Employer of Record (EOR) in Taiwan

Drafting an Employment Contract in Taiwan

Historically, individual employment contracts have not been customary. However, this is changing and employment contracts in Taiwan are becoming more common. If a written contract is provided, it should clearly indicate the rate of salary, benefits and provisions regarding termination. These contracts are typically written in Mandarin Chinese. Employment law in Taiwan is largely covered in the Labour Standards Act (LSA), but not all industries or employers are covered by it. In these cases, the Civil Code applies.

Some employment rights are statutory and cannot be waived. In other situations, an employment contract can modify the terms and conditions of employment.

The Labour Standards Act recognizes temporary, seasonal work and special work. Temporary work is short-term and up to six months in duration. Seasonal work contracts are for employment not to exceed nine months. Special work specifies the duration of the employment relationship. If employment is expected to last longer than one year, approval is necessary.

Employers with 30 or more employees must register their written work rules with the local labor authority. Taiwan law requires that local workers be considered for employer before foreign workers cab be hired.

Sky Executive uses compliant employment contracts that have been approved by local labor agencies.

Working Hours in Taiwan

The regular work week in Taiwan is 40 hours. The standard work day is 8 hours. Nearly all employees except for top-level managers are allowed overtime, including if they receive a salary rather than an hourly rate. Overtime pay is the following:

• 133% of the normal pay rate for the first two hours of overtime on a normal work day
• 166% of the normal pay rate for the next two hours of overtime on a normal work day

Employees must have on rest day per seven days of work. Employers cannot require employees to work overtime on their normal day off. Some employers will require employees to receive approval before working overtime to avoid claims that the employee was required to work on an off day or that the employee did not receive overtime pay. Additional rules apply for overtime required on a national holiday.

The employer and employee can negotiate a flexible schedule with up to 48 working hours over an 8-week period so that the employee works 10 hours each day at the regular rate of pay.

Public Holidays in Taiwan

Taiwan recognizes the following nine public holidays:

• New Year’s Day
• Chinese New Year
• 228 Peace Memorial Day
• Children’s Day
• Tomb-Sweeping Day
• Labor Day
• Dragon Boat Festival
• Mid-Autumn Festival
• National Day

Employees are typically given the day off on these holidays. If the holiday falls on a Saturday, the day immediately before it will be considered a holiday. If the holiday falls on a Sunday, the following day will be considered the holiday.

Taiwan Vacation Leave

All employees must receive paid annual leave. The number of vacation days depends on how long the employee has been employed, according to the following chart:

If the employee has worked for the employer for more than ten years, he or she is entitled to 15 days of paid annual leave, plus one additional day per year of service over ten years, up to a maximum of 30 days. For example, if the employee worked for the employer for 20 years, he or she would be entitled to 25 vacation days (15 for the first ten years and then one day per the following ten years of service).

Taiwan Sick Leave

Employees receive up to 30 days of non-hospitalized sick leave per year and up to one year of hospitalized sick leave. After three days of sick leave, employees receive half of their regular pay paid by their employer and 50% from Labor Insurance. The total amount of sick leave cannot exceed one year for every two consecutive years of service.

Maternity Leave in Taiwan

Mothers are entitled to maternity leave before and after childbirth up to eight weeks. If the mother has been employed by the employer for more than six months, she is entitled to full pay during this leave. Otherwise, she is entitled to half pay. If medical complications arise, she may be entitled to additional leave, which may be paid or unpaid, depending on the circumstances. Mothers are also entitled to two 30-minute nursing breaks if their child is under age one.

Male employees are entitled to five days of paid paternity leave when the mother gives birth.

Parental leave allowance may be available for parents with insurance coverage.

Tax Compliance

Income Tax in Taiwan

Employees in Taiwan pay progressive income tax that is taxed at a higher rate for higher income levels. The highest tax rate is 45%, beginning with annual salaries at or above NTD 10,310,001.

Social Contributions

Taiwan labor laws require employers to provide benefits to employees and make contributions to Taiwan’s social security system, including the following:

• Labor insurance of 9.5% of the employee’s insured grade
• Health insurance of 4.69% of the insured grade, for which the employer is responsible for 60%, the government is responsible for 10% and the employee is responsible for 30%
• Employment insurance of 1% of the employee’s insured grade
• Contributions to the employee’s individual pension account of a minimum of 6% of the employee’s insured grade

As the Employer of Record, Sky Executive handles all benefits, tax and compliance matters.

Taiwan’s Social Security Benefits

Taiwan labor laws require employers to provide benefits to employees and make contributions to Taiwan’s social security system, including the following:

• Labor insurance of 9.5% of the employee’s insured grade
• Health insurance of 4.69% of the insured grade, for which the employer is responsible for 60%, the government is responsible for 10% and the employee is responsible for 30%
• Employment insurance of 1% of the employee’s insured grade
• Contributions to the employee’s individual pension account of a minimum of 6% of the employee’s insured grade

As the Employer of Record, Sky Executive handles all benefits, tax and compliance matters.

Taiwan’s Health Insurance Benefits

Taiwanese law requires all employers to enroll and participate in providing comprehensive health coverage to employees. Private health insurance may also be provided to employees as an additional employment benefit. Medical benefits are usually extended to the spouses and dependent children of employees. Alternatively, some employers in Taiwan provide an allowance to employees to cover healthcare costs instead of purchasing separate private insurance.

Annual Bonus

Some employers in Taiwan offer a 13th or even 14th month salary as an attractive bonus to employees. This bonus is typically paid before the Chinese New Year.

Festivals Bonus

Taiwanese businesses may also pay festival bonuses to employees around major festivals. These bonuses are typically between NTD 500 and 5,000, depending on the industry, size of the business and the festival.

Other Employment Benefits

Employers may offer other employment benefits to make them a more attractive option for candidates. Employers may offer life, accident and business travel insurance. Housing allowances are also common in Taiwan. Some employers in Taiwan offer leaving service benefits. Meal allowances may be provided for employees up to NTD 2,400 each month. This allowance is exempt from individual income tax. The type of benefits that are available to employees depend on the employer and the employee’s role in the company.

Termination Procedures in Taiwan

Employment in Taiwan is not typically considered “at will” like it usually is in the western culture. Employers in Taiwan typically may only dismiss employees for permissible reasons, such as:

• The employer is closing the business or transferring ownership of it
• The employer is suspending operations for more than one month
• The employer must reduce the number of employees because the business nature is altered
• The employer shows the employee was incompetent to complete the work that he or she was hired to perform

In these situations, the employer must provide notice to the employee between 10 and 30 days, depending on the length of service. Additionally, the employer must pay severance pay to the employee as well as provide paid time off so the employee can find a new job.

If the reason for termination is more serious, the employer is not required to comply with severance and notice requirements. These reasons include

• The employee missed three consecutive days of work or six days in a month without justification
• The employee commits violence against the employer or his or her family or other employees
• The employee intentionally causes damage

Why using a Employer of Record (EOR) in Taiwan

EOR services are an effective alternative to the traditional employment arrangement. Sy Executive handles all human resource functions and takes over administrative and EOR responsibilities. We also provide the following services:

• Employment contract drafting – We draft compliant employment contracts for temporary, seasonal and special work.
• Recruitment services – We work closely with you to identify the key characteristics of candidates and then find them from across the globe.
• Employee onboarding – Our employment specialists make your employees’ transition seamless by handling all aspects of the administrative process required for new hires.
• Payroll – Our human resources specialists also handle all payroll responsibilities, including remittance of social insurance payments, handling of annual leave entitlement, the administration of benefits and tax compliance.
• Compliance – We ensure that you are compliant with Taiwan labor laws and handle employer liabilities.

Benefits of Using an EOR in Taiwan

Working with an EOR can provide many benefits to your company. You can hire employees in Taiwan within days, instead of waiting weeks or months. The process is more affordable since you can hire employees without having to establish a separate legal entity. This process provides you with greater flexibility since you can scale your business up or down as your business needs dictate.

Sky Executive’s employment solutions allow you to remain compliant with your employment relationships and labor contracts. At the same time, we assume all the risk associated with employment, allowing you to manage your risk while expanding your business to a new market.