Employment compliance is the "bottom line" of the steady operation of enterprises. The employment risks of most enterprises do not break out suddenly, but are caused by long-term accumulation and lack of timely investigation. In practice, a large number of labor dispute cases show that the core reason for enterprise defeat is not intentional violations, but at the critical turning point of business development, the failure to systematically sort out employment risks in a timely manner, resulting in small loopholes turning into major disputes - at best, paying economic compensation, facing administrative penalties, and damaging goodwill and affecting normal operations.

Combined with typical cases, enterprises must proactively, comprehensively and systematically sort out employment risks at the following four key nodes in order to build a solid line of defense for compliance.

1. Scale expansion and organizational structure adjustment must be sorted out

When enterprises enter the growth period from the start-up stage, and there are significant expansion of personnel, division splits and mergers, job adjustments, etc., the original employment model is very easy to be disconnected and the risks are concentrated. If not sorted out in time, problems such as ambiguous job responsibilities, irregular contract signing, and chaotic salary assessment are likely to occur, which will lead to batch labor disputes.

Typical case: The contract agreement does not circumvent the determination of labor relations

A high-fiber company recruited a number of workshop employees due to business expansion, did not sign a labor contract, and only signed a "workshop contracting agreement" with all personnel. Employee Cui claimed to confirm the labor relationship after being injured at work, but the company refused on the grounds of the contract agreement. The court held that Cui's work was part of the company's business, accepted the company's management, received monthly remuneration, and the contract agreement essentially had the attributes of a labor contract.

Risk alert

When expanding the scale, it is necessary to focus on sorting out:

• Whether the contract signing and probationary period of new employees are compliant
• Whether the consultation procedures are carried out for job adjustments and salary changes
• Whether the labor relations are smooth when the departments are merged
• whether there is a risk of avoiding labor relations in the contracting and outsourcing mode;

2. Changes in business models and adjustments in employment forms must be sorted out

Enterprises often have adjustments such as business transformation, outsourcing cooperation, and flexible employment, and the legal liability of different forms of employment varies greatly. If the boundaries and risks are not systematically sorted out, it is very easy to have problems such as "fake outsourcing and real dispatch" and "mixed employment", and bear joint and several liability.

Typical case: fake outsourcing and real dispatch, joint and several compensation by affiliated companies

A network technology company "outsourced" the fresh food distribution business to a logistics company, and He was dispatched to work in a technology company after signing a contract with the logistics company, but the working hours, routes, and standards were all managed by the technology company. After the logistics company defaulted on wages, He claimed that the technology company "fake outsourcing and real dispatch" demanded joint and several compensation. The court found that the technology company implemented substantive employment management on He, which was in line with the characteristics of labor dispatch, and ruled that he and the logistics company jointly paid 24,000 yuan in compensation for arrears of wages and social security supplements.

Risk alert

When adjusting the form of employment, it is necessary to focus on:

• The boundary between outsourcing and labor dispatch
• Definition of responsibilities of both parties in flexible employment
• Avoid avoiding statutory responsibilities in the name of "outsourcing"

• Clarify the main body of employment management and put an end to substantive mixed management

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3. Labor disputes are frequent and compliance warnings must be sorted out

If there are multiple labor disputes in a short period of time, or if the rectification notice is received from the labor department or the procuratorate, it indicates that there are systemic loopholes in employment management, and it must be comprehensively sorted out, the root cause of the problem must be identified, and rectified one by one.

Typical case: 20 years of work-related injury allowance arrears were finally included in the warning list

Deng, an employee of a manufacturing company, was injured at work, and the court ruled that the company should pay monthly disability allowances. In the past 20 years, the company has never taken the initiative to perform the contract, Deng needs to apply for compulsory enforcement every year, and the company has received compliance reminders many times but has not rectified. At the beginning of 2024, the court issued a judicial recommendation, the Federation of Trade Unions issued a supervision reminder letter, and the company was ordered to rectify within a time limit, make up more than 380,000 yuan of disability allowance at one time, and was also included in the warning list of employment violations.

Risk alert

Frequent labor disputes and compliance warnings are "red signals" of employment risks. At this time, it is necessary to comprehensively sort out the entire employment process and focus on investigation:

• loopholes in the payment of work-related injury benefits, contract performance, social security payment and other links
• Establish a problem ledger

• Improve the management system to avoid the recurrence of similar disputes

4. Labor laws and regulations and local policies must be sorted out after they are updated

Dynamic adjustment of labor laws and regulations, such as maternity leave standards, overtime pay accounting, social security payment policies, etc. If enterprises do not follow up on policy changes in a timely manner and continue to use the old management methods, compliance loopholes are very likely to occur.

Key policy updates in recent years

• Judicial interpretation that will come into effect on September 1, 2025: The agreement between the employer and the employee that the employer does not need to pay social security is invalid, and if the employee fails to pay social security in accordance with the law, the employee can terminate the contract and demand economic compensation
• The State Council's employment stabilization policy: Adjust the proportion of unemployment insurance to stabilize jobs, and raise the maximum to 90% for small, medium and micro enterprises
• Judicial guidelines in Jiangsu, Zhejiang and other places: further clarify the specific process and evidence requirements for "notifying the trade union" when the labor contract is terminated, and strengthen the compliance obligations of enterprises

Risk alert

Enterprises need to establish a policy tracking mechanism, focus on the update of labor laws and regulations, and local judicial guidelines, and sort out the employment system at least once a year, in particular:

• High-frequency disputes such as contract termination, trade union supervision, social security payment, and job stabilization subsidy application
• Investigate compliance loopholes one by one at policy adjustment points

Epilogue

The employment risks of most enterprises are not unavoidable, but "heavy operation and light compliance", ignoring systematic sorting at key nodes, resulting in small loopholes turning into big disputes. Employment compliance is not a "remedial remedy after the fact", but a "precautionary measure".

The above four key nodes are not only the high incidence period of employment risks, but also the "golden period" for enterprises to build a solid compliance defense line. Only by taking the initiative to sort out and rectify in a timely manner can employment management truly become the cornerstone of the steady development of enterprises.