch labor is a principal channel for doing that. According to a government report released in June on the employment status of older workers, the labor force participation rate of people aged 45-64 was 62.42%, up 0.53% from a year earlier. “Many people who are working full-time at age 50 or 60 might decide they don’t want to take on as much pressure and would rather focus on balancing their lives a bit,” explains Chen. “So many of them retire early, when they are still quite young and energetic. They are still able to use their knowledge and experience to continue to contribute to the labor market, and the temporary, flexible arrangements of dispatch staffing allow them to do so.” She does, however, note a slight disconnect between senior workers’ desire for dispatch employment and client companies’ general preference for younger employees.

Besides flexibility and the acquisition of specialized skills, the other primary incentive for companies to use dispatch labor is the potential to cut costs. In this respect, Taiwan diverges from its global counterparts. “In the United States, if a company utilizes dispatch labor for a project, the salary is supposed to be higher than the rate for regular employees,” says an executive at a major dispatching firm who requested anonymity. “But in Taiwan, we see the opposite. Dispatch laborers often earn minimum wage and have fewer benefits than regular employees.”

Companies seeking to reduce costs may see the utilization of cheap dispatch labor as any easy and efficient way to do so, the executive notes. She describes this tendency as unfair to dispatch workers and potentially damaging to the labor market and the overall economy.

All three parties involved in dispatching service – the client companies, workers, and dispatching agencies – may in fact lose out when companies pursue such cost-cutting personnel strategies. Demands from client companies for low-cost labor put pressure on dispatch agencies to provide ever-cheaper services, compromising quality. Critics say such pressure even causes some agencies to skirt provisions of the Labor Standards Law, undermining the security of dispatch workers and casting a shadow on all dispatch agencies, even those fully operating in accordance with the law.

As a result of that stigma, “many job applicants will reject dispatch work even if it is for non-entry-level positions that offer higher pay and better benefits, due to their conception that dispatch work is not a secure job,” Singing Jao notes. That mindset further shrinks an already decreasing pool of candidates, causing dispatching firms and customer companies to lose out on employees’ much-needed services.

Compounding the effects of the negative image, Taiwan’s low birth rate and rising living costs have resulted in fewer and fewer candidates who are willing to accept jobs that pay minimum wage and provide little or no security, stability, and benefits. Moreover, many dispatching jobs tend to be routine, clerical-type positions that attract few applicants and have high turnover rates. In a labor market where recruiting part-time labor is already quite a challenge, the stigma surrounding dispatch labor has driven up the rejection rate for dispatch positions in the past decade. Nowadays, nearly 9 out of every 10 candidates solicited for dispatch positions are unwilling to accept the offer, the staffing agency executive says.

Regulating dispatch services

For those who seek part-time or short-term work as a gateway into a new profession, a way to remain busy after retirement, or a means of earning a little extra cash, the benefits for the dispatch worker are clear. For those who accept dispatch work by necessity, however, there are significant risks and challenges. In an effort to remedy this problem and protect the rights of dispatch workers, the Ministry of Labor drafted a Dispatched Workers Protection Act in 2013. The primary purpose of the proposed legislation is to prevent enterprises from employing dispatch workers simply as a strategy for lowering personnel costs, hold client companies accountable for responsibilities as employers, and make dispatch companies jointly responsible with their clients for any violations of employee rights.

Further, the bill would cap dispatch labor at 3% of a company’s total headcount. The stated intention of the cap is to decrease the total number of dispatch laborers while raising the salary and benefits they receive, with the objective of increasing opportunities for regular, permanent employment. However, staffing agencies and employers contend that the cap would actually decrease overall job opportunities by increasing labor costs, discouraging startups, and deterring companies from launching special projects.

The 3% ceiling would pose particular problems for the small and medium enterprises that comprise upwards of 90% of the companies in Taiwan. These SMEs already have difficulty recruiting talent because the best applicants tend to be attracted to the well-known major domestic and international brands. Since the use of dispatch labor is a crucial way to overcome that disadvantage, imposing the 3% cap would come as a big blow, Adecco’s Chen notes.

There is currently no cap on dispatch labor in place, and the Dispatch Workers Protection Act remains under consideration by the Legislative Yuan. One complicating factor is that the government itself is the largest employer of dispatch workers and would have to dramatically revise its personnel policies if the 3% cap were adopted.

Aside from the provision imposing a per-company ceiling, however, there is broad support for legislation governing dispatch labor as long as it is in line with global best practices and provides industry with sufficient flexibility to meet its staffing needs. HR experts emphasize that such legislation should be based on detailed analysis of industry needs, and that percentage caps and other regulations should be tailored to individual industry sectors rather than set across the board. The key to successful regulation will be ensuring both adequate protection for dispatch workers and sufficient access to manpower for the businesses that are driving the Taiwan economy.