How to hire and pay an employee in Taiwan – Guide to Taiwanese payroll and employment law

Taiwan, known for its advanced technology sector and robust economy, is an attractive destination for businesses seeking to expand operations in Asia. However, hiring and paying employees in Taiwan involves navigating a specific set of employment laws, payroll regulations, and cultural considerations. This guide offers a comprehensive overview for international businesses aiming to employ workers in Taiwan effectively.

Employment law in Taiwan

Key legal requirements

Taiwan’s Labour Standards Act (LSA) governs most aspects of employment, including wages, working hours, leave, and termination. Here are the primary legal requirements:

• Employment contracts: Contracts can be written or verbal, but written agreements are recommended. The contract should specify key terms such as job duties, salary, work hours, and benefits.
• Working hours: Standard working hours are eight hours per day and 40 hours per week. Overtime must be compensated at a rate of at least 1.33 times the regular wage for the first two hours and 1.66 times thereafter.
• Minimum wage: As of 2025, the monthly minimum wage is TWD 27,470, and the hourly minimum wage is TWD 183. These figures are subject to periodic adjustment.
• Probationary periods: Probationary periods are allowed but typically do not exceed three months.
• Termination and severance: Employers must provide written notice of termination and follow specific notice periods (10-30 days, depending on tenure). Severance pay is required based on years of service.

Payroll regulations in Taiwan

Setting up payroll

To pay employees in Taiwan, businesses must comply with local tax and social security regulations. Here’s what you need to know:

1. Registration:
   • Register the business entity with Taiwan’s Ministry of Economic Affairs (MOEA).
   • Obtain a Unified Business Number (UBN).
   • Enrol in the National Health Insurance (NHI) and Labour Insurance systems.
2. Payroll schedule:
   • Salaries are typically paid on a monthly basis, with payment due by the fifth working day of the following month.
3. Income tax:
   • Resident employees: Tax is calculated on a progressive scale from 5% to 40%, depending on income.
   • Non-resident employees: A flat tax rate of 18% applies.
   • Employers must withhold and remit taxes to the National Taxation Bureau (NTB).
4. Social security contributions:
   • Employers and employees contribute to the following schemes:
     • Labour Insurance: Covers pensions, unemployment benefits, and workplace injuries.
       • Employer contribution: 10% of salary.
       • Employee contribution: 2% of salary.
     • National Health Insurance (NHI): Provides healthcare coverage.
       • Employer contribution: 4.55% of salary.
       • Employee contribution: 1.72% of salary.
       • Government contribution: 2.11% of salary.

Benefits and entitlements in Taiwan

Statutory benefits

1. Annual leave:
   • Employees are entitled to annual leave based on tenure:
     • 0–1 year: No statutory leave.
     • 1–2 years: 3 days.
     • 2–3 years: 7 days.
     • 3–10 years: 10 days.
     • 10+ years: 1 additional day per year, up to 30 days.
2. Sick leave:
   • Employees are entitled to 30 days of paid sick leave per year at half-pay.
3. Parental leave:
   • Maternity leave: 8 weeks, with compensation at full salary.
   • Paternity leave: 5 days, fully paid.
   • Parental leave without pay: Up to 2 years for each child under 3 years old.
4. Public holidays:
   • Taiwan has 12–13 public holidays annually, including Lunar New Year and National Day.

Additional benefits

Employers often provide supplementary benefits to attract and retain talent:

• Performance bonuses.
• Meal or transport allowances.
• Employee training programmes.
• Health and wellness benefits, such as gym memberships or counselling services.

Cultural considerations when hiring in Taiwan

1. Hierarchy and respect:
   • Taiwanese workplace culture values hierarchy. Managers are expected to lead by example and show respect to subordinates.
2. Team-oriented approach:
   • Emphasise collaboration and collective decision-making.
3. Language:
   • Mandarin is the primary language. Providing bilingual documentation (Mandarin and English) can enhance communication.

Hiring process in Taiwan

1. Job advertisement:
   • Use popular job portals such as 104 Job Bank or 1111 Job Bank.
   • Networking and employee referrals are also common.
2. Interviews and selection:
   • Emphasise professional qualifications and compatibility with company culture.
   • Be prepared for candidates to negotiate salary and benefits.
3. Onboarding:
   • Provide orientation about company policies and benefits.
   • Ensure compliance with mandatory health checks.

Payroll process in Taiwan

The payroll process in Taiwan involves several steps to ensure compliance with local regulations and timely payment to employees. Below is a breakdown of the key stages:

1. Registering with authorities

Before processing payroll, employers must register with relevant government bodies:

• Ministry of Economic Affairs (MOEA): To establish the business legally and obtain a Unified Business Number (UBN).
• National Health Insurance Administration (NHIA): To enrol employees in the National Health Insurance scheme.
• Bureau of Labour Insurance (BLI): To register for labour insurance coverage.

2. Collecting employee information

Employers must gather essential employee details, including:

• Full name and ID/passport number.
• Bank account details for salary transfers.
• Tax classification (resident or non-resident status).
• Proof of enrolment in social security schemes.

3. Calculating gross salary

Determine the gross salary based on the employment contract. Gross salary includes:

• Basic pay.
• Allowances (e.g., transportation, meal stipends).
• Performance bonuses (if applicable).

4. Withholding statutory deductions

Employers are required to withhold deductions from employees’ salaries, including:

• Income tax:
  • Residents: Taxed on a progressive scale (5%-40%).
  • Non-residents: A flat rate of 18%.
• Social security contributions:
• Labour Insurance: Employee portion is 2% of salary.
• National Health Insurance (NHI): Employee portion is 1.72% of salary.
• Pension fund contributions:
• Labour Pension Fund (LPF): Employers must contribute at least 6% of an employee’s salary to the LPF account.

5. Employer contributions

Employers must make additional contributions, including:

• Labour Insurance: 10% of the employee’s salary.
• National Health Insurance: 4.55% of the employee’s salary.
• Pension contributions: Minimum 6% to the LPF.

6. Issuing payslips

Employers are required to issue detailed payslips to employees each pay period. A payslip should include:

• Gross salary.
• Statutory deductions (tax, insurance, pension).
• Employer contributions.
• Net salary after deductions.

7. Paying employees

• Payment frequency: Salaries are generally paid monthly, with payments due no later than the fifth working day of the following month.
• Payment method: Bank transfer is the most common method. Ensure bank details are securely stored in payroll systems.

8. Filing taxes and contributions

Employers must remit withheld taxes and social security contributions to the appropriate authorities:

• Income tax: Submit to the National Taxation Bureau (NTB) by the 10th of the following month.
• Social security contributions: Paid to the NHIA and BLI monthly.

9. Year-end compliance

At the end of the financial year, employers must:

• Submit an annual payroll report to the tax authorities.
• Issue Withholding and Non-Withholding Tax Statements to employees for individual income tax filings.

Payment methods in Taiwan

Salaries are typically paid via bank transfer. Employers should collect employees’ bank details during onboarding and use secure payroll software to process payments.

Outsourcing payroll in Taiwan

For international businesses unfamiliar with local regulations, outsourcing payroll can save time and ensure compliance. Consider hiring a professional employer organisation (PEO) or payroll provider to handle:

• Tax filings.
• Social security contributions.
• Payslip issuance.

Summary checklist for hiring and paying employees in Taiwan

1. Register your business and obtain necessary permits.
2. Draft compliant employment contracts.
3. Set up a payroll system aligned with Taiwanese regulations.
4. Ensure tax and social security contributions are correctly withheld and remitted.
5. Provide statutory and additional benefits to employees.
6. Respect cultural nuances during hiring and employment.

By understanding Taiwan’s employment laws, payroll regulations, and cultural expectations, businesses can hire and pay employees smoothly while fostering positive workplace relationships.

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