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2008 Benefits and
Employment Terms Taiwan
Watson Wyatt Data Services
Overview of Watson Wyatt Data Services Reports ASIA PACIFIC REPORTS
Benefits Report – Asia Pacific Employment Terms and Conditions – Asia Pacific Asia Pacific Survey Report on Employee Benefits Car Policy Report – Asia WorkAsiaTM Benefits and Employment Terms by Country: Australia China Hong Kong India Indonesia Japan Korea Malaysia Philippines Singapore Taiwan Thailand Vietnam
Compensation Reports by Country: Australia Hong Kong India Indonesia Japan Korea Malaysia Philippines Singapore Taiwan Thailand Vietnam
Compensation Reports – China: Local Chinese Nationals Western & Asian Expatriates Hong Kong Expatriates
Director Remuneration & Corporate Governance – An Analysis of Hong Kong and Mainland Companies Listed in Hong Kong Sales and Marketing Compensation Report – Asia Pacific Foreign Sourced Employees Compensation and Benefit Policies – Asia Pacific
EUROPEAN AND NORTH AMERICAN REPORTS
Global 50 Remuneration Planning Report Benefits Report – Europe Employment Terms & Conditions – Europe Benefits & Employment Terms Report – By Country Company Car Report – Europe Top Management Compensation – Europe, Israel and USA Compensation Reports by Country: Argentina Austria Belgium Brazil Bulgaria Chile Colombia Costa Rica Croatia Czech Republic Denmark Dominican Republic EI Salvador Estonia Finland France Germany Greece Guatemala Honduras Hungary Ireland Israel Italy Kazakhstan Latvia Lithuania Luxembourg Mexico Netherlands Nicaragua Norway Panama Paraguay Peru Poland Portugal Puerto Rico Romania Russia Serbia and Montenegro Slovak Republic Slovenia Spain Sweden Switzerland Turkey Ukraine United Kingdom United States* Uruguay Venezuela
* Focus reports by industry, job family and geographic location are also available. HR REFERENCE MANUALS
Communications: Exhibit Book of Employee Opinion Surveys Exhibit Book of Employee Handbooks Exhibit Book of Compensation Communication Handbooks Exhibit Book of Benefit Communication Programs Exhibit Books of Position Descriptions
Personnel Policies: Exhibit Books of Personnel Policies Exhibit Book of Alternative Work Arrangements Exhibit Book of Emergency Preparedness Protocols Exhibit Book of Expatriate Personnel Policies Exhibit Book of Employee Relocation Policies Exhibit Book of Employment Contracts and Severance Pay Programs
Pay for Performance: Decision Maker’s Guide to Salary Management The Complete Variable Pay Collection Manual of Sales Incentive Plans Exhibit Book of Annual Bonus Plans The Complete Long-Term Incentive Collection Exhibit Book of Employee Recognition Plans & Other Low Cost Reward Programs Exhibit Book of Performance Management Programs
hrresource.watsonwyatt.com
2008 Benefits and Employment Terms – Taiwan iii
Watson Wyatt Data Services
This report is produced by Watson Wyatt Data Services — Asia Pacific, your gateway to human capital information resources. Serving clients worldwide, Watson Wyatt Data Services — Asia Pacific is dedicated to producing timely and comprehensive reports oncompensation, benefits and employment practices in the Asia Pacific region.
Contact Us
We are always pleased to receive your questions, comments and suggestions concerning this report. Our colleagues who can give you a speedy reply are listedbelow.
SINGAPORE HONG KONG
Betty Chan Watson Wyatt Singapore Pte. Ltd. 135 Cecil Street #09‐01 Singapore 069536 Tel: (65) 6880 5688 Fax: (65) 6880 5699 Email: [email protected]
Karen Nip Watson Wyatt Hong Kong Ltd 29/F., Sun Hung Kai Centre 30 Harbour Road Hong Kong Tel: (852) 2827‐8833 Fax: (852) 2827‐7700 Email: [email protected]
Taiwan
Josephine Chow Watson Wyatt & Company, Taiwan Branch 5F, 205 Tun Hwa North Road Taipei 105, Taiwan Republic of China Tel: (886) 2‐2718‐3314 Fax: (886) 2‐2719‐7438/0246 Email: [email protected]
For more information concerning other regional reference reports and services, please contact us at the addresses listed on this page or refer to the Appendices section of this report for the Watson Wyatt office nearest to you. Alternatively, you could visit our website at http://hrresource.watsonwyatt.com.
License Agreement Copyright © 2003‐2008 Wyatt Data Services, Inc. All Rights Reserved.
This license agreement is entered into by and between Watson Wyatt Data Services
(“WWDS”) and the Licensee. In consideration of the mutual covenants in thisagreement WWDS and the licensee agree as follows: Grant of License. All WWDS publications contain the compilation of certaincompensation data and materials provided to WWDS by its survey participants intoanalyzed and transformed information (the “Transformed Data”). WWDS hereby grants the Licensee a nonexclusive, nontransferable, limited license to use theTransformed Data as permitted by this agreement. The license of any form ofTransformed Data constitutes acceptance by the Licensee of the following terms and
2008 Benefits and Employment Terms – Taiwan iv
conditions: The Licensee has the right to manipulate and modify the Transformed Dataand to reproduce and excerpt it in reports or memoranda created by the Licensee in theregular course of business. It may not distribute the Transformed Data for any other use. Any use of the Transformed Data that is included in any report or analysis forinternal or external parties in the regular course of business must acknowledge thesource of the Transformed Data as Watson Wyatt Data Services. Limitations on Use. Except as expressly provided in this Agreement, the Licensee maynot, in any way or manner, reproduce, display, rent, lend or resell, relicense,commercially exploit, adapt, or redistribute in any fashion the Transformed Data.The Licensee must not permit public access to the Transformed Data. The Licenseeshall not assign, sublicense, or otherwise transfer this license agreement without theprior written consent of WWDS. The Licensee may not use the Transformed Data inany form, the name of the Transformed Data reports or the name Watson Wyatt Data Services in any type of marketing or sales activities. Rights In Data. The Transformed Data is the confidential and proprietary informationof WWDS and may not be reproduced, displayed, adapted, resold or distributed without WWDS’s prior written consent. This License Agreement does not convey to theLicensee any proprietary or other ownership of the Transformed Data or theunderlying compensation data. The Licensee acknowledges that WWDS and/or WatsonWyatt & Company own the underlying compensation data and Transformed Dataincluding all copyrights, patents, trade secrets and other proprietary rights therein. Warranties Disclaimed.WWDS assumes no responsibility of any kind, oral or written,express or implied, including but not limited to, fitness for a particular purpose,accuracy, omissions, completeness, and currentness of information. WWDS shall in noevent whatsoever be liable to licensee or any other party for any indirect, special,consequential, incidental, or similar damages, including damages for lost data oreconomic loss, even if WWDS or Watson Wyatt has been notified of the possibility ofsuch loss. Some jurisdictions do not allow the exclusion or limitation of impliedwarranties or liability for incidental or consequential damages, in which case theseprovisions may not be fully applicable. This paragraph shall survive the termination ofthis license agreement. Term. This license agreement will have a term of 10 years. WWDS reserves the right to terminate this license agreement upon written notice to the Licensee if the Licenseebreaches any of the terms of this Agreement. In addition, if WWDS, in its solejudgment, believes that the Transformed Data is being used for a purpose not approvedby WWDS, that WWDSʹs rights are being jeopardized, or that the Licensee is in defaultunder this agreement, WWDS may immediately terminate this agreement and theLicensee shall immediately return all Transformed Data, in whatever form, to WWDS.
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2008 Benefits and Employment Terms – Taiwan v
TABLE OF CONTENTS
About This Report .......................................................................................................................................1 BENEFITS
1 Overview of Benefits..............................................................................................................................61.1 Introduction .....................................................................................................................................61.2 New Developments.........................................................................................................................61.3 Key Data .........................................................................................................................................7
2 Statutory Benefits ..................................................................................................................................82.1 Introduction .....................................................................................................................................82.2 Retirement Benefits ......................................................................................................................112.3 Death Benefits ..............................................................................................................................152.4 Disability Benefits..........................................................................................................................152.5 Worker’s Compensation ...............................................................................................................162.6 Healthcare Benefits.......................................................................................................................172.7 Other Mandatory Employee Benefits............................................................................................202.8 Severance Payments....................................................................................................................212.9 Summary of Contributions ............................................................................................................23
3 Company Benefit Practice ..................................................................................................................243.1 Overview.......................................................................................................................................243.2 Major Laws and Supervisory Bodies ............................................................................................243.3 Funding Methods ..........................................................................................................................243.4 Customary Retirement Plan Structure ..........................................................................................253.5 Death and Disability Benefit..........................................................................................................263.6 Healthcare Benefits (Other Group Insurance Programs)..............................................................263.7 Other Benefits ...............................................................................................................................283.8 Severance Payments....................................................................................................................28
4 Taxation of Benefits.............................................................................................................................294.1 Contributions.................................................................................................................................294.2 Benefits .........................................................................................................................................304.3 Taxable Income ............................................................................................................................30
5 Comparison of Statutory Benefits and Company Benefits..............................................................325.1 Retirement Benefits ......................................................................................................................325.2 Death and Disability Benefits ........................................................................................................335.3 Worker’s Compensation ...............................................................................................................335.4 Healthcare Benefits.......................................................................................................................345.5 Severance Payments....................................................................................................................34
TABLE OF CONTENTS
2008 Benefits and Employment Terms – Taiwan vi
EMPLOYMENT TERMS
1 Overview ...............................................................................................................................................361.1 Introduction ...................................................................................................................................361.2 New Developments.......................................................................................................................36
2 Country Profile .....................................................................................................................................37
2.1 People and Population..................................................................................................................372.2 Government and Political Structure ..............................................................................................372.3 Economic and Business Environment ..........................................................................................372.4 Taxation ........................................................................................................................................38
3 Employment Law..................................................................................................................................393.1 Legal Influence..............................................................................................................................393.2 Hierarchy of Laws .........................................................................................................................40
4 Employment Issues .............................................................................................................................494.1 Contract of Employment ...............................................................................................................494.2 Approval of Foreign Nationals ......................................................................................................54
5 Working Conditions .............................................................................................................................615.1 Pay................................................................................................................................................615.2 Working Hours ..............................................................................................................................615.3 Holidays and Leave ......................................................................................................................635.4 Equal Opportunities ......................................................................................................................665.5 Health and Safety .........................................................................................................................685.6 Training .........................................................................................................................................705.7 Sickness and Disability, Pensions, and Life Assurance ...............................................................705.8 Secrecy, Patents, and Copyright ..................................................................................................74
6 Industrial Relations..............................................................................................................................796.1 Bodies Involved With Industrial Relations.....................................................................................796.2 Collective Bargaining ....................................................................................................................816.3 Strikes and Other Industrial Actions .............................................................................................826.4 Settlement and Mediation Proceedings ........................................................................................83
7 Termination of Employment ...............................................................................................................867.1 Change of Contract.......................................................................................................................867.2 Types of Contracts........................................................................................................................877.3 Termination During Probation.......................................................................................................877.4 Types of Terminations ..................................................................................................................887.5 Termination Benefits .....................................................................................................................907.6 Unfair Dismissals ..........................................................................................................................927.7 Dismissals of Union Representatives ...........................................................................................927.8 Dismissals of Managerial Employees ...........................................................................................927.9 Collective Dismissals ....................................................................................................................93
Useful Addresses ......................................................................................................................................94
Exchange Rates .........................................................................................................................................95 Watson Wyatt in Asia Pacific ...................................................................................................................96
2008 Benefits and Employment Terms – Taiwan 1
ABOUT THIS REPORT
2008 Benefits and Employment Terms — Taiwan is divided into two main sections. The Benefits section sets out employee benefits law and practice covering retirement,death and disability, health care, social security benefits and severance pay. Supplementary retirement plan design, funding methods, market benefit practice and taxation of benefits are also included. The Employment Terms and Conditions section details employment law and practice covering contract of employment, workingconditions, industrial relations and termination of employment.
Benefits Overview of Benefits A discussion of the factors influencing the provision of statutory and company benefits,and a summary of new developments.
Statutory Benefits A comprehensive review of mandatory benefits such as retirement, death, disability and medical schemes. Also included here are those company‐paid items mandated by law.
Company Benefits Practice A detailed description of benefit practice among private employers with regard toretirement plan design, benefit amounts, contributions, vesting and portability and funding methods. The usual market practice of benefits and perquisites are alsohighlighted.
Taxation of Benefits A quick reference guide to the taxation of benefits.
Comparison of Statutory Benefits and Company Benefits A quick reference table comparing statutory and company retirement plans, death anddisability benefits, worker’s compensation, health care benefits, severance paymentsand perquisites.
Employment Terms Overview and Country Profile A discussion of the demographics, political and economic environment of the country, factors influencing employment laws and a summary of new developments.
Employment Law This section explains the legal basis for deciding matters related to employment conditions. Items covered here typically include the country’s constitution, statutes,and royal or ministerial decrees. This is an especially useful section for readers whowish to know which sources of law are of increasing importance in the resolution of questions or disputes.
Employment Issues The most significant aspects relating to the fundamental relationship between theemployee and the employer are reported here. Key items covered include: definition ofand conditions required for a valid contract, types of employees, and trial or probationary periods. This section also contains valuable information about workpermits and visas.
ABOUT THIS REPORT
2008 Benefits and Employment Terms – Taiwan 2
Working Conditions This section covers laws pertaining to wages and salaries, working hours, holidays andleave, discrimination, occupational health and safety, training, sickness and disabilitybenefits, pensions and life assurance, and patents and copyright.
Industrial Relations The various labor councils and unions that are involved in or influence the country’s industrial relations policies are discussed in this section. Also mentioned are theramifications of collective bargaining that includes items which are legitimate mattersof negotiation, the usual length of agreements, registration, interpretation andenforcement of agreement. The mechanisms of industrial relations, including the basiclegal framework of strikes, lockouts, and other forms of employee or employer actionsare also discussed.
Termination of Employment This section addresses contract modification and suspension, individual termination, types of termination, severance pay and other termination indemnities, and collectiveand managerial dismissals. Also included are the various compensatory actionsrequired or offered by employers in the event of wrongful dismissal and termination without notice.
Appendix Useful Addresses
Contributors Josephine Chow and Regina Chu Watson Wyatt Taiwan [email protected] [email protected]
Tina Chen (email: [email protected]) is a senior paralegal who specializes in employment issues, work visas and immigration, as well as intellectual property andcorporate matters including trademark enforcement and contracts. Lloyd Roberts (email: [email protected]), Winkler Partners’ publications and promotions associate. Tina and Lloyd updated the chapter on Taiwan with the help of a team of associatesmade up by Christine Chen, a senior associate who specializes in corporate, fair trade, labor issuesand intellectual property law; Lewis Chen, Winkler Partners’ head librarian and legal researcher; Chih‐shan Lee, a senior associate who specializes in civil law, corporate law, anti‐trust issues, and securities law; Liu Yen‐ling, a senior associate who practices company law, securities law, labor law, and general civil and criminal law.
ABOUT THIS REPORT
2008 Benefits and Employment Terms – Taiwan 3
Also Available 2008 Benefits and Employment Terms — by Country is available for 13countries/locations in Asia Pacific. Clients who oversee the Asia Pacific region maywish to refer to the two reports mentioned below.
2008 Benefits Report — Asia Pacific provides employee benefit laws and practices for the 14 countries/locations in Asia Pacific, covering in detail topics such as retirement, death, disability, and medical schemes. Plan design, benefit amounts, funding methods and tax implications are also included.
2008 Employment Terms and Conditions — Asia Pacific sets out employment laws and practices for the same countries/locations (excluding Macau), covering in detail issues such as sources of law, start of employment, working conditions, industrialrelations, termination of employment, residency requirements and many othertopics.
Contact Us It is always our pleasure to receive your comments, questions and suggestions
concerning this report. For matters pertaining to a particular country, we suggest thatyou contact the respective Watson Wyatt office, as indicated in the end pages of thisreport. For all other matters, please contact Betty Chan in Singapore or Karen Nip in Hong Kong.
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2008 Benefits and Employment Terms – Taiwan 5
BENEFITS TABLE OF CONTENTS
1 Overview of Benefits
1.1 Introduction 1.2 New Developments 1.3 Key Data
2 Statutory Benefits 2.1 Introduction 2.2 Retirement Benefits 2.3 Death Benefits 2.4 Disability Benefits 2.5 Worker’s Compensation 2.6 Healthcare Benefits 2.7 Other Mandatory Employee Benefits 2.8 Severance Payments 2.9 Summary of Contributions
3 Company Benefit Practice 3.1 Overview 3.2 Major Laws and Supervisory Bodies 3.3 Funding Methods 3.4 Customary Retirement Plan Structure 3.5 Death and Disability Benefit 3.6 Healthcare Benefits (Other Group Insurance
Programs) 3.7 Other Benefits 3.8 Severance Payments
4 Taxation of Benefits 4.1 Contributions 4.2 Benefits 4.3 Taxable Income
5 Comparison of Statutory Benefits and Company Benefits 5.1 Retirement Benefits 5.2 Death and Disability Benefits 5.3 Worker’s Compensation 5.4 Healthcare Benefits 5.5 Severance Payments
Taiwan
2008 Benefits and Employment Terms – Taiwan 6
1 OVERVIEW OF BENEFITS 1.1 Introduction
Under Social Security, an employee in Taiwan is covered by two insurance programs, Labor Insurance (LI), including Employment Insurance (EI), and National HealthInsurance (NHI). LI provides monetary compensation to workers in the case of non‐occupational and occupational illnesses or injuries, as well as disabilities, retirement, and death. Unemployment benefit is provided under EI. NHI provides non‐monetary medical care benefit coverage for both hospitalization and outpatient care, includingdental and optical care. The NHI and LI (including EI) programs are two independent systems with different benefits, premium rates, insured salary caps, and administrativeagencies. In addition to benefits covered by Social Security, private companies are stipulated bythe Labor Standards Law and Labor Pension Act to provide other mandatory benefits to employees. Multinational companies typically provide benefits exceeding the localpractice. In particular, additional coverage for life and accidental injury insurance, aswell as medical benefits, is often provided.
Several laws that set down statutory minimum provisions are the key determinants ofthe scope and amount of benefits to be provided to employees. The following are theseven main areas of legislation:
(1) Labor Standards Law (2) Labor Pension Act (3) Labor Insurance Act (4) Employment Insurance Act (5) National Health Insurance Act (6) Gender Equality in Employment Law (7) Employee’s Welfare Funds Act
1.2 New Developments The National Pension Act was promulgated on August 8, 2007 and
will become effective October 1, 2008.
Revision of the Labor Insurance Act has been scheduled and is awaiting legislative approval.
See 2.1
See 2.1.1
The premium rate of Labor Insurance, including EmploymentInsurance, has been proposed to be increased to 7% from thecurrent 6.5%.
The premium rate of Employment Insurance has been proposed to be reduced from 1% to 0.5%.
See 2.1.1
See 2.1.1
The minimum wage was increased from 15,840 NT dollars (TWD) to TWD17,280 effective July 1, 2007.
See 2.2.1
OVERVIEW OF BENEFITS Taiwan 1.2 New Developments ___________________________________________________________________________
2008 Benefits and Employment Terms – Taiwan 7
Salary tables for Labor Insurance, the Labor Pension Act, and National Health Insurance have been revised following the increase in the minimum wage, effective July 1, 2007.
See 2.2.3, 2.6.1
A Labor Pension Fund Subcommittee has been formed under the Labor Pension Act.
See 2.2.3
The employer‐paid occupational injury insurance premium under
Labor Insurance has been amended and will become effective January 1, 2008. It ranges from 0.05% to 2.97%.
See 2.5.2
The national holiday celebrating President Chiang Kai‐shek’s birthday has been proposed to be removed.
Parental leave allowance has been proposed under an amended provision of Employment Insurance.
See 2.7.2
See 2.7.11
1.3 Key Data
2006 2007 2008
Population (millions)2 22.7 22.9 22.9
Unemployment rate2 3.9% 3.9% 3.9%
Consumer prices (% change per annum, average)1 0.6% 1.1%* 1.4%*
GDP (% real change per annum)1 4.7% 4.3%* 4.4%*
Marginal personal income tax rate2 40.0% 40.0% 40.0%
Compensation breakpoint for marginal personal income tax rate (effective July 1, 2007)2
TWD3,720,000 TWD3,720,000 TWD3,720,000
* Estimates Sources: 1 Economist Intelligence Unit, July 2007. 2 Taipei National Tax Administration, Ministry of Finance.
Taiwan
2008 Benefits and Employment Terms – Taiwan 8
2 STATUTORY BENEFITS 2.1 Introduction
Under social security, Labor Insurance (LI) covers retirement benefits, death payments,
and worker’s compensation due to non‐occupational and occupational illnesses, injuries, or disabilities. Employment Insurance (EI) covers the unemployment benefit.National Health Insurance (NHI) provides non‐cash medical care benefits coverage for both hospitalization and outpatient care, including dental and optical care. The LI andEI schemes, which are contributed to by employers, employees, and government, areindependent systems with different administrative agencies. The National Pension Act, which will be effective October 1, 2008, was promulgated August 8, 2007 to ensure the basic insurances when employees become old and/or disabled, as well as the stability of the lives of their relatives, In addition to social security, private enterprises are required by the Labor StandardsLaw (LSL) and the Labor Pension Act (LPA) to provide mandatory benefits toemployees. The LSL sets out the minimum requirements of employment benefits and conditions, such as retirement benefits, severance pay, leave of absence, and compensation foroccupational disease and injury. The purpose of the LSL is to protectlaborers’/employees’ rights and interests, as well as to improve the social and economic development of the country. The LPA, which regulates a portable and definedcontribution pension scheme, has been effective since July 1, 2005 and will eventuallyreplace the LSL retirement scheme. Unlike plans under LI, the government does not contribute to the LSL and LPA.
2.1.1 Labor Insurance Act
The Labor Insurance Act (LIA) was promulgated in 1958. It provides insurancecoverage for non‐occupational and occupational illnesses or injuries, as well as fordeath, disabilities, and retirement. Employees between the ages of 15 and 60 and whoare working for companies with five or more employees are required to participate inLI. This program provides the statutory base for the compulsory social securitycoverage of a large number of Taiwan’s workforce. The government has proposed extending LI coverage to all workers, regardless of thenumber of employees an employer has, in order to protect all employees.Amended provisions of the LIA are in the process of gaining legislative approval. The revised Act will also extend coverage to workers who have received old age benefit payments under LI and allow coverage up to the age of 65. Changing the payment option for the old age benefit from a lump sum payment to an annuity has also been discussed under the provisions. To improve the financing of LI, the Council of Labor Affairs has proposed changing the LI premium rate to 7% from the current 6.5%. This rate will comprise two parts: 6.5% is for LI and 0.5% is for Employment Insurance (see 2.1.5 Employment Insurance Act).
2.1.2 National Health Insurance Act
NHI became effective on March 1, 1995. This mandatory system provides universalhealthcare coverage to all people in Taiwan. NHI provides family medical attention,including coverage for outpatient, inpatient, dental and maternity expenses preventative care, and sickness benefits.
STATUTORY BENEFITS Taiwan 2.1 Introduction _______________________________________________________________________________
2008 Benefits and Employment Terms – Taiwan 9
2.1.3 Labor Standards Law
The LSL was promulgated in August 1984. Before May 1, 1997, it covered only 60% ofindustries, mainly in the areas of manufacturing, utilities, telecommunications, transportation, and mining. Coverage has been extended to almost all industries sincethe end of 1998. It is important to note that the retirement benefits required by the LSLare being replaced by the LPA. Since July 1, 2005, all businesses subject to the LSL are required to provide the new pension scheme under the LPA to all eligible employees.
2.1.4 Labor Pension Act
The LPA was promulgated on June 30, 2004 and came into effect on July 1, 2005. It was enacted to enhance employees’ standard of living after retirement, strengthening the relationships between employees and employers, and promoting social and economic development. All companies and employees covered by the LSL will be subject to the LPA, excluding employees whose pension funds shall be set aside in accordance with the Private School Law. The following individuals may voluntarily make contributions and claim for pensionfund payments in accordance with this Act:
domestic employees who are not subject to the LSL and have obtained their employers’ consent to contribute to the pension funds on their behalf
employers who perform labor
commissioned managers Taiwan national employees who were subject to the LSL prior to July 1, 2005 and still work for the same business entity after that date may choose to remain subject to the pension mechanism under the LSL. Those employees also have the option of choosing between LSL or LPA pension schemes until July 1, 2010. However, once a Taiwan national employee has opted to be subject to the LPA pension mechanism, he or she cannot revert to the pension mechanism under the LSL. His or her seniority prior to the enforcement of the LPA shall be maintained. However, if such employees leave their current employer and are re‐employed, they shall be subject to the pension mechanism under the LPA. Non‐Taiwan national employees shall only be subject to the retirementplan under the LSL.
After the inception of the LPA, some multinational companies provided a definedcontribution top‐up plan to employees on top of the LPA retirement benefits.In summary, the LSL retirement regulations and LPA retirement regulations are asfollows:
Item Labor Standards Law (LSL) Labor Pension Act (LPA)
Type of plan Defined benefit Defined contribution
Employer contribution rate At least 2% of total payroll (applies only to employees hired before July 1, 2005) to the designated trust company, the Bank of Taiwan. “True” cost is likely to differ from the minimum contribution rate and can only be appropriately estimated through actuarial valuation.
No less than 6% of the employee’s monthly wage with a maximum contribution salary of TWD150,000, subject to the Table of Monthly Wages and Contribution Rates in 2.2.3 Labor Pension Act.
Continue on next page
STATUTORY BENEFITS Taiwan 2.1 Introduction _______________________________________________________________________________
2008 Benefits and Employment Terms – Taiwan 10
Item LSL LPA
Cost sharing Full cost is borne by the employer. Employers’ minimum cost is targeted around 6% of employees’ salaries.
The employee may make voluntary contributions of up to 6% of his or her salary, subject to a cap of TWD150,000 per month.
Employee benefit 2 units* per year for the first 15 years of service;
1 unit per year for service after 15 years of service;
Maximum of 45 units (at 30 years of service)
(*unit = final monthly salary)
Total amount accumulated in the employee’s individual account plus investment return.
Service credit Employer-dependent Portable
Benefit type Lump sum If Individual Pension Fund Account Scheme is applied: lump sum or monthly payment, depending on years of service.
Lump sum payment: age 60 with less than 15 years of LPA contribution service or death.
Monthly payment: age 60 with more than 15 years of LPA contribution service.
If Annuity Insurance Scheme is applied: annuity.
Retirement eligibility
Voluntary retirement:
at least age 55 with 15 years of service; or
25 years of service regardless of age.
Mandatory retirement:
upon reaching age 60; or
disability that renders the employee incapable of performing work.
Same as LSL
Payment eligibility Retirement eligibility or request for early retirement
Age 60
Death
Flexibility of funding Yes Yes, with minimum 6%
Fund carrier Bank of Taiwan Bureau of Labor Insurance
2.1.5 Employment
Insurance Act
The Employment Insurance (EI) Act came into effect in January 2003. The main purpose of this Act is to enhance labor skills and facilitate the employment process. There are four allowances included in EI: unemployment allowance, advance employment subsidy, vocational training living allowance, and NHI premium subsidy.
STATUTORY BENEFITS Taiwan 2.1 Introduction _______________________________________________________________________________
2008 Benefits and Employment Terms – Taiwan 11
Under the amended provisions of EI, parental leave allowance is proposed to be provided and to be paid for up to six months at a rate of 40–50% of total average insured salary.
2.2 Retirement Benefits The major statutory systems that provide retirement benefits are the Labor Standards
Law (LSL), Labor Insurance Act (LIA), Labor Pension Act (LPA), and National Pension Act (NPA), which will be effective October 1, 2008. LI coverage includes retirement, death, disability, unemployment benefits, and worker’s compensation. Currently, an employee can receive benefits from two sources upon retirement if he orshe works for a company covered by the LSL: the company must provide at least 45months of full salary for 30 years of service under the LSL retirement plan; and Labor Insurance’s (LI’s) old age benefit provides up to 45 months of insured salary. Following the inception of the LPA in July 1, 2005, workers covered by the LSL may claim the retirement benefits set forth in the LPA, which requires an employer to contribute no less than 6% of the employee’s monthly wages to a portable individual pension fund account.
2.2.1 Labor Insurance Eligibility LI provides retirement, unemployment, disability, and death benefits to cover ordinaryrisks as well as occupational risks (including work injury and occupational diseases) toworkers in the 15 to 60 age group employed in organizations with five or moreworkers. Foreign workers are also covered under LI. An establishment cannot bewithdrawn from coverage even if the number of employees or workers employed fallsbelow five. Retirement Age Under LI, lump sum benefits are payable under any of the following conditions:
when an insured male employee reaches age 60, or a female employee reaches age55, provided he or she has accumulated at least one year of LI membership,
when an employee with at least 15 years of LI membership reaches age 55,
when an employee with at least 25 years of LI membership reaches age 50,
when an insured employee has been in the plan for 25 consecutive years under the same insuring entity, and
when an employee working for more than five years in certified dangerousconditions requiring physical labor reaches age 55.
The retirement benefits of an insured employee who continues to work after age 60 are payable at age 65. The maximum amount cannot exceed 50 months’ insured salary evenif he or she continues to work beyond age 65. Retirement Benefit Old age benefits (retirement benefits) under LI are calculated based on insured salary, currently capped at the ceiling of TWD43,900 per month. The insured salary ceiling was revised from TWD42,000 to TWD43,900 on July 1, 2006, and the minimum insured salary was revised from TWD15,840 to TWD17,280 on July 1, 2007.
STATUTORY BENEFITS Taiwan 2.2 Retirement Benefits ___________________________________________________________________________
2008 Benefits and Employment Terms – Taiwan 12
The retirement benefit is a lump sum payment equal to one month’s average insuredsalary per year of LI membership up to 15 years, plus two months’ average insuredsalary per year of LI membership beyond 15 years, up to a maximum payment of 45months’ average insured salary. “Average insured salary” is defined as the average monthly insured salary over the lastthree years of LI coverage. An LI coverage of less than six months is counted as zero, but coverage of six months or more is counted as one full year. Contribution LI premiums are expressed as a percentage of the insured worker’s monthly insurancesalary up to a current monthly maximum of TWD43,900. (The minimum monthly insured salary is TWD17,280.) The LI premium rates are of two types: non work‐related accident and work‐related accident. For the first, the contribution is equal to 5.5% of theinsured person’s monthly insured salary, with 70% of it paid by the employer, 20% bythe employee, and 10% by the government. Occupational injury insurance premiumrates vary, ranging from 0.06% to 3% of the insured person’s monthly insurance salary,as stipulated in the Table of Categories of Occupations and Premium Rates Applicablefor Occupational Injury Insurance, which is only paid by the employer (implemented asof January 1, 2005 and adjusted at least once every three years). The new occupational injury insurance premium will take effect beginning January 1, 2008, and will range from 0.05% to 2.97%.
2.2.2 Labor Standards Law
The LSL stipulates the minimum statutory standards on employment terms and conditions. It includes a defined benefit retirement scheme and compensation foroccupational deaths, injuries, and disabilities.
Retirement Age Under the LSL, an employee retires under the following conditions:
Mandatory retirement:
upon reaching age 60, or when he or she is mentally or physically disabled and unable to perform his or
her duties.
Voluntary retirement:
when he or she is aged 55 or above with 15 or more years of service, or when he or she has 25 or more years of service.
Retirement Benefits LSL retirement benefits are in the form of a lump sum payment, covering both localand foreign employees. This benefit is equal to two months of average earnings foreach year of service up to 15 years of service, and to one month of average earnings for each year of service beyond the 15th year, with a maximum benefit of 45 months’average earnings. The aforementioned year(s) of service refers to the service yearscovered under the LSL retirement plan. For this purpose, “average earnings” is defined as the average monthly full salary, including all regular remuneration over the last sixmonths of employment. A fractional year of service of less than six months is countedas half a year, but as one full year for six months of service or more. Contribution Companies are mandated to make a minimum 2% contribution of the company’s totalpayroll (only applied to employees hired before July 1, 2005) to its pension fund
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2008 Benefits and Employment Terms – Taiwan 13
account in the Bank of China (BOT, and formerly known as Central Trust of China) for LSL pension liability. The actual cost is subject to the number, salary, seniority, andturnover rate of a company’s employees. Additional pension contribution has to bemade over a period of five years from July 1, 2005 such that the company’s pension fund in the BOT is sufficient to cover such employees’ pension liabilities.
2.2.3 Labor Pension Act
The LSL sets forth the employer’s obligation of providing retirement benefits toemployees. However, the eligibility for the benefit is too stringent. The government therefore proposed to stipulate a portable pension system, the LPA, for new employeeswho are not likely to receive the LSL retirement benefit entitlement.
Eligibility Taiwan national employees who were subject to the LSL prior to July 1, 2005 and still work for the same business entity after this date may choose to remain subject to the pension mechanism under the LSL. Those employees also have the option untilJuly 1, 2010 of choosing between LSL or LPA pension schemes. However, once a Taiwan national employee becomes subject to the LPA pension mechanism, he or she cannot revert to the pension mechanism under the LSL. Their seniority prior to the enforcement of the LPA shall be maintained. However, if they leave their current employer and are re‐employed, they shall be subject to the pension mechanism underthe LPA. Foreign (non‐Taiwan national) employees are not eligible for this programand are subject to the LSL retirement plan. Retirement Age Those who are subject to the LPA may claim pension payments if they meet the following criteria:
Age 60 and above with 15 or more LPA contribution years:
entitled to monthly pension payments; and each installment is calculated based on the annuity life chart, average life
expectancy, interest rate, and other factors.
Age 60 and above, but with less than 15 LPA contribution years:
entitled to a lump sum pension payment; and the principal and accrued return are claimed in full at one time.
Retirement Benefits Under the LPA, there are two schemes to choose from: the “Individual Account Scheme” and the “Private Annuity Insurance Scheme.” An employer with over 200employees may purchase annuity insurance according to the Insurance Law in lieu ofcontributing to any labor pension fund, provided that the employer obtains the consentof a labor union or of over half of its employees. If less than half of the employeesdecide to participate in the annuity insurance scheme, it shall not be implemented.Currently, the Individual Account Scheme is under the government’s custody, which guarantees a minimum investment return at a two‐year time deposit rate. A Labor Pension Fund Subcommittee was formed on July 1, 2007 to monitor the capital gain of pension funds under the LPA. In the event that the fund has a lower return, the government Treasury will make up the difference. Contribution The Bureau of Labor Insurance also takes charge of the collection, payment, and custody of the Labor Pension Fund. Employers subject to the LPA are required to contribute to the employees’ individual accounts at the Bureau on a monthly basis.
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The rate of contribution shall not be less than 6% of the employee’s monthly salary (see the Table of Monthly Wages and Contribution Rates, below). The maximummonthly salary from which the contribution is calculated is currently set at TWD150,000. (The minimum is TWD1,500.) The LPA also allows an employee to voluntarily contribute up to 6% of his or her monthly salary.
Table of Monthly Wages and Contribution Rates
Actual Monthly Salary (TWD)
Amount for Contribution
Computation (TWD)
Actual Monthly Salary (TWD)
Amount for Contribution
Computation (TWD)
Below and equal to 1,500 1,500 38,201–40,100 40,100
1,501–3,000 3,000 40,101–42,000 42,000
3,001–4,500 4,500 42,001–43,900 43,900
4,501–6,000 6,000 43,901–45,800 45,800
6,001–7,500 7,500 45,801–48,200 48,200
7,501–8,700 8,700 48,201–50,600 50,600
8,701–9,900 9,900 50,601–53,000 53,000
9,901–11,100 11,100 53,001–55,400 55,400
11,101–12,105 12,105 55,401–57,800 57,800
12,106–12,300 12,300 57,801–60,800 60,800
12,301–13,500 13,500 60,801–63,800 63,800
13,501–15,840 15,840 63,801–66,800 66,800
15,841–16,500 16,500 66,801–69,800 69,800
16,501–17,280 17,280 69,801–72,800 72,800
17,281–17,400 17,400 72,801–76,500 76,500
17,401–18,300 18,300 76,501–80,200 80,200
18,301–19,200 19,200 80,201–83,900 83,900
19,201–20,100 20,100 83,901–87,600 87,600
20,101–21,000 21,000 87,601–92,100 92,100
21,001–21,900 21,900 92,101–96,600 96,600
21,901–22,800 22,800 96,601–101,100 101,100
22,801–24,000 24,000 101,101–105,600 105,600
24,001–25,200 25,200 105,601–110,100 110,100
25,201–26,400 26,400 110,101–115,500 115,500
26,401–27,600 27,600 115,501–120,900 120,900
27,601–28,800 28,800 120,901–126,300 126,300
28,801–30,300 30,300 126,301–131,700 131,700
30,301–31,800 31,800 131,701–137,100 137,100
31,801–33,300 33,300 137,101–142,500 142,500
33,301–34,800 34,800 142,501–147,900 147,900
34,801–36,300 36,300 147,907 and above 150,000
36,301–38,200 38,200
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2008 Benefits and Employment Terms – Taiwan 15
2.2.4 New Pension Rule for Public Employees’ Retirement Benefits
In an effort to narrow the gap between retirement benefits for the civil service andprivate sectors, a new rule caps pension and retirement benefits at 85% of monthly salary for all civil servants, teachers, and military personnel with up to 25 years ofservice. In addition to the 85% rule for those with up to 25 years of service, the new rulestipulates that civil servants with 25–35 years of service will be entitled to 85% of their final salary plus an additional 1% for every year of service above 25 years. Those withmore than 35 years of service will be entitled to 95% of their final salary.
The cap for civil servants who fall between grades 12 and 14 starts at 75% of final salary for up to 25 years of service, plus an additional 0.5% for every year of service above 25years. Those with more than 35 years of service will be entitled to 80% of their finalsalary. The Examination Yuan, the body responsible for the examination, employment, and management of civil service personnel, announced the new rule, which becameeffective on February 16, 2006.
2.3 Death Benefits There are no death or survivor benefits regulated under the Labor Standards Law.
The Labor Pension Act’s individual account (as long as there is an outstanding balance in the account) will be payable upon the employee’s death to the employee’s beneficiary, who are either legal dependents according to the priority list as per the law, or an appointed beneficiary.
2.3.1 Survivor Benefits
As provided by the Labor Insurance Act, survivor benefits for an employee’s spouse,children, father, mother, or a dependent grandchild, brother(s), or sister(s) are 10months of average monthly insured salary if the employee’s accumulated Labor Insurance coverage is less than one full year, 20 months if the coverage is more thanone full year but less than two full years, or 30 months if the coverage is more than twofull years.
2.4 Disability Benefits 2.4.1 Eligibility An insured person who has received medical treatment covered under the National
Health Insurance (NHI) for at least one year, who has not recovered from the physical handicap, and who is diagnosed by an NHI hospital as being incurable may claim benefits in one lump sum payment based on his or her average monthly insured salary.
2.4.2 Benefit Amount
Long‐Term Disability Long‐term disability benefits are available to employees who, following a non‐occupational injury or illness, are diagnosed in an NHI hospital as being permanentlydisabled. The benefit level will vary with the degree of disability. After the above‐mentioned short‐term disability benefit stops, an individual who continues to bedisabled will be entitled to a lump sum payment, the amount of which varies from 30days to 1,200 days of an insured’s average salary, depending on the degree ofdisability. For this purpose, salary is averaged over the six months precedingdisablement.
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Sickness Benefit/Short‐Term Disability After salary continuation payment by an employer ceases, an employee is entitled to receive cash sickness benefits from the Labor Insurance scheme. These benefits, at the earliest, commence from the fourth day of work incapacity. The cash sickness benefit is equal to 50% of the employee’s average monthly covered earnings. For this purpose,salary is averaged over the six months preceding the illness or accident. The benefit ispaid for a maximum period of six months. In case the employee has at least one full year of insurance coverage prior to commencement of the injury or sickness, suchbenefits shall be payable for an additional six months.
2.5 Worker’s Compensation The employer is required to pay the following in the event of an employee’s
occupational death, disability, injury, or sickness:
full cost of medical treatment, full salary during his or her absence from work, and death benefit. The Bureau of Labor Insurance is required to pay the following in the event of an employee’s occupational death, disability, injury, or sickness:
full salary during his or her absence from work,
disability benefits based on the disability benefit schedule listed in the Labor Insurance Act, and
death benefit. The benefit payments due to occupational death under the Labor Standards Law (LSL)listed above can be offset by applicable benefits under Labor Insurance (LI) (see furtherbelow).
2.5.1 Death Benefits
Under the LI, in case an insured employee dies from an occupational injury or sickness, the Bureau of Labor Insurance shall pay a funeral grant equal to five months of an employee’s insured salary, as well as a lump sum survivor benefit that is equal to 40times an employee’s insured salary. In case there is more than one eligible survivor, the lump sum benefit will be equally split between them. Under the LSL, in the event that an employee dies from an occupational injury orsickness, an employer shall pay a funeral grant equal to five months of the employee’saverage monthly salary, as well as a lump sum survivor benefit that is equal to 40 times the employee’s average monthly salary. The formula is the same with LI, except that the salary definition differs.
Impact on Benefits from Labor Insurance Death benefits paid by the employer due to occupational death under the LSL requirement listed above can be offset by death benefits paid by the Bureau of Labor Insurance.
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2008 Benefits and Employment Terms – Taiwan 17
2.5.2 Disability Benefits
Under LI, in the event of a temporary disability following a work accident or anoccupational disease, an insured employee will be entitled to a temporary disabilitypayment equal to 70% of his or her insured salary. For this purpose, insured salary is averaged over the period of six months preceding the disability. In the event that theemployee does not recover from the illness or injury after one full year, the paymentlevel is reduced to 50% of his or her insured salary for a maximum period of one year. In the event of a permanent disability following a work accident or an occupationaldisease, an insured employee will be entitled, after expiration of the benefits asmentioned in the previous paragraph, to a lump sum benefit of between 45 and 1,800days of his or her insured salary, depending on the degree of disability. Contribution A new employer‐paid occupational injury insurance premium under LI will take effect from January 1, 2008, which ranges from 0.05% to 2.97%.
Under the LSL, in the event of a temporary disability following a work accident or anoccupational disease, an employee will be entitled to have his or her medical expensespaid by the employer. During the period of disability, the employer is required to pay the full amount of the employee’s salary. But if after two years of medical treatment the employee has lost his or her original ability to work, the employer may pay him or her a lump sum allowance of 40 months of the employee’s average salary and be exemptedfrom further responsibilities of wage compensation.
Impact on Benefits from Labor Insurance Wage compensation paid by an employer due to occupational injury or sickness under the LSL requirement listed above can be offset by a disability payment paid by the Bureau of Labor Insurance.
2.6 Healthcare Benefits 2.6.1 National
Health Insurance
Taiwan’s medical and sickness benefits are provided under the National HealthInsurance (NHI) and Labor Insurance. Eligibility The NHI Act covers all employees, including foreigners with an Alien ResidentCertificate. It also covers government employees, teachers, the self‐employed, alien seamen, farmers, fishermen, veterans, military dependents, and the heads of low‐income households. Taiwan nationals are covered if they have maintained a registeredhousehold in Taiwan for four months or more.
Coverage also includes dependents of those insured under NHI. NHI definesdependents of Group 1 (who are mostly employees) as
unemployed spouse of the insured; unemployed lineal blood ascendants of the insured (i.e., grandparents or parents);or
lineal blood descendants of the insured within the second degree of relationshipwho are under 20 years of age and unemployed, over 20 years of age but are
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2008 Benefits and Employment Terms – Taiwan 18
incapable of making a living, or are in school without employment (i.e., children orgrandchildren).
For members of Group 1, group insurance applicants are the agencies, schools,enterprises, institutions, or employers they work for; or unions where they holdmembership (Article 14, Paragraph 1). The insuring entity files an insurance applicationwithin three days after the employee meets all requirements; the insuring entity reportsinsurance suspension within three days after the cause for suspension arises (Article16). The insurer is the Central Health Insurance Bureau. Insurance medical service institutesinclude the following (Article 55):
contracted hospitals and clinics, contracted drug stores, other contracted medical service institutes designated by the regulatory authorities,and
insurer‐appointed medical laboratory institutes.
Outpatient and Emergency Care The insured and dependents shall pay 20% of outpatient or emergency care expenses.According to Article 33, if outpatient care is received directly without referral, thefollowing rates apply:
30% at a district hospital, 40% at a regional hospital, and 50% at a medical center. The regulatory authorities have the power to adjust fees annually if needed.
Hospitalization The insured and dependents will pay as follows:
At an emergency ward: 10% for the first 30 days, 20% from the 31st to the 60th day,and 30% from the 61st day onward.
At a chronic care ward: 5% for the first 30 days, 10% from the 31st to the 90th day,20% from the 91st to the 180th day, and 30% from the 181st day onward (Article 35).
For hospitalization in an emergency ward for 30 days or less, or in a chronic ward for less than 180 days, the regulatory authorities will determine the maximum amount tobe paid by the insured. According to Article 36, no contribution is required from theinsured or dependents for hospital, emergency, or outpatient care under the following conditions:
major diseases or injury as defined by the regulatory authorities, confinement at childbirth, and preventative healthcare as provided by NHI (Article 32).
Delivery and dispensing of medicine by a physician shall be handled in accordance
with Article 102 of the Pharmaceutical Affairs Law (Article 31).
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2008 Benefits and Employment Terms – Taiwan 19
Contribution The premium payable by the insured and his or her dependents is calculated inaccordance with the insured salary and the premium rate of the insured (Article 18). The premium rate for the insured and his or her dependents is 4.55%. This rate may bere‐evaluated in the following year with a maximum premium of 6% (Article 19).The insured may pay premiums for up to a maximum of three dependents. If there are more than three, all dependents shall be covered by the premium paid for threedependents (Article 19). Following is the percentage breakdown of premium paid by employers, employees,and their dependents from the private sector (Article 27):
insured (employee) and dependent(s): 30% insuring entity (employer): 60% various levels of government: 10% The employer’s share of the contribution for dependents is based on the averagenumber of dependents of insured people in Taiwan. The Department of Health, Executive Yuan, and the representatives of the industrial and commercial sectors agreethat the average number of dependents should be decreased from 0.78 to 0.70. This revision became effective on January 1, 2007. The insured salary for an employee in the private sector is determined by the employee’s payroll income up to a maximum of 131,700 (Article 22). Rules implementing NHI divide employee salary into brackets for contributioncomputation.
Actual Monthly Salary (TWD)
Amount for Contribution Computation (TWD)
Actual Monthly Salary (TWD)
Amount for Contribution Computation (TWD)
17,280 and below 17,280 45,801–48,200 48,200
17,280–17,400 17,400 48,201–50,600 50,600
17,401–18,300 18,300 50,601–53,000 53,000
18,301–19,200 19,200 53,001–55,400 55,400
19,201–20,100 20,100 55,401–57,800 57,800
20,101–21,000 21,000 57,801–60,800 60,800
21,001–21,900 21,900 60,801–63,800 63,800
21,901–22,800 22,800 63,801–66,800 66,800
22,801–24,000 24,000 66,801–69,800 69,800
24,001–25,200 25,200 69,801–72,800 72,800
25,201–26,400 26,400 72,801–76,500 76,500
26,401–27,600 27,600 76,501–80,200 80,200
27,601–28,800 28,800 80,201–83,900 83,900
28,801–30,300 30,300 83,901–87,600 87,600
30,301–31,800 31,800 87,601–92,100 92,100
31,801–33,300 33,300 92,101–96,600 96,600
31,801–33,300 33,300 96,601–101,100 101,100
33,301–34,800 34,800 101,101–105,600 105,600
Continue on next page
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2008 Benefits and Employment Terms – Taiwan 20
Actual Monthly Salary (TWD)
Amount for Contribution Computation (TWD)
Actual Monthly Salary (TWD)
Amount for Contribution Computation (TWD)
34,801–36,300 36,300 105,601–110,100 110,100
36,301–38,200 38,200 110,101–115,500 115,500
38,201–40,100 40,100 115,501–120,900 120,900
40,101–42,000 42,000 120,901–126,300 126,300
42,001–43,900 43,900 126,301 and above 131,700
Maternity Benefits
If childbirth occurred during the insurance interval, benefits will be provided under theprovisions of NHI in non‐cash terms with contracted medical care institutions providing hospital care and physicians providing prescriptions.
2.7 Other Mandatory Employee Benefits
2.7.1 Annual Leave
Annual paid leave is provided on the basis of length of service. Seven working days ofannual leave are granted to workers employed continuously for more than one year butless than three years. Ten working days are prescribed for workers employedcontinuously for three years but less than five years. Fourteen working days of annualpaid leave are provided to workers employed continuously for five years but less than10 years. One additional working day of leave is prescribed for each additional year of service up to a total of 30 working days.
2.7.2 National Holidays
Under the enforcement rules of the Labor Standards Law (LSL), employees are entitled to a total of 19 days of national holidays per year. One of the national holidays, which celebrates the birthday of President Chiang Kai‐Shek, has been proposed to be cancelled.
2.7.3 Sick Leave
Under the LSL, employees are entitled to 30 working days of sick leave per year at halfpay. Sick leave beyond 30 days is not payable. Sick leave without hospitalization shallnot exceed 30 days in a year and shall not exceed one year within a two‐year interval. An employee’s total sick leave with and without hospitalization must not exceed oneyear within any two consecutive years.
2.7.4 Menstruation Leave
A female employee who encounters difficulty in performing her job because ofmenstruation may request one day’s leave each month. The number of leave days canbe incorporated into sick leave.
2.7.5 Marriage Leave
Eight working days of leave at full pay are granted for marriage.
2.7.6 Maternity Leave
Under the LSL, a period of eight calendar weeks of fully paid maternity leave (beforeand after childbirth) is required if the employee has been employed for more than six months. If she has been employed for less than six months, maternity leave is paid athalf the regular rate.
2.7.7 Miscarriage Leave
Four calendar weeks of miscarriage leave with full pay are required by the LSL if theemployee has been employed for more than six months and has incurred a miscarriageafter three months of pregnancy. The miscarriage leave will be paid at half the regularrate if the employee has been employed for less than six months.
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2008 Benefits and Employment Terms – Taiwan 21
Under the Gender Equality in Employment Law (GEEL), seven calendar days are granted without pay for a miscarriage of a pregnancy of over two months but less than three months. Five calendar days without pay are granted for a miscarriage of apregnancy of less than two months. For an employment period of between three and six months, there will be four weeks’ half pay. Under the LSL, benefit entitlement is only granted to employees with a pregnancy of longer than three months, as indicatedin the first paragraph. Under the GEEL, the criterion is length of pregnancy, regardless of the employment.
2.7.8 Paternity Leave
An employee is granted two calendar days with full pay within the five‐day period before or after the birth of his child.
2.7.9 Personal Leave
Fourteen working days of leave with no pay are granted within one year for anemployee dealing with his or her personal affairs.
2.7.10 Family Care Leave
An enterprise with more than 30 employees shall grant a maximum of seven workingdays a year without pay for an employee’s family care leave. The number of leave days shall be incorporated into personal leave.
2.7.11 Parental Leave
After being employed for more than one year, an employee of an employer with morethan 30 employees may apply for parental leave without pay before any of his or her children reach the age of three years. The duration of this leave cannot exceed twoyears. But when the employee is raising two or more children at the same time, theperiod of parental leave shall be computed aggregately and the maximum period shall be limited to two years. Under the Amended Provisions of Employment Insurance, parental leave allowance is proposed to be provided and to be paid for up to six months at 40–50% of the employee’s total average insured salary.
2.7.12 Bereavement Leave
The bereavement leave granted depends on the deceased’s relationship with theemployee. Eight working days with full pay are granted upon the death of the spouseor parents. Six working days with full pay are granted upon the death of grandparents, parents‐in‐law, or children. Three days with pay are granted on the death of siblingsand grandparents‐in‐law.
2.8 Severance Payments
Severance payment varies according to the applicable retirement benefit plans (see 2.2), as follows.
2.8.1 Labor Standards Law
Under the Labor Standards Law (LSL), the termination of an employment contractrequires a notice period of 10 days for employees who have been working for morethan three months but less than one year, 20 days for employees with one to three years of service, and 30 days for those with more than three years of service. If an employerterminates the contract without giving the required advance notice, he or she shall paythe employee his or her salary for the advance notice period. After the notice is given to an employee, two paid days off from work should be granted during each week of the notice period so that the employee may search for a new job.
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Benefit Amount Under the LSL, the employer must provide severance pay of one month’s salary for each year of service covered under the LSL retirement plan. For employees with less than one year of service, severance pay should be proportionately calculated. Service ofless than one month is calculated as one month. For long service employees who are approaching their retirement age, the market practice is to pay more than one month. Since 1985, the government has set up an Outstanding Wage Settlement Fund to protectemployees from sudden business closures that may prevent them from receiving their rightful pay. In such cases, the fund will pay them the first six months of outstandingwages. The employer‐paid premium for the fund is 0.1% of insured salary, payablethrough the monthly Labor Insurance premium.
Example of Severance by Years of Service Covered under the LSL Retirement Plan
Benefit Amounts (in No. of Monthly Salary)
Monthly Salary in USD/TWD
5 Years of Service
10 Years of Service
20 Years of Service Formula
1,000/32,000 5 10 20
5,000/160,000 5 10 20
Completed YOS covered under LSL retirement plan × monthly salary with no salary ceiling.
Exchange rate: USD1 = TWD32
Benefit is assumed for redundancy due to restructuring. * YOS: Years of service
2.8.2 Labor Pension
Act
For employees who are subject to the pension mechanism under the Labor Pension Act (LPA), severance pay is calculated at half the average monthly wage for each year of service covered under the LPA in addition to the portable LPA contribution balance, provided their labor contracts are terminated (Article 11, the conditional provisions of Articles 13, 14, and 20 of LSL, or Articles 23 and 24 of the Occupational Accident Labor Protection Law). The severance pay for a period of service of less than one year shall becalculated proportionately. The total severance pay shall not exceed six months of the average monthly wage. The severance pay shall be paid within 30 days after the termination of the laborcontract. A unit of average monthly salary is defined as the final six‐month average monthly income including base pay, regular allowance, incentives, and overtime, butexcluding year‐end bonus. Untaken leave is required by the LSL to be taken before thetermination of employment or by giving pay‐in‐lieu. Unpaid salary items such as pro‐rated guaranteed bonus, accumulated variable bonus, or commissions may beconsidered as additional payments to be included in calculating related payments.
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2008 Benefits and Employment Terms – Taiwan 23
Example of Severance Pay by Years of Service Covered under the LPA
Benefit Amounts (in No. of Monthly Salary)
Monthly Salary in USD/TWD
5 Years of Service
10 Years of Service
20 Years of Service Formula
1,000/32,000 2.5 5 6
3,000/96,000 2.5 5 6
5,000/320,000 2.5 5 6
Completed YOS* × half of average monthly salary with no salary ceiling. Payment shall not exceed six months of average monthly wage.
Exchange rate: USD1 = TWD32
Benefit is assumed for redundancy due to restructuring. * YOS: Years of service
2.9 Summary of Contributions
Type of Benefits
Government Contribution
Employer Contribution
Employee Contribution
Total Contribution
Maximum Monthly
Salary (TWD) Subject to
Contribution
Labor Insurance (LI)
Non-occupational accident
0.55% 3.85% 1.1% 5.5% 43,900
Employment Insurance
0.1% 0.2% 0.7% 1% 43,900
Occupational accident
– 0.05–2.97% – 0.05–2.97% 43,900
Labor Standards Law (LSL)
– Min 2.0% – Min 2.0% none
Labor Pension Act (LPA) – Min 6.0% Cap at 6% 12.0% 150,000
National Health Insurance (NHI)
0.77% 4.64% 1.37–5.46% 6.78–10.87% 131,700
Taiwan
2008 Benefits and Employment Terms – Taiwan 24
3 COMPANY BENEFIT PRACTICE
3.1 Overview
Many elements of the retirement plan design are set forth in the Labor Standards Lawand Labor Pension Act (LPA) and are adopted as policy by employers. Another feature that has gained popularity after the inception of the LPA is the top‐up plan. Employees who have achieved the minimum service requirement can receive apercentage of their retirement benefit upon leaving the company. Most companies offerthis benefit to employees who have completed at least five years of service. According to Watson Wyatt’s recent survey, 53% of companies providing a non‐LPA benefit provide the top‐up plan; and, of those, 48% adopt a flat‐rate top‐up plan. Apart from retirement, company benefits that exceed the statutory obligations are in the areas of life insurance and supplementary medical coverage. These are largelyprovided by multinational employers and progressive local companies.
3.2 Major Laws and Supervisory Bodies The major statutes applicable to company benefit plans are as follows:
Labor Standards Law Enforcement Rules of the Labor Standards Law Article 33 of the Income Tax Law Labor Insurance Act National Health Insurance Act Employment Insurance Act Labor Pension Act Occupational Accident Labor Protection Law
Supervisory bodies governing company benefit plans are as follows:
Council of Labor Affairs Bureau of Labor Insurance Bureau of National Health Insurance Labor Bureau
3.3 Funding Methods
Employers Subject to the Labor Standards Law Minimum funding of at least 2% of contributions into the Bank of Taiwan ismandatory. For costs above the funding level, the following are the most commonfunding methods:
Companies may meet pension obligations on an unfunded or pay‐as‐you‐go basis. Not surprisingly, this is the most popular form of funding among local companiesthat are reluctant to commit funds to a retirement fund reserve on a regular basis.
Companies may book reserve for current and future retirement benefit liabilities.