fivehundred magazine > Employment Yearbook 2023 > Q&A: Dentons

Q&A: Dentons

1. What are the key labour laws and regulations that employers in Taiwan need to be aware of?

Employers should be aware of several key labour laws and regulations. These include the Labour Standards Act (LSA), Enforcement Rules of the Labour Standards Act (Enforcement Rules of the LSA), Labour Pension Act, Regulations of Leave-Taking of Workers, Occupational Safety and Health Act, Employment Services Act, Act of Gender Equality in Employment, Labour Incident Act, and the Labour Union Act, among others.

The LSA stands out as the primary employment-related law. It dictates the basic terms and conditions of employment. The LSA is applicable to almost all industries and occupations, with only a few exceptions, and encompasses the vast majority of workers. Additionally, aside from a few managers who are explicitly governed by mandate agreements, employment laws and regulations also extend to foreign nationals working in Taiwan. This applies even if there are clauses in an employment contract that specify a different choice of law.

2. Can you explain the process for hiring and terminating employees in Taiwan, including any legal requirements or obligations?

For the hiring process, employers are allowed to conduct background checks on job applicants. However, the collected data should be limited to information essential for the job or required in the public’s interest, especially given the specific nature of the job position. In most scenarios, job applicants must also explicitly give their consent for such data collection. According to the Employment Service Act, employers are prohibited from discriminating against job applicants based on race, language, religion, gender, sexual orientation, age, marital status, and other similar reasons.

In Taiwan, employers cannot terminate employment contracts at will. Any termination must follow one of the specific conditions for unilateral termination as outlined in the LSA. A notice period or payment in lieu of notice is required. Legitimate reasons for termination include: (1) a halt in business or change in ownership; (2) business losses leading to a downsizing in operations; (3) operations paused for over a month due to unforeseen events (force majeure); (4) a shift in the business focus that results in fewer needed employees, with affected employees unable to be reassigned to other roles; and (5) the employee’s inability to fulfill their assigned tasks.

3. What are the rights and protections afforded to employees under Taiwanese labour laws?

According to Taiwanese labour laws, employees are entitled to participate in the Labour Pension Plan. Employers are responsible for contributing an amount equal to 6% of the employee’s monthly salary to the employee’s personal retirement account during their period of employment.

Additionally, employers are generally required to provide employees with statutory insurance coverage, which includes health insurance, labour insurance, labour occupational accident insurance, and employment insurance. Moreover, based on Taiwanese labour regulations, if an employee is terminated, they can legally claim severance pay. The amount is calculated based on the employee’s years of service.

4. How can employers ensure compliance with minimum wage and working hour regulations in Taiwan?

Based on Taiwanese labour practices, the labour regulatory authority periodically conducts random labour inspections on employers. According to the LSA, unless for employees in certain specific industries, a regular employee is allowed to work a maximum of eight hours a day (excluding overtime) and no more than 40 hours per week. They must also have at least two rest days in every seven-day period, consisting of one mandatory day off and one flexible rest day. Employers are obligated to maintain daily attendance records of their employees, documenting the exact minutes of their work attendance.

Starting from 1 January 2023, the statutory minimum wage is set at TWD26,400 per month and TWD176 per hour. However, the Minimum Wage Act is still being reviewed by the Executive Yuan and has not been submitted to the legislature for approval.

5. Are there any specific regulations or considerations for employers regarding workplace safety and health in Taiwan?

Yes, the Occupational Safety and Health Act mandates several responsibilities for employers to ensure the wellbeing of their workforce:

  1. prevention measures: employers must implement appropriate equipment and strategies to reduce the risk of occupational incidents;
  2. medical support: there are circumstances where employers are required to offer medical services and examinations to their employees;
  3. equipment inspection: any equipment that poses potential risks must be thoroughly inspected and must adhere to specific safety standards; and
  4. safety committees and medical personnel requirements: companies of specific sizes or those engaging in high-risk operations must establish a health and safety committee.

Furthermore, companies that meet these criteria are also required to employ medical professionals on their staff.

6. What are the legal requirements for drafting employment contracts in Taiwan, and what key elements should be included?

The enforcement rules of LSA dictate that employment agreements should encompass the following essential aspects:

  1. workplace and assigned roles;
  2. working schedule, such as the start and end times, break, regular holidays, rest days, annual leave, and shift rotation details;
  3. payment terms;
  4. termination cause and retirement conditions;
  5. details on severance and pension benefits;
  6. employee-borne expenses;
  7. occupation health and safety;
  8. education and training opportunities;
  9. employee welfare;
  10. healthcare support;
  11. work rules, guidelines on discipline and rewards; and
  12. any other relevant details pertaining to the rights and responsibilities of both the employer and the employee.

7. What steps should employers take to prevent and handle disputes or conflicts with employees, such as grievances or disciplinary actions?

According to Taiwan’s judicial precedents, all disciplinary measures must adhere to principles of clarity, consistency, and fairness, ensuring there is no misuse of power. When contemplating termination, the ‘last resort’ principle should be prioritised. For instance, an employee’s termination due to performance issues should first be preceded by a performance improvement plan. If not, such termination may be legally challenged.

In accordance with prevailing judicial precedents, direct deductions from an employee’s salary are typically deemed illegal. However, reductions applied to ancillary compensation components, such as bonuses, are permissible when executed with a clear and reasonable rationale.

8. Are there any specific regulations or considerations for employers regarding employee benefits, such as leave entitlements or insurance coverage?

According to the LSA, employees are entitled to annual leave based on the length of their continuous service:

(1) six months up to one year of service: three days of annual leave; (2) one year up to two years of service: seven days of annual leave; (3) two years up to three years of service: ten days of annual leave; (4) three years up to five years of service: 14 days of annual leave; (5) five years up to ten years of service: 15 days of annual leave; (6) more than ten years: an additional day of annual leave is added for each year, up to a maximum of 30 days.

Furthermore, it is customary for employers to provide their employees with mandatory insurance coverages. These coverages typically include health insurance, labour insurance, labour occupational accident insurance, and employment insurance.

9. Can you provide guidance on the legal requirements for employee privacy and data protection in Taiwan?

Taiwan’s Personal Data Protection Act (PDPA) governs personal data, categorising it into general personal information (GPI) and sensitive personal information (SPI), with SPI encompassing medical, genetic, and criminal records. While collecting GPI requires informed consent from employees, SPI demands explicit written affirmation, which can be digitally provided.

For multinational companies, it is imperative to exercise diligence when dealing with employees’ personal data, such as medical evaluations or mental health assessments. They must also ensure that cross-border data transfers comply with both the PDPA and any associated international regulations.

10. What are the potential legal risks and liabilities for employers in Taiwan, and how can they be mitigated or managed effectively?

When employers contemplate alterations to an employee’s working conditions or intend to reassign roles through mobility clauses, they must adhere to the following ‘Five Principles of Mobility’ set forth in the LSA: (1) changes should be based on the genuine operational needs of the business; (2) the employee’s compensation or other terms of employment should not suffer any disadvantageous changes; (3) adjustments must be tailored to match the particular skills and capabilities of the affected employee; (4) if these modifications result in the employee relocating to a less accessible workplace, the employer has a duty to offer assistance; and (5) employers must weigh decisions against the broader context, taking into account the employee’s family commitments and overall quality of life.