Employer of Record (EOR) in Taiwan
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An Employer of Record (EOR) acts as the legal employer for workers in Taiwan, providing a crucial role commonly known as a Global Professional Employer Organization (Global PEO). As your dedicated Employer of Record in Taiwan, we take charge of various employment aspects. This includes meticulous oversight to ensure strict compliance with local labor laws and regulations, expert management of payroll processes, handling taxes, offering mandated benefits, and crafting comprehensive employment agreements.
With Mercans as your Employer of Record in Taiwan, you can rely on a partner committed to:
- Ensuring meticulous compliance with Taiwan’s employment laws.
- Skillfully managing the intricacies of the local payroll process.
- Expertly handling the filing of employment-related taxes and requisite paperwork.
- Issuing timely payslips to the worker.
- Disbursing the worker’s salary payments promptly.
Our Global PEO services in Taiwan provide a seamless solution for your global expansion, eliminating the need for entity setup. As your trusted Employer of Record in Taiwan, we guarantee legal compliance, a robust local presence, and Intellectual Property (IP) protection. This allows your business to concentrate on its core operations. Benefit from our expertise to facilitate seamless global mobility, efficiently manage work visas, and build a diverse and productive global workforce. Choose Mercans as your Employer of Record in Taiwan for a compliant and streamlined employment experience for your global workforce.
Employment Contracts in Taiwan
- Courts consider the content and nature of the contract, not solely the written form.
- For “specific nature of work,” recordation with the competent authority doesn’t affect the contract’s nature.
- Temporary employment: Unexpectable non-continuing employment for six months or less.
- Short-term employment: Non-continuing employment expected to be completed in six months.
- Seasonal employment: Non-continuing employment affected by seasonal factors with a term shorter than nine months.
- Specific employment: Non-continuing employment completed within a specific period.
- Continuous work mandates a non-fixed term contract.
- Employers violating this may face fines of NT$20,000 to NT$300,000 under Article 79 of the Act.
- Employers violating this may face fines of NT$20,000 to NT$300,000 under Article 79 of the Act.
- Divided into fixed-term and non-fixed term.
- Probationary period negotiated between employers and employees, usually around three months.
- Annual leave entitlement based on years of service, ranging from 3 to 30 days.
- Termination notice requirements vary from 10 to 30 days based on years of service.
Termination, Severance Pay and Notice Period
Termination
Employers may not terminate employees without good cause, and the necessity for advance notice depends on the reason for termination and the employee’s years of service. There are two main categories of good causes for termination, each with its own set of conditions. Advance notice is required for reasons such as business suspension, operating losses, force majeure, changes in the nature of business, or an employee’s inability to perform duties. However, under certain circumstances, an employer can dismiss an employee within 30 days without notice, such as when the employee misrepresents facts, engages in violent acts, violates the labor contract or work regulations, deliberately damages property, or is absent from work without cause.
Severance Pay
In Taiwan, severance pay is governed by the Labor Standards Act (LSA) and the Labor Pension Act (LPA). Employees who started after 1 July 2005 (under the LPA) receive severance pay calculated at half a month of average wages per full year, up to six months’ wages. Those who started before can choose between the LSA and LPA, with the LSA offering one month of average wages for each year.
Procedurally, employers must inform authorities 10 days before dismissal but don’t need prior approval. Dismissals require good cause under the LSA. Mass terminations follow the Act for Worker Protection of Mass Redundancy, involving a 60-day notice and negotiations.
Class or collective actions are allowed, initiated by labor unions. Employers can impose mandatory retirement at 65, and the employee cannot refuse.
Notice Period
Article 16 of the LSA outlines the minimum notice periods for employer termination:
Upon receiving notice, an employee can request leave during work hours (up to 2 days a week) for job hunting, with continued wage payment. If an employer terminates without proper notice, full wages for the notice period must be paid.
Overtime Pay
Taiwan’s labor ministry urges employers to adhere to overtime pay regulations, revealing fines totaling NT$62 million ($1.94 million) for violations in 2022. The ministry highlights common illegal practices, including compensating overtime with leave instead of extra pay. Employers often underpay staff for overtime by calculating using a “basic salary” excluding various bonuses, violating wage regulations. The ministry emphasizes precise minute-based calculation of overtime wages, emphasizing the illegality of a minimum one-hour extra claim. Labor activist Roy Ngerng urges continuous education, regular checks, and simplified unionization processes for worker rights protection.
Employees vs Independent Contractors
Comparison Between Taiwanese Employees and Contractors:
| Criteria | Contractors | Employees |
|---|---|---|
| Autonomy | High level of autonomy; freedom in work schedules and methods. | More direction from the employer; specific working hours. |
| Tools and Equipment | Own their tools and equipment. | Company provides tools and equipment. |
| Integration | Less integrated; often work remotely. | Highly integrated; often work on-site. |
| Benefits | Not entitled to benefits and protections under Taiwanese law. | Entitled to employment benefits and protections. |
| Engagement | Time-bound engagement for a specific project or period. | Indefinite engagement; often hired for indefinite periods. |
| Risk of Loss | Assume more risk and liability for their work. | No risk of loss; sheltered from liability by the employer. |
| Subcontracting | Can assign work to be completed by another individual/entity. | No subcontracting; expected to complete work individually. |
This table provides a concise overview of the key distinctions between contractors and employees in Taiwan, considering autonomy, tools, integration, benefits, engagement, risk, and subcontracting.
Social Security in Taiwan
- Taiwan’s social security system comprises the Labor Insurance Program (LIP), National Health Insurance Program (NHIP), and Labor Pension Program (LPP).
- The Labor Insurance Program covers death, injury, illness, and medical costs from occupational hazards, while the Labor Pension Program offers a pension scheme for all employees, including expats.
- Labor Insurance Program (LIP): 11% of the monthly salary, capped at TWD 45,800. Employees contribute 20% of the premium.
- National Health Insurance Program (NHIP): 5.17% of the monthly salary, up to TWD 150,000. Employees contribute 30% of the total premium.
- Labor Pension Program (LPP): Voluntary contribution, minimum 6% of the monthly salary, up to TWD 150,000.
- Labor Insurance Program (LIP): Employers contribute to ordinary risk insurance (70% of 11% of the monthly salary) and occupational accident insurance (0.14% of the monthly salary).
- National Health Insurance Program (NHIP): Employers pay 60% of the total premium.
- Labor Pension Program (LPP): Employers must contribute a minimum of 6% of the employee’s monthly salary.
- South Korea: 9.545%
- China: 27.5%
- Japan: 15.87%
Note: Social security contribution rates and regulations are subject to change. Consult with a local HR or tax professional for the latest information.
Payroll in Taiwan
Minimum Wages
The prevailing minimum wage in Taiwan, Province of China, stands at NT$26,400.00 per month, effective from January 1, 2023, and remains valid through December 2023. All figures are denoted in Taiwan Dollars.
Payroll Cycle
In Taiwan, the standard payroll cycle occurs monthly, with payments typically disbursed on the 15th of each month. It is a customary practice in Taiwan to provide a 13th-month salary, commonly distributed during the Lunar New Year.
Overtime Pay
Overtime pay in Taiwan is regulated on a monthly cycle, with disbursements typically on the 15th. The tradition of a 13th-month salary is observed, often paid during the Lunar New Year.
Mercans’ payroll capabilities
- Payroll Cycle: Ensuring timely payment to both employees and contractors in the local currency (Taiwan Dollar).
- Payroll Services: Proficient in comprehensive payroll setup, processing, and administration.
- Statutory Compliance: Expert handling of statutory filings and payments to meet regulatory requirements.
Personal Income Tax in Taiwan
Overview
Individual Income Tax (IIT) is applicable to both resident and non-resident individuals for Taiwan-sourced income, unless exempt under the Income Tax Act and related laws.
Tax Rates for Non-Residents
- Non-resident aliens residing less than 90 days face an 18% withholding tax on salary from Taiwan entities.
- Non-residents, 90 to 183 days, incur an 18% flat tax on taxable salary, regardless of payment location.
Progressive Tax Rates for Residents (2022)
- 5% on income up to TWD 560,000.
- 12% on income from TWD 560,001 to 1,260,000.
- 20% on income from 1,260,001 to 2,520,000.
- 30% on income from 2,520,001 to 4,720,000.
- 40% on income above 4,720,001.
Income Basic Tax (IBT)
Residents face a flat 20% IBT on foreign-sourced income meeting specific criteria. IBT calculation includes add-back items, and if IBT exceeds regular income tax, it’s payable based on a defined formula.
IBT Add-Back Items
- Qualified insurance benefits.
- Income from certain transactions.
- Non-cash charitable donations.
- Foreign-sourced income over TWD 1 million.
Credit for Foreign Taxes
While foreign-sourced income increases IBT, credits are available for foreign taxes paid, subject to limitations.
Taiwan Employee Hiring Cost
In Taiwan, employing an individual with a gross annual salary of TWD 9,999.96 incurs additional employer costs totaling TWD 54,329.28 annually. This comprehensive calculation includes various expenses such as benefits, insurance, and contributions. Therefore, the total annual cost of hiring this employee amounts to TWD 74,329.24, encompassing both the gross salary and the associated employer-related expenditures. This example illustrates the holistic perspective required when estimating the total investment in an employee, considering not only the salary but also the additional costs associated with employment.
Employee Benefits in Taiwan
- 3 days for 6 months to 1 year
- 7 days for 1 to 2 years
- 10 days for 2 to 3 years
- 14 days for 3 to 5 years
- 15 days for 5 to 10 years
- 15 days for 5 to 10 years
- Additional day per year for over 10 years (up to 30 days).
Accumulated annual leave usage can follow different timelines, decided by mutual agreement within 30 days of eligibility. Unused vacation can be carried over, converted into wages, or paid out at the end of the second year or employment contract.
Work Permit in Taiwan
To work in Taiwan, individuals must undergo a comprehensive process starting with the receipt and signing of an employment contract issued by the employer. Subsequently, the employer applies for a work permit from the Ministry of Labor, a prerequisite before commencing work. To reside in Taiwan, employees need a work visa and an Alien Residence Certificate, issued post the approval of the EZ Taiwan work permit. The Taiwanese job market caters to over 40,000 expats through various online platforms like Forumosa, tiptopjob, and Taiwan.xpatjobs, with popular industries including startups, computer hardware and software, acting and modeling, publishing, marketing and advertising, mobile gaming, and bicycles. There are four types of visas in Taiwan, each serving distinct purposes. To apply for an EZ Taiwan work permit, both employees and employers need to submit specific documents, including education diplomas, work experience certificates, tax statements, and more. The application process involves obtaining a work visa, undergoing a medical examination, applying for an Alien Resident Certificate, and registering with relevant authorities. The EZ Taiwan work permit typically takes 7-14 days for approval, with the work visa issued in 30 working days. Mercans, as a global Employer of Record (EOR) solution, facilitates the work permit application process by providing comprehensive HR solutions and expert guidance, streamlining the hiring process for companies worldwide.
EOR Solutions in Taiwan
Conclusion
Experience the ease of global expansion with Mercans’ comprehensive EOR solutions in Taiwan. From payroll and compliance to seamless workforce integration, Mercans ensures a smooth journey for businesses venturing into the Taiwanese market, providing unmatched support and expertise.