Taiwan has a population of 24 million, but it ranks 22 of world economies by GDP. It has excellent infrastructure and access to healthcare, human rights, and freedom of speech. With a diversified supply chain, Taiwan is a major manufacturer and exporter of goods like electronics, textiles, machinery and chemicals. Due to its central location, Taiwan is an ideal location for international businesses to expand into Asia.
As businesses set up operations in Taiwan, there are no doubt numerous key considerations to bear in mind. Legal entities, corporate assets, recruitment, and supply chain processes are just some of the core functions that businesses need to get right. Above all, businesses need to hire the right people to execute these tasks while ensuring that they are well remunerated. This then boils down to understanding and navigating the complexities of managing payroll in Taiwan.
Wages, Bonuses and Severance
Most Taiwan companies have a monthly payroll. Employees must be issued with payslips for each pay period, and payroll records must be kept for at least 10 years. As of 2022, the minimum wage in Taiwan is as follows:
The monthly basic wage is NT $25,250
The hourly basic wage is NT $168
Paying a 13th-month salary is customary in Taiwan and is generally paid during the Lunar New Year.
Notice periods for terminations vary depending on the length of service which are as follows:
3 months to 1 year of employment: 10 days’ notice
1-3 years of employment: 20 days’ notice
Over 3 years of employment: 30 days’ notice
Severance pay is mandatory in Taiwan and is determined by the employee’s length of service and the start date of the employment contract.
If the employee’s contract start date is before 2005, the Labour Standards Act requires the calculation of the severance pay to be one months’ salary for each year of employment.
If the employee’s contract start date is after 2005, the Labour Standards Act requires severance pay to be half a month’s salary for each year of employment.
Tax and Social Security
Income tax is withheld at source by employers, and is levied in Taiwan across five progressive bands, starting at 5% for the first TWD$540,000 of annual earnings, and reaching the top band of 40% for all earnings over TWD$4,530,000 per year.
Labour Insurance is deducted based on the table released by the government. The employer is required to enrol for labour insurance, health insurance and labour pension act at the on-board date and deduct labour insurance and health insurance borne by employees from their salary. For supplementary NHI, the employer will need to pay the supplementary premium when total monthly Taxable income exceeds total monthly insured cap. For voluntary termination, the employer needs to file Termination of Social Security with authorities. For involuntary termination, the employer needs not only to file termination of social security but also report to the government of redundancy with reasons for employee’s termination.
Social Security payments are to be paid to authorities by the following dates:
Labour Insurance – 30th of the following month
Health Insurance – 15th of the following month
Labour Pension Act – 30th of the following month
Taiwan Overtime Regulations
The limits in terms of working time for employees is to a maximum of 40 hours per week and eight hours on any given day. Working hours are not set in stone and can be varied in employment contracts depending on business needs. Overtime can be worked as long as total working hours don’t exceed 12 hours in a day. It should be no more than 36 hours of overtime are worked per month. The monthly limit can be extended to 54 hours with union agreement. The four extra hours worked on a working day are paid at 1.34 times the hourly rate for each of the first two hours, and 1.67 times hourly rate for the last two. It is mandatory to have two days off every seven days. One of these days off is compulsory and the other day is flexible and can be worked and paid as overtime. The overtime calculation is 1.34 times hourly rate for the first two hours, 1.67 times for the next six hours, and 2.67 times for the last four hours up to the 12-hour limit.
Taiwan Statutory Leave Regulations
Paid time off
Paid leave entitlement increases based years of service, starting at three days for the first year once an employee has worked six months. Annual leave is accrued as follows:
6 months to less than 1 year of employment: 3 days’ paid leave
1 year of employment: 7 days’ paid leave
2 years of employment: 10 days’ paid leave
3 years of employment: 14 days’ paid leave
5 years of employment: 15 days’ paid leave
One additional day is provided for each year of service following the completion of 10 years (to a maximum of 30 days)
For any leave that is unused, employees must be paid in lieu.
Taiwan has 13 days of public holidays each year. Employees are entitled to take these days off, and employers must provide alternative days off if the employees have to work on the designated days themselves.
Sick leave
Sick leave entitlement is up to 30 days a year when employees are not hospitalised. Sick leave entitlement increases to twelve months when the employee is hospitalized. The former comes with an entitlement of 50% of salary: some of this may be covered by insurance payments and should there be a difference in the amount due and the regular salary rate of pay, the employer must pay the difference.
Maternity and paternity leave
Employees are entitled to 8 weeks paid maternity leave at full pay for employees with a minimum of six months of employment. If the employee has not been employed for the minimum period, maternity pay reduces to 50%. Maternity leave entitlement is eight weeks at full pay (50% of pay for those with less than six months’ service). In the event of a miscarriage, an employee is entitled to 4 weeks’ leave if the miscarriage occurs after 3 months of pregnancy, 1 week if it occurs two to three months into the pregnancy and five days if it occurs less than two months into the pregnancy. An employee is entitled to paid leave for 7 days for the purpose of prenatal checkups.
An employee whose spouse is in labor is entitled to 7 days of paid paternity leave. The leave can also be taken for the purpose of accompanying the spouse for prenatal check-up also called Paternity Inspection Leave.
Parental leave
After being in service for six months, employees may apply for parental leave without pay before any of their children reach the age of three years old. The period of this leave is until their children reach the age of three years old but may not exceed two years. When employees are raising over two children at the same time, the period of their parental leave shall be computed as an aggregate and the maximum period shall be limited to two years received by the youngest child.
During the period of parental leave without pay, employees may continue to participate in their original social insurance program. Premiums originally paid by the employers shall be exempted and premiums originally borne by the employees shall be deferred for three years.
For the purpose of raising children of less than three years of age, employees hired by employers with more than thirty employees may request one of the following subparagraphs from their employers:
To reduce working hours one hour per day; and for the reduced working time, no compensation shall be paid.
To reschedule working hours.
Employees hired by employers with less than thirty employees may request to apply the above provisions by discussing with their employers to reach mutual consent.
During unpaid parental leave, employee may apply for parental leave allowance which is “calculated as 60% of the average insured monthly salary under the employment insurance program” with up to six months’ allowance in aggregate for each child. To enhance the economic support for employees during unpaid parental leave, the Ministry of Labor promulgated the Guidelines for Salary Subsidies for Unpaid Parental Leave. It states that an employee who applies for the parental leave allowance pursuant to the Employment Insurance Act may also apply to the Labor Insurance Bureau for a salary subsidy for unpaid parental leave. It is calculated as “20% of the average insured monthly salary under the employment insurance program” and is paid together with the parental leave allowance. The aggregate of the subsidy and allowance can reach 80% of the average insured monthly salary under employment insurance program.
Other Leave Entitlements
An employee is entitled to 8 days of paid wedding leave. Female employees having difficulties performing their work during menstruation may request 1 day menstruation leave each month. If the cumulative menstrual leaves do not exceed 3 days in a year, they must not be counted towards days off for sick leave. All additional menstrual leaves must be counted towards days off for sick leave. Employees are also entitled to compassionate leave with the following:
8 days on the death of a parent, foster parent, stepparent or spouse;
6 days on the death of a grandparent, child, spouse’s parent, foster parent or step parent of spouse; and
3 days on the death of a sibling, great-grandparent or spouse’s grandparent.
Employee’s Attendance Recording
In Taiwan, employers are required to maintain records of employee’s attendance on a daily basis and the total sum of wages paid to the employee etc. The records need to be maintained for a period of at least 5 years.
The attendance record includes a check-in book, attendance card, card machine, access card, bio metric identification system, electronic attendance record system or other recording tools that can verify the attendance record. The employer needs to record the dates of annual paid leaves of employees and the total amount of the wages paid for annual paid leaves in the employee’s payroll.
Penalties
Statutory officers will conduct onsite inspections to ensure companies are complying accordingly to the Labour Standards Act. For non-compliance, companies may receive fines that can range from NT$20,000 to as much as NT$1,000,000 for regulation breaches, and the government will publish the company name, responsible person’s name and type of breach on the Bureau of Labour Affairs portal.
Managing Taiwan payroll can potentially be daunting. Hence, it is advisable to invest in a robust payroll software to take care of the administrative payroll matters. Most payroll software today comes with features that enable salary calculations and tax computation while taking into account the statutory contributions and deductions. Other features include monthly alerts to remind payroll staff of important tax filing deadlines or payroll cut-off dates. i-Admin helps organisations to manage complex payroll processes across multiple countries, such as Singapore, Hong Kong, Taiwan and more. Speak to one of our consultants today to understand how we can support you on your payroll journey.
If you like our content, remember to subscribe to our e-newsletter to receive the latest tips, articles, tools and exclusive promotions for payroll & HR professionals conveniently in your inbox!