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Hiring in Taiwan
When negotiating the terms of an employment contract and offer letter with employees in Taiwan, it may be useful to keep the following in mind.
Employment contracts in Taiwan
In Taiwan, a written employment contract is not mandatory when employing local employees. However, if an employer seeks to hire an international employee, a written employment contract must be provided. Regardless of the employee’s nationality, we recommend putting a strong, written contract in place, which spells out the terms of the worker’s compensation, benefits, and termination requirements. An offer letter and employment contract in Taiwan should always state the salary and any compensation amounts in Taiwan dollars (TWD) rather than another currency. According to Taiwan’s law, preferable consideration of locals must be made ahead of hiring international employees.
Most employment laws in Taiwan are covered in the Labor Standards Act (LSA). The Civil Code covers terms and conditions in individual contracts not covered by the LSA.
In Taiwan, the LSA recognizes 2 primary types of employment contracts — fixed-term and nonfixed-term employment. Fixed-term employment can be:
- Temporary or short-term work of up to 6 months.
- Seasonal work of no more than 9 months.
- Specific work, the duration of which is specified in the contract; approval is needed if such employment will last longer than a year.
Employers who have more than 30 employees are required to submit written work rules to the local labor authority for approval.
In Taiwan, the total salary typically consists of a basic salary plus any fixed allowances such as a meal allowance. Meal allowances can be provided for up to a maximum of TWD 3,000 per month and are exempt from individual income tax.
A 13th- or even 14th-month salary is provided to employees in Taiwan, although this is not required. The 13th- and 14th-month salaries are typically paid before the Lunar New Year.
It’s a tradition in Taiwan to reward employees on festival occasions. In general, more than 90% of companies provide festival bonuses to employees for the Lunar New Year, the Dragon Boat Festival, and the Mid-Autumn Festival. The average cash bonus for each festival is TWD 3,000 or more, depending on the festival, the industry, and the size of the company.
Working hours in Taiwan
The workweek in Taiwan is normally 40 hours, with a standard workday of 8 hours.
Other than top-level country managers of a specific entity, all other employees — including senior managers and mid-level managers — are allowed overtime, even if they are salaried. For the first 2 hours of overtime, the overtime rate is 134% of the worker’s pay rate. For the second 2 hours of overtime, the overtime rate is 167% of the worker’s pay rate. An overtime rate of 200% applies when overtime falls on a rest day or national holiday. It is illegal for employees to work overtime on their regular day off without consent.
Holidays in Taiwan
Employees receive the day off for these 9 public holidays:
- New Year’s Day
- Lunar New Year
- 228 Peace Memorial Day
- Children’s Day
- Tomb-Sweeping Day
- Labor Day
- Tuen Ng (Dragon Boat) Festival
- Mid-Autumn Festival
- National Day
If any of the public holidays fall on a Saturday, the preceding day will be observed, while if it falls on a Sunday, workers will have the following day off.
Vacation days in Taiwan
In Taiwan, all employees are entitled to paid annual leave, which is determined based on the employee’s years of service with the company.
- Employees who have worked more than 6 months but less than 1 year receive 3 days of leave.
- Employees who have worked more than 1 year but less than 2 receive 7 days of leave.
- Employees who have worked more than 2 years but less than 3 receive 10 days of leave.
- Employees who have worked more than 3 years but less than 5 receive 14 days of leave.
- Employees who have worked more than 5 years but less than 10 receive 15 days of leave.
- Employees who have worked more than 10 years receive 15 days plus 1 day for every additional year of service, up to a maximum of 30 days.
Taiwan sick leave
Employees are entitled to non-hospitalized sick leave of 30 days per year, which is paid at half-pay. In addition, if an employee is hospitalized, they are entitled to unpaid sick leave of up to 1 year. Total sick leave cannot exceed 1 year every 2 consecutive years.
Maternity and paternity leave in Taiwan
Pregnant employees are entitled to maternity leave before and after childbirth for a combined total of 8 weeks.
- If the employee has completed more than 6 months of service, they are entitled to full pay during their parental leave.
- If they have worked less than 6 months, they are entitled to half-pay.
Non-birthing parents are entitled to 7 days of paid “pregnancy check-up accompaniment and paternity leave” when their partners give birth.
Health insurance in Taiwan
The National Health Insurance Act (NHIA) requires all employers to enroll and participate, ensuring comprehensive health coverage for all employees.
Additionally, private health insurance is neither mandatory nor standard, but also not unheard of for senior executives.
Please note that employees who will travel outside of Taiwan on business must be covered by a travel insurance policy that includes global coverage for baggage, trip cancellation, evacuation, medical repatriation, and emergency travel expenses.
Taiwan supplementary benefits
Other common employee benefits include:
- Housing allowances
- Festival bonuses
- Meal allowance
Meal allowances can be provided for up to a maximum of TWD 2,400 per month and are exempt from individual income tax. Housing allowances are mainly provided to expatriates and some senior-level executives and are excluded from taxation. Most multinational companies provide these enhanced benefits to attract and retain local talent.
Medical benefits are typically extended to employees’ spouses and dependent children.
Generally, we recommend budgeting 20% as benefits costs on top of the gross salary to allocate the total employer’s expenses, including benefits in Taiwan.
Termination and severance in Taiwan
Probationary periods, or “trial periods” as they are locally referred to, are not mandatory in Taiwan. However, even when a probationary period is included in the terms of the employment agreement, if the employer dismisses the employee during or at the end of the probationary period, the conditions related to statutory cause, advance notice, and severance pay remain applicable to the termination.
Employment in Taiwan is not considered to be “at will.” There are set restrictions on termination of employment. An employer must have cause to terminate an employee, and dismissal is only permissible for the following reasons:
- The employer is closing the business, or ownership is transferred.
- The employer’s business is suffering from operating losses or business contractions.
- Operations are suspended for more than 1 month by reason of force majeure.
- The business nature of the employer is altered, requiring a reduction in the number of employees and there are no suitable job openings for the redundant employees.
- The employee is confirmed to be incompetent to carry out the work assigned to them.
In each of the above situations, the employer must give notice and pay severance to the employee. Notice and severance pay is not required for more dire circumstances, such as:
- Misrepresenting facts at the time of signing the employment contract in a manner which might mislead the employer.
- Committing violence against or grossly insulting the employer, the employer’s family, or fellow employees.
- Being absent from work for 3 consecutive days or for 6 days in a month without a justifiable reason.
- Deliberately causing damage or abusing any machinery, tools, raw materials, product, or other property of the employer or deliberately disclosing technical or confidential information.
- Being sentenced to temporary imprisonment without a suspended sentence or the option to commute the sentence to payment of a fine.
- Being in serious breach of the employment contract or in serious violation of work rules.
Where an employer or an employee is required to give notice, the following notice periods apply:
- 10 days’ notice: For an employee with more than 3 months but less than 1 year of service.
- 20 days’ notice: For an employee with more than 1 year but less than 3 years of service.
- 30 days’ notice: For an employee with more than 3 years of service.
An employee is entitled to paid leave of up to 2 working days per week during the notice period for the purpose of finding a new job. The employer may elect to pay in lieu of the notice period.
Paying taxes in Taiwan
Employees pay progressive income tax in Taiwan. The top rate is approximately 40% and starts at a salary level of NTD 4,720,001.
Local labor law in Taiwan requires that employers provide benefits, assist their employees with enrollment in Taiwan’s social security systems, and pay for:
- Labor insurance (LI): 11% of the employee’s insured grade
- Employment insurance: 1% of insured grade
- National Health insurance (NHI): 5.17% of insured grade
With labor insurance and employment insurance, employers pay 70%, employees pay 20%, and the government pays 10%. With labor occupational accident insurance, the employer pays 100%.
Employers must also pay at least 6% of an employee’s insured grade toward the pension plan, deposited to a specific individual pension account.
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