Companies looking toward expansion into Asia should consider Taiwan as a first target market. The country ranks 19th out of 190 economies in ease of starting a business, averages six percent growth in the gross domestic product (GDP) over the last 30 years, is a major platform for trade with China, and serves as a logistics hub for the entire Asia Pacific region.
However, before expanding, it is important that companies build a full understanding around controversial reforms that have placed business interests over workers’ rights.
Labor Standards Act
The Labor Standards Act (LSA) is the primary legislation in Taiwan concerning workers’ rights, regulating the minimum terms and conditions of employment for nearly all industries and occupations. The law applies to both foreign nationals working domestically, and workers abroad for employers subject to Taiwanese labor laws.
The LSA also includes incentives for business expansion to Taiwan. Small to medium businesses can deduct gross salary payments if they hire additional domestic workers. Tax incentives are also offered for employers who hire foreign professionals in some industries. Additionally, for workers laid off due to redundancy, employers can get a re-employment award provided that the position is similar to what the worker was doing previously, and they remain re-employed for at least three months.
Employing Foreign Nationals
Taiwanese labor laws require a foreign national to have a work permit before applying for residency. If the worker is not visa exempt, then he or she must apply for a residency visa before entering the country. They can obtain a visa from any Taiwanese embassy in their jurisdiction by showing their work permit, valid passport, and other necessary supporting documents.
To obtain a work visa, employers must apply on behalf of their employees with the Taiwanese Ministry of Labor and provide documents such as an employment contract, the foreign national’s education, certified documents showing the employee’s work history, and a valid passport.
Most employment contracts do not need to be in writing unless hiring foreign nationals. When a written employment contract is utilized, employers must meet or exceed the minimum requirements laid out in the LSA. The contract includes essential terms of employment, including place of work, work duties, wages, rules of conduct and work discipline.
Taiwanese workers and employers both recognize the value of a reasonable work-life balance after a number of young people died from overwork in the late 2000’s. In 2016, the LSA was amended to reduce the amount of time workers are allowed to work per week. Employees are limited to working 40 hours a week, with no more than 8 hours of work per day (not including overtime). The total number of working hours (including overtime) can never exceed 48 hours per week.
By law, workers are entitled to at least two days off each week, one mandatory day off and one flexible rest day. An employee cannot agree to work on his mandatory day off, but he can agree to work on the flexible rest day assuming higher overtime pay. If employers violate these requirements, they face fines between $685 to $10,200 (USD).
The 2016 LSA amendment also solidified annual leave. Annual leave is calculated based on an employee’s years of service and onboard date. Taiwanese employers have a duty to inform their workers of their annual leave entitlement and benefits. If the employee is terminated, then they must be paid the equivalent of a daily wage for each day of unused annual leave they have left, paid to the employee upon termination.
Taiwan is not an at-will termination jurisdiction, so termination must be carried out according to the specifications outlined in the LSA. The grounds for termination are fairly broad and include redundancies, force majeure, misconduct, or unexcused and extended absences. Depending on the circumstances, the employer may be required to give advance notice to the employee prior to termination.
Family and Sick Leave
Taiwan’s commitment to work-life balance extends to parental leave. Women are given up to eight weeks of maternity leave. If a woman has been working for the company for six months prior to the birth, then she is entitled to full wages during her leave. Otherwise, she is entitled up to half of her standard wages. Paid time off also includes provisions for miscarriage. Female employees are offered additional breaks throughout the day if they are breastfeeding young children. Under the Gender Equality Employment Act, men are entitled to 3 days of paid paternity leave. Parents who choose to adopt are entitled to unpaid parental leave during the cohabitation period.
Employees can take at 30 days of sick leave per year at half pay if they are not hospitalized. In the event the worker is hospitalized, they are allowed one year of sick leave within a two-year period in which they are hospitalized. If the employee is disabled or injured from an accident at work, then they are entitled to paid occupational sickness leave until the employee is recovered.
Problems with Labor Laws in Taiwan
The recent amendments to the Labor Standards Act have impacted some businesses in Taiwan. Entrepreneurs complain of high costs of compliance with the LSA and government overreach. A recent survey of overseas companies based in Taiwan reported that costs of compliance often exceeded $20,000 USD. Strict overtime provisions in the LSA cause employers to incur overtime fees and additional management. Further, the LSA is inconsistently enforced, particularly at the municipal levels. This has led to confusion and instability across the business community.
The most recent amendment to the LSA, passed in early 2018, allows employers to require employees to work 12 days in a row, with just an 8-hour break between shifts. Taiwanese workers protested this amendment, citing it as “the worst in history.” One labor advocacy group responded that “[the amendment] will exacerbate the badly overworked and underpaid working conditions facing workers in virtually all sectors in Taiwan.”
Proponents of the law believe it benefits both parties: employers can get more work out of their workers, and employees are provided more income earning opportunities. Labor groups believe it will be difficult to enforce the requirement to obtain permission from government agencies first, increasing the likelihood of overworked and underpaid employees. Given the recent implementation of this amendment, its impacts are not fully known.
An Exciting Future
It is true that Taiwan faces challenges in its labor laws. However, the consumer market in the region is growing, and the prospects of future growth may impact legislation in the coming years. Generally, the Taiwanese have more disposable income than their counterparts in Korea, Japan, France or the UK. Forty percent of consumer goods are imported, creating strong economic trade markets. Employees command lower wages relative to their regional counterparts, helping make it an attractive market for any business looking to break into Asian trade.
The team at Blueback Global makes it our mission to support entrepreneurs expanding globally. Contact us today and find how our depth of knowledge and proven, the in-market experience can elevate your results in Taiwan and around the world.