Key Details about Taiwan’s Labor Standards Act
When expanding a business into Taiwan, understanding the local labor laws is essential. The Labor Standards Act provides the legal framework that governs employment relationships, ensuring fair treatment for workers and clear guidelines for employers. This post will walk you through the key aspects of Taiwan’s labor laws, helping you navigate compliance and build a strong foundation for your business operations.
Taiwan Labor Laws Explained: An Overview
Taiwan’s labor laws are designed to protect workers’ rights while balancing the needs of employers. The primary legislation is the Labor Standards Act, which covers employment contracts, wages, working hours, leave entitlements, and termination procedures. This act applies to most employees in Taiwan, including foreign workers, with some exceptions such as government officials and certain domestic workers.
The law aims to create a fair working environment by setting minimum standards. For example, it mandates minimum wage levels, regulates overtime pay, and requires employers to provide safe working conditions. Understanding these rules is crucial for businesses to avoid legal disputes and penalties.
Employers should also be aware of the importance of written employment contracts. These contracts must clearly state job duties, salary, working hours, and other essential terms. Having a well-drafted contract helps prevent misunderstandings and protects both parties.
Employment Contracts and Worker Rights
Employment contracts in Taiwan must comply with the Labor Standards Act. They should specify the nature of the work, salary, working hours, and other conditions. Contracts can be fixed-term or indefinite, but fixed-term contracts must be justified by the nature of the work.
Workers have the right to receive at least the minimum wage (NT$29,500 per month or NT$196 per hour in 2026), which is reviewed annually by the government. Employers must also provide overtime pay for work beyond standard hours, at least 1.34 times the regular hourly rate, with higher rates for longer overtime, rest days and national holidays.
In addition to wages, employees are entitled to various types of leave, including:
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Annual paid leave based on length of service
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Sick leave with partial pay
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Marriage leave (14 days with full pay from 1 October 2026)
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Maternity and paternity leave
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Public holidays recognized by the government
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Family care leave (up to 7 days a year, counted as unpaid personal leave; from 2026 it can be taken by the hour and cannot affect perfect-attendance bonuses)
Employers must also contribute to labor insurance and health insurance programs, which provide social security benefits to employees.
What are the standard working hours in Taiwan?
Standard working hours in Taiwan are set at 8 hours per day and 40 hours per week. Employees must have two days off in every seven days: one regular leave day and one rest day. Most companies make these Saturday and Sunday, but the law does not fix which days. However, some industries may have different arrangements based on operational needs.
Overtime work is permitted but strictly regulated. Employers must compensate overtime hours at higher pay rates:
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1.34 times the hourly wage for the first 2 overtime hours on weekdays, and 1.67 times for the next 2 hours
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2.34 times the hourly wage for the first 2 hours of work on rest days, and 2.67 times from the 3rd hour (for monthly-paid staff, an extra 1.34 and 1.67 times on top of the monthly salary)
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2 times for work on national holidays
Employers should keep accurate records of working hours to ensure compliance. Failure to comply with these regulations can result in fines and legal action.
Overtime is also capped: working hours may not exceed 12 hours a day including overtime, and overtime may not exceed 46 hours a month (or 54 hours a month and 138 hours every 3 months with the consent of the union or labor-management meeting). Hours worked on rest days count toward this cap. Attendance records must be kept for 5 years and recorded to the minute.
Flexible working hours and shift work are allowed but must be clearly defined in the employment contract or company policies. This flexibility can help businesses adapt to varying workloads while respecting labor laws.
Leave Entitlements and Employee Benefits
The Labor Standards Act mandates several types of leave to support workers’ well-being. Annual leave is granted based on the length of continuous service:
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3 days for 6 months to 1 year of service
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7 days for 1 to 2 years
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10 days for 2 to 3 years
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14 days per year for 3 to 5 years
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15 days per year for 5 to 10 years
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One more day for each year over 10 years, up to 30 days
Unused annual leave must be paid out at the end of the year or when employment ends. If both parties agree, it can be carried over to the next year, but any days still unused at the end of that year must be paid out.
Sick leave is also protected, with employees entitled to up to 30 days of half-paid sick leave per year (without hospitalization). From 2026, taking 10 days or fewer of ordinary sick leave in a year may not lead to unfavorable treatment, and perfect-attendance bonuses may only be reduced in proportion to the sick leave taken. Maternity leave includes 8 weeks of paid leave, and fathers are entitled to paternity leave as well.
Employers must also provide labor insurance and national health insurance contributions, and contribute at least 6% of monthly wages to eligible employees’ individual pension accounts under the Labor Pension Act. These programs cover medical expenses, disability, unemployment benefits, and retirement pensions.
Understanding these benefits helps businesses create competitive employment packages that attract and retain talent.
Termination and Severance Rules
Terminating an employee in Taiwan requires careful adherence to legal procedures. Employers must provide valid reasons for dismissal, such as poor performance, misconduct, or redundancy. Unlawful termination can lead to legal claims and compensation.
Notice periods depend on the length of service:
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10 days for employees with 3 months to 1 year of service
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20 days for 1 to 3 years
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30 days for 3 years or more
Alternatively, employers can provide payment in lieu of notice.
Severance pay is required for employees dismissed on statutory grounds such as business downsizing or inability to perform the job (Article 11), or who resign because of the employer’s breach (Article 14). The amount is calculated based on the employee’s average monthly wage and years of service.
Proper documentation and communication during termination help minimize disputes and maintain a professional workplace environment.
Navigating Compliance with Local Expertise
Complying with Taiwan’s labor laws can be complex, especially for businesses new to the market. Partnering with local experts who understand the nuances of the labor standards act taiwan can save time and reduce risks.
Songjer CPA offers comprehensive support for entrepreneurs and businesses expanding into Taiwan. Their expertise includes employment law compliance, payroll management, and human resource consulting. This partnership ensures your business meets all legal requirements while focusing on growth.
By staying informed and seeking professional guidance, businesses can build a strong foundation in Taiwan’s competitive market.
Understanding Taiwan’s labor laws is a critical step for any business planning to operate in the country. From employment contracts to working hours, leave entitlements, and termination procedures, the Labor Standards Act provides clear rules to protect both employers and employees. Leveraging local expertise can help navigate these regulations smoothly and position your business for success.