Hiring your first employees in Taiwan: what a UK employer needs to unlearn
Taiwan's labour law operates on different assumptions than the UK, and the surprises start with the contract and compound through mandatory costs and exit rights.
How employment law in Taiwan differs from what a UK employer expects
Taiwan's Labour Standards Act is the primary statute governing employment relationships, and it assumes a full-time indefinite employment relationship as the default rather than a contract management tool you shape ad hoc. The differences run through every element of the employment experience, and grasping them before your first hire saves months of misalignment later.
The law protects employee tenure as a principle, which means an employer has fewer ways out and less flexibility in contract structure than UK law typically allows. The grounds for termination are defined in statute, not negotiable. Notice periods, severance, leave entitlements and working hours are all prescribed, not subject to employment contracts that override them with more generous terms.
The Ministry of Labor administers the Labour Standards Act, and local labour bureaux under it enforce compliance. They are active regulators, not distant backstops, and breaches of work rules or statutory entitlements are investigated and penalised when reported by employees or uncovered through routine audit.
Fixed-term contracts are the exception. Indefinite employment is the default.
One of the first shocks to UK employers is that fixed-term contracts are not a default employment tool. They are permitted only under specific conditions set out in the Labour Standards Act, such as project-based or seasonal work with a defined end date, or a defined task that will conclude. A twelve-month rolling contract or a series of fixed terms that functionally amount to indefinite employment are not permitted.
An employer who wants flexibility and structures employment on rolling fixed-term contracts is not complying with the law. The statutory interpretation is that if the employment repeatedly renews or persists beyond the defined contract period, it becomes indefinite de facto regardless of what the documents say. Once that happens, an employer cannot then assert the contract was always fixed-term to avoid statutory exit obligations.
In practice this means your first hire is almost certainly on an indefinite contract. The expectation of probation or a trial period is common in employment practice, but probation does not shorten the notice period for an employee to resign or for an employer to dismiss, nor does it suspend statutory leave or social insurance entitlements. Probation is a cultural practice without legal teeth.
Leave, public holidays and working time are statutory and enforced
Annual leave entitlements, public holiday entitlements and weekly rest days are all set by statute. An employee on an indefinite contract accrues annual leave as they complete a year of service, and the amount changes at defined milestones. Public holidays are prescribed by the government calendar and do not count against annual leave.
Working hours and overtime are also statutory. A regular work week has a maximum, and any hours beyond it are overtime and must be paid at a multiplier set by law. This is not something an employment contract can contract around, and it is not something you can handle informally. The enforcement is not passive, and non-compliant patterns of work are investigated when reported.
Rest days are a defined minimum per week and cannot be waived. An employee must have at least one full day off and cannot be directed to work seven days in succession. Where rest days are shifted, there are rules around how they must be compensated if the shift harms the employee's welfare.
Mandatory employer contributions are real costs on top of salary
This is the item that most catches first-time foreign employers. Taiwan has four mandatory employer insurance and pension schemes, each run by a government agency, each with a contribution rate set by law and updated periodically. They are: labour insurance, national health insurance, the labour pension scheme and employment insurance. Payroll withholding differs from contribution, and both have thresholds and rate changes you must track.
Labour insurance is employer-financed and covers injury, occupational disease and certain life events. National health insurance is joint-financed by employer and employee. The labour pension scheme is a defined-contribution account registered by each employee with the Bureau of Labor Funds. Employment insurance covers unemployment and training benefits.
These are not benefits you choose. They are statutory obligations and non-payment is a violation that carries penalties. An employer who pays salary to an employee but does not contribute to these four schemes has unpaid liabilities that can be enforced by the labour bureau. When budgeting the cost of an employee, assume salary plus these contributions as the true economic cost.
Dismissal is governed by statute and is not a negotiated exit
Dismissal in Taiwan requires one of a defined set of statutory grounds. An employer cannot dismiss for convenience, cannot dismiss because the employment is no longer needed and cannot dismiss because a probation period has concluded. The grounds must fall into one of the categories set out in the Labour Standards Act: serious misconduct, breach of a material employment condition, inability to perform the role despite reasonable opportunity and support, or changes in business circumstances so severe that the position is genuinely no longer tenable.
When a dismissal is lawful, the employer must provide written notice and severance calculated by formula according to years of service. The notice period and severance entitlements are in the statute, not negotiable. A settlement agreement in the UK sense, by which an employee agrees to a smaller exit payment and signs away their right to dispute dismissal, has no legal equivalent in Taiwan. An employee cannot waive statutory severance or shorten their notice period by agreement.
Dismissal for an unlawful reason is wrongful termination and exposes the employer to a claim for reinstatement and back wages, or payment in lieu. An employer who dismisses without one of the statutory grounds, or who fails to provide the required notice or severance, is in breach of the Labour Standards Act. Do not attempt dismissal without advice from a Taiwanese employment adviser.
Work rules for larger employers and the cost of non-compliance
Employers with more than a certain number of employees must draw up written work rules covering hours, overtime, leave, rest days, discipline and the grounds and procedure for termination. The threshold is set by the Ministry of Labor and changes. These work rules must be filed with the local labour bureau and shown to employees.
The significance of work rules is that once filed, they become the employer's binding commitment. If the work rules say employees get a certain rest day schedule or certain hours, the employer is locked into that schedule. Breach of the filed work rules is not just a breach of an employment contract; it is a breach of the employer's public commitment to the labour bureau and invites inspection and penalties if breached.
An employer who does not know they must file work rules, or who files them and then ignores them in practice, creates a compliance and morale liability. Check the current threshold before hiring, and when you are over it, budget for professional advice on drafting work rules that reflect your actual intentions and are compliant with the statute.
Employer of record versus incorporation: the practical choice
When a UK company is ready to hire its first employee in Taiwan, it faces a choice between two broad paths. The first is to partner with an employer of record, a local company that legally employs the person on the UK parent's instructions and handles payroll, contributions, tax withholding and compliance. The second is for the UK company to incorporate a subsidiary in Taiwan and employ the person directly through the Taiwanese entity.
An employer of record is quick to set up and requires no capital remittance or company registration. The EOR handles the employment relationship from a compliance and administrative perspective, and the parent company directs the work. The cost is the EOR's fee plus the salary. The downside is that the employment relationship is between the employee and the EOR, not the parent company, which can matter for termination and for the employee's sense of direct engagement with their real employer.
Incorporation means setting up a Taiwanese company, capitalising it with remitted funds and employing people directly through that entity. It requires more setup time and cost upfront, and it means the Taiwan operation is a separate tax and legal entity. But it gives the parent company direct employment control, it avoids layering a third-party service provider between the parent and the employee and it is cleaner for a business that expects to grow beyond a first hire. The choice depends on whether the Taiwan presence is a test or the beginning of local operations.
Written contracts, payroll withholding and the mechanics of compliance
Employment contracts in Taiwan are typically a joint document signed by both employer and employee, and they should spell out the role, the compensation, the working hours, the leave entitlements and the grounds and procedure for termination. An employer cannot rely on verbal agreements or omit material terms, because statutory entitlements fill any gap and a contract cannot understate them. A well-drafted contract is a control that clarifies both parties' expectations.
Payroll involves withholding tax and contributions from the employee's salary and remitting them to the tax authority and the relevant insurance and pension agencies. The withholding rates and thresholds change annually, and an employer who does not keep up with the changes either underpays, creating a liability, or overpays, which creates an incorrect withholding record for the employee. Payroll is not a casual item and requires either in-house systems or a payroll service that tracks the current year's rates.
Employer record-keeping is mandatory. An employer must maintain time records showing hours worked and any overtime, records of leave taken and accrued and payroll records showing salary, withholding and contributions. These records must be retained for a minimum period set by law and are the basis for any government inspection or employee claim. Record-keeping that is casual or treated as approximate creates a liability and denies you a defence if an employee claims underpayment or non-contribution.
Common questions
Can we use a fixed-term contract for our first hire?
Only if the role genuinely is project-based or seasonal with a defined end date that is real, not hypothetical. A rolling fixed-term contract or a series of fixed terms that effectively amount to indefinite employment do not comply with the Labour Standards Act. Assume your first hire will be on an indefinite contract.
What happens if we dismiss someone without following statutory procedure?
Wrongful termination is a breach of the Labour Standards Act and exposes the employer to a claim for reinstatement and back wages, or to payment in lieu. An employer cannot dismiss without a statutory ground, proper notice and severance. This is a serious compliance matter and should not be attempted without advice from a Taiwanese employment adviser.
Are the mandatory insurance contributions separate from tax withholding?
Yes. Tax withholding (income tax), labour insurance contributions, health insurance contributions, labour pension contributions and employment insurance contributions are all separate items. They all come out of the employee's pay or are employer-financed, and they are all remitted separately to different agencies. They compound to a significant cost beyond salary.
Can an employee waive their right to severance or public holidays?
No. Statutory entitlements under the Labour Standards Act cannot be waived by agreement. If an employee agrees in writing to a smaller severance or fewer public holidays, that agreement does not override the statute, and the employee can still claim their full statutory entitlement.
What is probation really, and does it change the employment relationship?
Probation is an employment practice but not a legal category. A probation period does not reduce an employee's statutory rights, does not shorten notice periods or severance and does not suspend leave accrual or social insurance entitlements. An employee on probation is employed under the same legal rules as anyone else.
Where to check the current position
- Ministry of Labor, Taiwan, and its guidance on the Labour Standards Act and employee rights
- Local labour bureau under the Ministry of Labor (district level), which enforces work rules and hears employee disputes
- Bureau of Labor Funds under the Ministry of Labor, which administers the labour pension scheme
- National Health Insurance Administration, which administers health insurance enrolment
These guides are general information, not legal, tax or investment advice. Rules and figures change: check the current position with the bodies named above before you act.
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