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The island of Taiwan is a multiparty democracy just under the combined sizes of Maryland and Delaware. It has a population of over 22 million, 84% of whom are native Taiwanese, but which also includes Mainland Chinese and aborigines. The majority of the population practices Buddhist, Confucian, or Taoist beliefs, and Mandarin Chinese is the official language. The current president is Chen Shui-bien.

Taiwan claims to be the Republic of China, though the United Nations and most major countries refute this title. The status of Taiwan has been ambiguous since 1949, as the Peoples Republic of China has continuously maintained that the island is one of its provinces, due to historical links. Although the two sides have softened their stances over the past 50 years, the issue remains unresolved.

Taiwan's economy has remained one of the strongest in the Asia Pacific region, despite the Asian Financial Crisis in 1997 and a severe earthquake in 1999. Unlike its neighbors, Taiwan experienced a positive growth rate every quarter from 1997-1999. Furthermore, analysts believe the Taiwans upcoming accession to the WTO (for political reasons, Taiwan will be allowed to join only after China becomes a member) will only increase its financial strength.

Table 1: GDP and Unemployment 

Source: Ministry of Economic Affairs, Taiwan

The Labor Pool

Taiwan has a labor force of nearly 10 million people, more than half of whom are employed in the service sector. One third of these are members of labor unions. The majority of companies are small businesses, with less than 5% considered to be large-scale enterprises.

Although shortages of qualified workers exist in some highly technical fields, such as financial brokerage and advanced computer hardware and software design, Taiwan offers a large supply of educated and skilled workers. The Council of Labor Affairs (CLA) is implementing training programs to fill high-tech labor shortages.

Unskilled workers, however, are still in short supply for most sectors. The CLA has created a new subsidy for laborers in the manufacturing sector, in an effort to attract more workers from Taiwan to fill unskilled labor positions. These workers will receive a NT$60,000 (US$1,837) government subsidy after their first six months of employment, for a total of NT$120,000 (US$3,674) for one year.

Since 1989, many companies have turned to hiring legal foreign workers in the absence of local workers. Firms hoping to hire foreign workers must apply to the CLA, and invest in the governments local labor training program. Firms in high-tech industries are required to invest more than those in other sectors.

By late 2000, Taiwan had legally employed more than 320,000 foreign workers, 47% from Thailand, and the rest from the Philippines, Indonesia, and Malaysia. Today, however, Taiwanese unemployment is rising, even as the government is lowering the maximum working hours. In a move to protect local labor, the government put immigrant labor restrictions in place. By 2004, Taiwan hopes to cut back foreign labor figures by 60,000 to cap the amount at 260,000.

In addition, the government is restricting which companies may hire foreign workers, blocking those delinquent in their wage payments or contributions to employees insurance funds, those who are involved in labor disputes, are experiencing severe financial difficulty, or are involved in illegal activities.

Labor Laws

Basic requirements under the Labor Standards Law are as follows:

Table 2: Basic Requirements of the Labor Standards Law

Minimum Age	15 years
Minimum Wage	NT$15,840 (US$485)/month*
Maximum Hours / 2Wks	84 hours
Maximum Days/Wk	6 days**
Maximum Overtime/day
- Men	3 hours
- Women	2 hours

Sources: Department of Commerce, Bureau of International Labor Affairs, 
Social Security Administration, International Labor Organization.

* The minimum wage is recalculated every year in August. The calculation is based on half of the labor productivity increase and on the inflation rate.

** Government organizations and about a third of private companies participate in a new system in which their employees work 5 days every other week. This system is not mandatory for private companies.

Leave Entitlements. The Labor Law stipulates that foreign companies and large domestic companies must pay their employees annual leave entitlements. At minimum, employers must provide the following (assuming continuous employment):

Table 3: Leave Entitlements

Workers Service Period	Annual Leave Required
1 (less than) 3 years	7 days
3 (less than) 5 years	10 days
5 (less than) 10 years	14 days
10 years or more	For every year of service above 10 years, Employees must receive one extra day of leave, for a maximum of 30 days.

Sources: Department of Commerce, Bureau of International Labor Affairs, 
Social Security Administration, International Labor Organization.

Anti-discrimination. While the Constitution protects equality irrespective of sex, religion, race, class, or party affiliation, Taiwan has never enacted an equal employment rights law. The Labor Standards Law does require that male and female employees receive equal wages for equal work, but the Council on Labor Affairs estimates women actually receive 85% of mens salaries for similar work. In addition, protective laws restrict womens working hours, limiting their overtime and night work. This, in addition to the added cost of maternity benefits to employers, means that women are less likely to be hired than men. President Chen Shui-bien has recently called attention to the problem of gender discrimination in working conditions, pointing out that women receive less wages, benefits, and promotions.

Under the Disabled Welfare Law, 1% of each private companys employees must be disabled; 2% of large public organizations. Noncompliance will result in a fine equal to the basic monthly salary for each disabled person not hired, roughly US$570 per person. The law has also set a minimum fine of US$2,400 for discrimination against the disabled.

Labor Organization. All employees, apart from civil servants, teachers, and defense industry workers, may establish and participate in labor unions, including those working in export processing zones. Employers may not discriminate against union members, although the law does not set a penalty for such behavior. Labor organizations must submit their constitutions and rules to government oversight, however, and conform to the Labor Union Law. The law entails that leaders be elected through secret ballot, and grants the right to strike, although it limits the conditions in which strikes and lockouts are acceptable.

Termination . According to the Labor Standards Law, employers must provide severance pay equal to one month of salary for each year of service, based upon the employees last six months salary. Employees must also receive notice of termination based upon their years of service, as follows:

Table 4: Termination Notice Requirements

Period of Employment	Termination Notice Required
Less than 1 year	10 days
1 (less than) 3 years	20 days
3 years or more	30 days

Sources: Department of Commerce, Bureau of International Labor Affairs, 
Social Security Administration, International Labor Organization.

The Labor Insurance Program

The national insurance system, under the Labor Insurance Act, is compulsory for all people between the ages of 15 and 60 who work in an organization with more than five employees, or who are self-employed. Foreigners are also covered under the program, and other groups may sign on voluntarily.

The fund offers two types of premiums. Accident insurance requires a contribution of 6.5 11% of each employees monthly salary. Employment injury insurance takes 0.09 3% of the same salary, with an average contribution of 0.39%. (Specific worker contributions are listed in the Table of Grades of Employment Injury Contribution, available through the government).

Employers, employees, and the government divide the responsibility for these contributions in varying amounts, according to the type of work done. In the majority of cases, workers pay 20% of accident insurance fees, employers, 70%, and the government, 10%. Also in most cases, employers pay the full amount of occupational injury/illness premiums.

Employees receive several types of benefits, as listed below:

Table 5: Insurance Benefits  

Source: Taiwan Bureau of Labor Insurance Online

*All salaries for the basis of these awards must be those paid to employee while he/she is insured. All awards are based on monthly salary.

** Workers over the age of 60 who wish to continue working may collect an additional award of 1 month of salary for each full year worked (maximum: 5 years).

Medical Benefits. Since 1995, Taiwan has operated the National Health Insurance program (NHI), which works in tandem with the labor insurance program. NHI provides non-occupational injury/illness benefits, while the labor insurance program deals with occupational injury and illness awards.

Workers with an occupational injury/illness may attend any hospital associated with the NHI system. Labor insurance will cover a large part of medical fees, and offers free, regular checkups.

The Department of Health (DOH) has proposed increasing the required premiums for single people between the ages of 20 and 65, and providing free care to people under 20 and over 65 who have no income. In addition to adjusting the contribution scale, DOH officials expect that an overall increase in premiums will be necessary in coming years.

Retirement Benefits. Currently, old age benefits are granted to male workers at 60 and female workers at 55, as long as they have been within the insurance program for at least one year. The CLA has proposed a new cap of 55 years of age, which it will most likely put into effect later this year or early next year.

Under existing rules, employers must contribute 2%-5% of employees monthly wages to their retirement fund account. In February 2001, however, the CLA raised the minimum contribution to 6%, a move that dissatisfied both employers and labor unions. While employers say that the new rate pushes their operating costs up to an unacceptable level, workers are advocating an increase to 12%, which they claim is necessary for a decent retirement living standard. The CLA will implement the new contribution standards in 2002, once it has completed its amendments to the new rule.

Unemployment Benefits. In new rules coming into effect January 2001, workers who have been members of the labor insurance program for at least one year before they lose their employment are eligible for unemployment benefits. While previously only workers laid off because of bad business financials could receive unemployment benefits, now those affected by other factors are also eligible. Workers susceptible to seasonal labor shortages, as well as those unable to find work for more than three months after their work contract has expired are now included in the program as long as they are members of the insurance program.

Benefits include a monthly award of 60% of the employees previous average monthly insurance salary, vocational training, and job placement services. Workers who have been members of the insurance program for less than one year may receive six months of the monthly award over a period of two years of unemployment. Those who have been members for 5 10 years may receive twelve months of the monthly award, and those who have been members for over ten years may receive 16 months of the award.

 

Trends in Wages and Company-Provided Benefits

Wages. Typically, salaries in Taiwan are equal to roughly one half to two thirds of those in the US, though urban workers usually receive at least twice Taiwans minimum wage. The minimum monthly rent for an apartment is US$300 - $400, and the least expensive meal costs $3, making the minimum wage of $485 inadequate to cover basic living expenses.

Salaries in high-tech industries are surprisingly low, with entry-level electrical engineers receiving between $1,200 and $1,400 per month. Even mid-level engineers garner only $1,500 - $2,000, and high level, $2,500 - $3,500. (These figures represent average salaries; superstar employees will of course receive more). In general, wages are not the prime motivator companies use to attract high quality engineers; employees are drawn to their benefits packages, which include stock options and bonuses.

Fringe Benefits. Companies are expected to provide a Spring Festival bonus and an end-of-the-year bonus, and many also provide meals, transportation, and sometimes housing. Although the law does not require partial vesting of retirement benefits when employees retire, many companies do offer to vest 100% of such benefits after 15 years of service and 25% after 5 years.

Although in many sectors, companies give out bonuses equal to one-month salary, hi-tech workers have begun to expect preferential treatment. Workers in technological fields, such as electronics and telecommunications, received substantial end-of-year bonuses in December 2000, far more than other sectors. Even unskilled workers in these companies received a bonus of 5-6 months of salary, plus stock dividends. Three electronics companies handed out bonuses of 14-month salaries in this period. Whether or not this trend will continue depends upon Taiwans growth rate.

Stock options are also an important part of the hiring package in high-tech firms, and can offset a low salary and bonus in attracting employees. These companies have come to rely on stock bonuses and options to keep their workers, offering between $4,000 and $80,000 per person per year in stock benefits.

Despite their gains in bonuses and stock options, high-tech employees are willing to work longer hours than employees in other areas. In mid-2000, a survey conducted by a Taiwanese magazine found that 86% of workers in high-tech industries work more than eight hours a day, 20% more than ten hours, and 12% more than 12 hours.

Conclusion: New Trends

Taiwan is undergoing significant changes in HR regulation. Apart from the new work hour law just passed in 2000, several reforms are in the works, including changes in health insurance premiums, a raise in employers pension contributions, and an ambitious national development plan set to be put into effect later this year. The development plan to invest US$93.75 billion of government funds over four years into Taiwans infrastructure, education, and resource preservation was one of President Chen Shui-biens campaign promises, as a way to develop Taiwan and to boost its economic situation and lower the unemployment rate. The Council for Economic Planning and Development claims the effort will create 38,000 jobs and raise the GDP growth rate by 0.7% to reach 5.3% this year.

The governments focus on generating new jobs is due partly to the economys slowing growth, as well as the projected reaction to the new workweek law. Although most multinational companies will not be affected -- most had been employing workers less than 84 hours per two weeks already -- the majority of Taiwans indigenous businesses are small companies, and will encounter difficulties with the new regulations.

Despite the challenges ahead, Taiwans economy has a strong foundation, and its prospect for positive developments is excellent. Multinational companies in particular will benefit from the governments new employment measures, including training programs, while seeing little downside from its new protective labor laws.

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