Amendments to Taiwan’s Labor Standards Act (“LSA”) passed the legislature on 26 April 2019. These amendments aim to keep pace with the rise of the gig economy and an increasingly atypical workforce. Currently, there are around 150,000 dispatch employees in Taiwan. In order to provide greater protection for these dispatched employees, two key provisions were passed:

Firstly, dispatch agencies can now only sign permanent employment contracts with dispatch employees. Such a restriction prevents agencies from using fixed-term contracts to circumvent their obligations to provide statutory severance pay. In the past, agencies would sign fixed-term contracts with dispatch employees based on the period of the dispatch project. Thus, the agency could terminate the dispatched employees on the end date of the fixed-term contracts, which meant that they did not need to have a statutory cause for termination or pay the dispatched employees severance pay. This loophole has now been closed.

Secondly, if agencies do not pay wages on time, dispatch employees can request that the client enterprise pay them instead. Client enterprises can then ask for reimbursement from the dispatch agency or deduct it from the expenses payable as outlined in the contracts they’ve signed with the agency. This measure would effectively mitigate the risk that dispatched employees would not receive their wages from the dispatch agency. It could also encourage the client enterprise to select well-operating agencies to prevent any costs being incurred from paying wages to the dispatched employees.

In separate amendments made to the Labor Pensions Act, eligibility for pensions under this act has been extended to all permanent residents (APRC holders), regardless of how they gained permanent residency status (through marriage, professional employment etc). Previously, only permanent residents married to Taiwanese nationals or those on certain work permits were able to join the pension scheme under the LPA. This change will affect how other payments, such as severance, are calculated. Any seniority accrued under the old (Labor Standards Act) pension scheme will remain the same, but seniority under the LPA will only begin to count from the time the employee decides to switch to the new pension scheme. This issue was a long standing concern of the foreign community in Taiwan, as it was seen as an obstacle to people settling here long term. The government expects 15,000 permanent residents will be positively affected by these changes.

These amendments are likely to have a significant impact on the dispatch industry, and we will continue to monitor developments once these changes go into force. Similarly, the inclusion of all permanent residents in the pension scheme will go some way to ensuring foreign nationals living and working in Taiwan receive equal treatment to their Taiwanese colleagues and neighbors.

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