Employment in Taiwan is governed under the Labor Standards Act (LSA), which establishes the minimum terms and conditions of employment in Taiwan. Conditions such as issues on labor contracts, wages, work hours, leaves of absence, compensation, retirement, and benefits all are covered in the LSA. Hiring foreign nationals is governed by the Employment Services Act (ESA). Provisions for labor contracts are not very strict and are flexible. Currently, there is a push for greater flexibility for the LSA to provide fixed-term labor contracts, and to incorporate dispatched workers in employment regulations.
Taiwanese Labor laws allow the formation of trade unions under the constitution, which may form a larger confederation of businesses for widespread employee representation, such as the Taiwan Confederation of Trade Unions. The formation of employee and employer associations are widely used to discuss and negotiate employment issues, as well as lobbying the government on employment policies.
The Collective Agreements Law provides for collective bargaining arrangements, which occurs at the enterprise level. Although it is allowed, very few employees or employers are under collective bargaining arrangements.
Employment contracts may be in the form of writing or an oral agreement. They are governed by the LSA, while any provisions not covered by the LSA is covered by the Civil Code. Employment contracts may be written in a foreign language if both parties agree, although most are drafted in Mandarin Chinese. Typically, the employment contract must describe the following:
Fixed-term contracts are appropriate when the employment arrangement is for temporary, short-term, seasonal or special work that will have a given period of activity for the employee who must fulfil that obligation, where the employment arrangement ends upon expiry of the contract or satisfying the terms of the contract.
Fixed-term contracts become indefinite-term contracts when the employee continues to work even when the contract has been terminated due to expiry. In addition, employees who consecutively enter into fixed-term contracts lasting more than 90 days will be considered as working under an indefinite-term contract.
Indefinite term contract
Any labor contract for continuous work is considered a non-fixed-term contract.
The probationary period is not recognized under the LSA; instead it is known as the trial period. There is no maximum period for the trial period in Taiwan, where the length of probationary periods is open to negotiate between the employer and employee.
It is widely practiced that a three months trial period is used. The employment terms, conditions and benefits do not have to match those of employees during the trial period, although must meet the minimum requirements in the LSA and Civil Code. After three months of employment, trial employees are entitled to at least 10 days’ notice of termination regardless of how many days are left in the trial period. Employees terminated this way during the trial period are entitled to severance pay.
The termination of employees must ensure that the rights and benefits the employee is entitled to under the LSA are maintained, where termination does not violate these minimum standards. According to the LSA, the employer may not terminate an employment contract unilaterally unless the reason falls under Article 11 or Article 12 of the LSA, which includes causes such as:
For the more severe reasons under Articles 11 and 12, no severance pay or termination notice is required. For less severe reasons or reasons not related to the employee, prior notice should be given, which ranges from 10 days to 30 days depending on the employee’s duration of employment.
Redundancy has a very limited scope for being valid grounds for termination. Only when redundancy is caused by suspension of the employer’s business, operating losses, or business losses may the employer terminate the employee.
Incompetence may be reasonable grounds for termination, given that poor performance has been carried out and improvements for performance has been demanded of the employee. Failure to accomplish the task of the role may deem the employee incompetent, and may be terminated on these grounds.
Annual leave, or vacation time, is determined by the length of service. Employees are entitled to compensation in lieu of unused paid vacation time at the end of the calendar year or at the end of the employment contract. The employee is entitled to the following vacation time:
Employees are entitled to paid holidays on any central government designated days. Typically, they are national paid holidays set annually by the government. Companies may also provide employees with other holidays.
Employees receive a maximum of 30 days’ of non-hospitalized sick leave per year, and up to one full year of hospitalized sick leave. After three days of sick leave, employees receive 50% of their regular pay from the employer, and 50% from Labor Insurance. Any cash sickness benefit provided by Labor Insurance that is less than 50% must be made up by the employer.
Female employees are entitled to eight weeks of maternity leave. Any medical complications that arise may allow the employee a maximum of 30 days of extra leave for non-hospitalized circumstances, or up to 1 year of unpaid leave if they are hospitalized.
Any employee taking maternity leave who has been employed for six months or longer are entitled to pay in full earnings. Those employed for less than six months is entitled to 50% of earnings.
Employees with a child under age one is entitled to two 30 minute periods per day to nurse the child, which is considered pay working time.
Male employees are also entitled to three days’ paid paternity leave for the birth of the child.
Parental leave is also allowed for employees with children under age three, which extends up to two years unpaid leave. The employee may be eligible for parental leave allowance if they have insurance coverage. Paternal leave is only available in companies with more than five employees.
Employees are eligible for seven days of paid leave per year for care of family members only if the company has more than five employees.
The social security system in Taiwan is two-fold, consisting of Labor Insurance and National Health Insurance, governed by the Labor Insurance Act. For employees between the ages of 15 and 60 in companies with at least five companies must participate in the system. For employees in companies with less than five employees may be covered in the event of an occupational injury or unemployment. The Labor Insurance program is supervised by the Council of Labor Affairs.
Labor Insurance in Taiwan provides the following benefits, based on the employee’s average monthly salary:
In addition, a National Pension system has been established to cover old age, disability and death benefits for employees between 25 and 65 who are not covered by Labor Insurance, with contribution rates identical to Labor Insurance payable by the individual and the government.
Companies with 50 or more employees must make monthly contributions to a welfare fund for their employees, which are used to provide benefits such as training and facilities for the employees.
The standard work week is 84 hours every two weeks. A flexible schedule may be arranged with the employee’s agreement, with up to 48 hours per week over an eight week period, at 10 hours per day.
Employees are entitled to one rest day every seven days.
Overtime may only be taken with the consent of the union or the employee. The maximum number of overtime hours per month is 46 hours, or 32 hours for women. Employees may not work over three hours of overtime per day for men, and two hours for women. Consent is not required if the overtime was due to an unexpected occurrence, but the employer must notify the union within 24 hours.
Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Taiwan. For companies which intend to employ their staff directly through their incorporated Taiwanese entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Taiwan.
As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Taiwan.
The Shield GEO solution is an attractive alternative where
– the company is looking to employ staff quickly
– the company doesn’t have an appropriately incorporated entity in Taiwan
– the company wants to work within a defined budget
– the company wants to limit its initial commitment in Taiwan
– the company needs help with tax, employment, immigration and payroll compliance in Taiwan
Shield GEO can contract directly with the company to employ and payroll their staff in Taiwan. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits. Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.