Understanding Payroll in Taiwan: What Global Companies Need to Know About Taiwan's Payroll
Jul 18, 2017
As Asia’s 5th largest economy, and 18th worldwide per gross domestic product, Taiwan has been able to stand on its own economically for years. Its success has made it attractive to foreign companies with international payroll, with its key exports like semiconductors and LCD panels, premium textiles and fibers, chemicals, oil products and machinery equipment. Some of Taiwan’s largest companies make components for mobile phones, laptops and other electronic devices. These products are exported to key trading partners like Hong Kong, China, and Singapore, all important Asian economies, as well as to the US and the EU.
Taiwan’s unemployment rate is relatively low, under 4%, with 431,000 unemployed in May 2017. But with changing labor laws and payroll regulations, international businesses in Taiwan must stay on top of these business factors to sustain its business.
The minimum capital requirement of NTD$500,000 (USD $16,448, £12,596, €14.342) is required for companies registering in Taiwan as an LLC or branch office of an international company. Employers in Taiwan must register their business and employees, and apply for work permits for any foreign nationals, with the Ministry of Labor.
Registering a branch office in Taiwan with all documents complete and submitted on time usually takes between 4-6 weeks. In some cases, special permits or approval for particular industries, and that time frame can be lengthened for any special licenses necessary.
Another key component for companies operating in Taiwan is to outsource a payroll solution. Getting a global payroll established in Taiwan is essential for employees and management.
Employment Laws/Employee Rights
The Employment Services Act provides rights to Taiwan employees. These rights include non-discrimination clauses for employers on any of the following - sexual orientation, race, religious preference, place of birth, political affiliation, and more. Termination rights and other employment laws are covered under Taiwan‘s Labor Standards Act (LSA) by the Ministry of Labor.
Foreign nationals are required to have a written contract with employers, which generally includes details like work assignment, work times, place of work, work payments, vacations and other rules of employment. Upon arriving in Taiwan, foreign nationals have two weeks to go to the National Immigration Agency to fill out paperwork for the Alien Resident Certificate (ARC). The employee or an agent must show proof of the foreign national’s work contract, resident visa, work permit, housing accommodations and a valid passport. Once granted, these certificates are valid for 1 yr.-3 yrs., depending on the work permit.
Companies generally pay their employees a monthly salary, on average 13-14 times a year. Employees are generally paid in a combination of basic salary and fixed allowances, such as towards a meal plan. Taiwan boosted its monthly minimum wage in mid-2015 by nearly 4% to NTD$20,000 (USD $657, £504, €574). The hourly minimum wage also went up to NTD$120/hr (USD $3.95, £3.02, €2.44).
Companies in Taiwan can give bonuses to managers at year end. However, these are often decided by the board of directors and are paid after first covering any losses incurred by the company.
Taiwan's employment laws do not allow for international companies to set up "at-will" employment deals, as Taiwan is not an at-will termination country. But there are some instances around hiring a top-level manager to the local position, and giving the company the ability to terminate the manager with or without cause. Severance payments (usually a month's pay per each year worked for the company) are generally not included in these 'mandate' agreements unless the contract specifically covers it.
Taiwan has a 17% corporate tax rate. This is lower than the average rate of nearly 22% over the past decade. This 17% tax rate applies to companies with a taxable rate of NT$120,001(USD $3,947, £3,023, €3.442) and above. Taiwan companies are taxed on their worldwide income, but foreign branches of international companies are taxed only on its Taiwan-derived income.
Employees pay different levels of income tax, with the top rate averaging around 45% of income.
Taiwan employers are required to provide employee benefits, set up employees with social security, and pay for health insurance, employment insurance, and labor insurance. Health insurance is a shared payment between the employer (60%), the employee (30%) and the government (10%).
Leave - Sick, Maternity, Vacation, Absence, Holidays
Starting in 2017, the Ministry of Labor added an extra day of rest for employees around the workweek. Employers now must give employees a regular day and a rest day off every week (7 days). This is a big change in a country that built up its reputation for employees working 6-7 days a week.
Employee holidays are also impacted this year. There are now 12 public annual holidays, down seven from the previous 19 days, a result of Taiwan moving to a 40-hr. workweek from the previous 48-hr. workweek.
Taiwan companies offer a generous sick leave, with employees able to take 30 days annually, but only at half-pay. Maternity leave is assessed on the total time worked for a company. An employee seeking maternity leave gets full pay for eight weeks before and after childbirth, if she has worked more than six months for the company. Less than six months work time gets half-pay. Fathers get five days paid off around the childbirth time.
Annual leave is tied to the number of years served by a Taiwan employee. It moves up incrementally; from 3 days leave for an employee working less than a year for a company, to 15 days for an employee with 5-10 years of service.
|Date||Taiwan's Public Holiday Schedule|
|January 1st||New Year's Day|
|Day before 1st day of 1st lunar month||Chinese New Year's Even|
|1st - 5th day of 1st lunar month||Chinese New Year|
|February 28th||Peace Memorial Day|
|April 4th||Children's Day|
|April 5th||Tomb Sweeping Day|
|May 1st||Labor Day|
|May 29th - 30th||Dragon Boat Festival|
|October 4th||Mid Autumn Festival|
|October 9th - 10th||National Day|
It’s a big task for global companies to achieve compliance with Taiwan work regulations and payroll regulations in Taiwan is a major task. Multinational companies should seek out a payroll solution provider to help simplify management of payroll registration, client payroll and payment services in Taiwan.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.