After lengthy discussion and public debate, amendments to the Labor Standards Act (“LSA”) were passed after its third reading on 6 December 2016. The main changes that employment law practitioners, human resource managers, employers and employees must be aware of include:

Changes to annual leave

The qualifying threshold for taking paid annual leave has been reduced from one year of service to six months of service. Employees earn additional annual leave based on years of service up to a maximum of 30 days per year. Minimum annual leave allowances as of 1 January 2017, when the new rules go into effect, are:

• More than six months but less than one year; 3 days
• More than one year but less than two years; 7 days
• More than two years but less than three years; 10 days
• More than three years but less than five years; 14 days
• More than five years but less than ten years; 15 days and
• Over ten years; one extra day of annual leave per year up to a maximum of 30 days.

Unused annual paid leave days must be cashed out by the end of each year of service. Failure to do so may lead to an administrative fine of between NT$20,000 and NT$1 million (approximately US$630 and US$31,500).

Elimination of national holidays

Seven national holidays have been eliminated for private sector workers. This is to make up the difference in time away from work when Taiwan switched from a 48 hour workweek to a 40 hour workweek earlier this year. When remaining national holidays occur on rest days (usually a weekend), employers must provide another day off for employees. The national holidays which have been eliminated include:

• The day after the Founding Day of the Republic of China (January 2);
• Revolutionary Martyrs’ Day (March 29);
• Confucius’ Birthday (September 28);
• President Chiang Kai-shek’s Birthday (October 31);
• Taiwan’s Retrocession Day (October 25);
• Dr. Sun Yat-sen’s Birthday (November 12) and
• Constitution Day (December 25).

Implementation of a five-day work, two-day rest week

The changes provide for two rest days in seven, an increase from one rest day in seven. This brings the rest of the private sector into line with the public sector and most office-based industries. Of the two rest days, one is a mandatory day off; the other is flexible. An employee cannot agree to work on the mandatory rest day. The employee may agree to work on the flexible rest day but higher overtime rates will apply.

Overtime on flexible rest days

Employees and employers need to be aware of the new overtime calculations for flexible rest days:

• Between 0 and 2 hours; 1.34 times regular hourly wage
• Between 3 and 8 hours; 1.67 times regular hourly wage
• Between 9 and 12 hours; 2.67 times regular hourly wage

Actual time worked will now be calculated at the top end of three four-hour periods. Less than 4 hours worked will be counted as the employee having worked four hours; between four and eight hours will count as eight hours and between eight and twelve hours will count as twelve hours. In other words, if an employee agrees to work on a flexible rest day and only works one hour, she must be paid for four hours at the increased overtime rate.

The above amendments will come into force once they are promulgated by the President. The changes to annual leave and elimination of national holidays will come into force on 1 January, 2017.

For more information on Taiwan employment law matters, please contact Christine Chen at cchen@winklerpartners.com.