This article introduces the following fundamental topics:
- I. Total hiring costs
- II. Working hours, leaves, and holidays
- III. Payroll
- IV. Work permit for foreign workers
- V. Termination of employment
Total hiring costs
In addition to salary, below costs are attached:
Labor pension premiums
The Labor Pension premium per month by an employer provided to the Annuities Insurance program may not be less than 6% of a worker’s monthly wage. While the contribution from the employee is not required.
Labor insurance premiums
The labor insurance premium is based on the insured employee’s monthly regular wage level, and paid by both the insured employee and his employer. The program provides ordinary insurance with 5 kinds of benefits (maternity, injury or sickness, disability, old-age and survivors’ benefits), and occupational accident insurance with 4 kinds of benefits (injury and sickness, medical-care, disability and survivors’ benefits).
National health insurance (NHI) premiums
Similar to the labor insurance premium, the NHI premium is based on the insured employee’s monthly regular wage level and paid by both the insured employee and his employer.
Supplementary national health insurance premiums
It is a response to two main criticism on NHI Premium:
- The NHI system is supported only by the normal salaried employees: the supplementary NHI Premium is levied on five types of income in addition to regular salaries. They include landlords’ rent income, lenders’ interest income, investors’ dividend income, self-employed’s income from professional practice, extra considerable bonus, and the income not from the employer.
- Some companies underreports their employee’s wage level in order to evade from a regular fee rate: the supplementary NHI Premium is levied on the difference when the total amount of salary paid exceeds the insured payroll-related amount for that month.
Exemplary total hiring costs
Considering above costs, we make examples as below. From column (g), we can find 10~20% additional costs are attached to the salary:
|Monthly Regular Salary in TWD(a)||Monthly Regular Salary in USD (b=a/31)||Labor Pension Premiums Paid by the Employer (c)||Labor Insurance Premiums Paid by the Employer (d)||NHI Premium Paid by the Employer (e)||Total Cost (f=a+c+d+e)||Total Cost Rate (g=f/a)|
Working hours, leaves, and holidays
- Regular working time
The regular working time may not exceed eight hours a day nor 40 hours a week.
- Extended working time
When an employer has a necessity to have the employee to perform the work besides regular working hours, the employer, with the consent of a labor union or the approval of a labor-management conference, may extend the working hours. The extension of working hours combined with the regular working hours shall not exceed twelve hours a day; the total number of overtime shall not exceed forty-six hours a month.
- Regular leave and rest day
A worker shall have two regular days off every seven days. One day is a regular leave and the other one is a rest day.
- Attendance records
Employers shall prepare and keep worker attendance records for five years. The attendance records shall register the attendance of workers on a daily basis to the minute. Employers may not refuse when workers request for duplicates or photocopies of the attendance records.
|1||Republic Day / New Year's Day||1 Jan|
|2||Chinese New Year||Chinese New Year's Eve ~ 5th day of 1st lunar month|
|3||Peace Memorial Day||28 Feb|
|4||Ching Ming Festival and Tom Sweeping Day, and Children's Day||4 Apr|
|5||Labor Day||1 May|
|6||Dragon Boat Festival or Tuen Ng Festival||5th day of 5th lunar month|
|7||Mid-Autumn Festival||15th day of 8th lunar month|
Overtime charge has different rates. We assume the monthly salary at $a and hourly rate $b=a/30, then:
|Overtime Hours||Overtime Charge Rate (c)||Charge Hours（d）||Overtime Payment（e=b*c*d）|
|<2 hours on working days||1.34 * b||actual overtime hours||1.34 * b * actual overtime hours|
|2～4 hours on working days||1.67 * b||actual overtime hours||1.67 * b * actual overtime hours|
|<2 hours on rest days||1.34 * b||actual overtime hours||1.34 * b * actual overtime hours|
|2~8 days on rest days||1.67 * b||actual overtime hours||1.67 * b * actual overtime hours|
|8~12 hours on rest days||2.67 * b||actual overtime hours||2.67 * b * actual overtime hours|
|<8 hours on regular leaves||b||8 (fixed)||b * 8|
|8~12 hours on regular leaves||2 * b||actual overtime hours||2 * b * actual overtime hours|
|<8 hours on holidays||b||8 (fixed)||b * 8|
|8~10 hours on holidays||1.34 * b||actual overtime hours||1.34 * b * actual overtime hours|
|10~12 hours on holidays||1.67 * b||actual overtime hours||1.67 * b * actual overtime hours|
Primary leaves guaranteed by labor laws are as below:
|1||Annual paid leaves||A worker who has worked continually for the same employer or business entity for a certain period of time shall be granted annual paid leaves on an annual basis:|
|3||Sick leave||When a worker must receive medical service or rest on account of ordinary injury, sickness, or physical reasons:|
|8||Leave for pregnancy checkups|
|9||Parental leave||After being in service for six months, before any of their children reach the age of three years old:|
|10||Family care leaves||For the purpose of taking personal care for family members who need inoculation, who suffer serious illness or who must handle other major events:|
As mentioned in section 1, labor and health insurance premiums are partly contributed by the employee, and therefore the employer should deduct these portions when paying salary. Besides, withholding tax on salaries should also be deducted. From column (g), we can observe that the employee receive 90~95% of the salary.
|Monthly Regular Salary in TWD (a)||Monthly Regular Salary in USD (b=a/31)||Labor Insurance Premiums Paid by the Employee (c)||NHI Premium Paid by the Employee (d)||Withholding Tax 5% (e)||Net Salary (f=a-c-d-e)||Net Salary Rate (g=f/a)|
Withholding tax on salary
The wage withholding system requires withholding for income taxes on payments by employers to employees. Income tax for the employee for the year is generally determined upon filing a tax return after the end of the year. The amount withheld and paid by the employer to the government is applied as the employee’s prepayment of income taxes and is refundable if it exceeds the income tax liability determined on the employee’s filing the tax return.
Most Taiwanese company includes an item of “food allowance” as much as TWD 2,400 in their salary. The reason is that, for the employee, the definition of taxable salary income covers all kinds of payment received from the employer. They include base salaries, stipends, wages, allowances, annuities, cash awards, bonuses and all kinds of subsidies. However, the food allowance as much as TWD 2,400 per month is an exception and can be exempted from the taxable salaries. Therefore, most Taiwanese companies provide employees with such food allowance.
Work permit for foreign workers
For the purpose of protecting Taiwanese nationals’ right to work, non-Taiwanese workers’ employment must never jeopardize nationals’ opportunities in employment, employment terms, economic development, or social stability. Accordingly, unless otherwise specified in the Employment Service Act, no foreign worker may work in Taiwan without the employer having first applied for and obtained a permit. No one may illegally let foreign workers stay to engage in work, nor is it legally for anyone to refer a foreign worker to work for any third party.
Types of work permit
There are many types of work permits, but we focus on two types which are most common to most companies:
- Specialized or technical work.
- Director/manager/executive of a business supported / set up by overseas investment.
Threshold of CEO work permit is lower but limited to one person for a company:
|CEO of a business supported or set up by overseas investment||Specialized or technical work|
|Quota||1 person||Not limited|
|Requirements for the employer||Capital: TWD 5 million|
|Requirements for the employee||Registered as the CEO|
|Requirements for monthly salary||None||TWD 47,971|
|Effective Period||Up to 3 years||Up to 3 years|
Three government agencies are involved:
|1||Apply for work permit||Ministry of Labor||1~2 weeks|
|2||Apply for work visa||Ministry of Foreign Affairs||1~2 weeks|
|3||Apply for Alien Resident Certificate ("ARC")||Immigration Agency||1~2 weeks|
Termination of employment
Minimum period of advance notice
When an employer terminates a labor contract, he shall govern the minimum period of advance notice:
- Where a worker has worked continuously for more than three months but less than one year, the notice shall be given ten days in advance.
- Where a worker has worked continuously for more than one year but less than three years, the notice shall be given twenty days in advance.
- Where a worker has worked continuously for more than three years, the notice shall be given thirty days in advance.
After receiving the advance notice, a worker may, during hours of work, ask for leave of absence for the purpose of finding a new job. Such leave of absence may not exceed two work days per week. Wages shall be paid during such leave of absence.
Where an employer terminates the contract without serving an advance notice within the time limit, he shall compensate the advance notice period by wages.
Legitimate reasons of terminating a labor contract with advance notice
No employer shall, even by advance notice to a worker, terminate a labor contract unless one of the following situation arises:
- Where the employers’ businesses are suspended, or has been transferred.
- Where the employers’ businesses suffers an operating losses, or business contractions.
- Where force majeure necessitates the suspension of business for more than one month.
- Where the change of the nature of business necessitates the reduction of workforce and the terminated employees can not be reassigned to other suitable positions.
- A particular worker is clearly not able to perform satisfactorily the duties required of the position held.
Legitimate reasons of terminating a labor contract WITHOUT advance notice
In any of the following situations, an employer may terminate a labor contract without advance notice:
- Where a worker misrepresents any fact at the time of signing of a labor contract in a manner which might mislead his employer and thus caused him to sustain damage therefrom.
- Where a worker commits a violent act against or grossly insults the employer, his family member or agent of the employer, or a fellow worker.
- Where a worker has been sentenced to temporary imprisonment in a final and conclusive judgment, and is not granted a suspended sentence or permitted to commute the sentence to payment of a fine.
- Where a worker is in serious breach of the labor contract or in serious violation of work rules.
- Where a worker deliberately damages or abuses any machinery, tool, raw materials, product or other property of the employer or deliberately discloses any technical or confidential information of the employer thereby causing damage to the employer.
- Where a worker is, without good cause, absent from work for three consecutive days, or for a total six days in any month.
Where an employer desires to terminate a labor contract, he shall do so within thirty days from the date he becomes aware of the particular situation.
The severance pay is based on the employee’s seniority: an amount equal to half a month of average wages for every full year of employment, and in proportion for a period of employment lasting less than one full year; the foresaid severance shall not exceed more than six months of average wages.
We assume an employee:
- With monthly salary at TWD 55,074;
- Leaves on the 15th of the month;
- Has 10 days of unused paid-leaves;
- Has worked in the company for 1 year, 4 months, and 23 days
then, the last payroll includes:
|1||Partial monthly salary||25,702 = 55,074 / 30 * 14|
|2||Compensation for unused paid leaves||18,358 = 55,074 / 30 * 10|
|3||Severance pay||Half of base salary: 27,537 = 55,074/2|
Severance pay: 38,475
=27,537 (1 year) + 27,537 / 12 * 4 (4 months) + 27,537 /12/30*23 (23 days)