For Flexibility in Taiwan’s Labor Laws

After much controversy, a revised Labor Standards Law has now been enacted in Taiwan.

In order to increase business competitiveness while continuing to protect the local labor force, the American Chamber of Commerce’s Human Resources Committee recommends that the Ministry of Labor (MOL) make the Labor Standards Law (LSL) more flexible and more predictable. The current labor laws regulating overtime work and employer-employee relations are based on traditional labor-intensive employment such as manufacturing. However, since the implementation of the LSL in 1984, Taiwan has evolved away from a traditional labor-intensive industries to become a knowledge-based, technology-oriented economy. As of 2014, approximately 45% of the Taiwan workforce consisted of knowledge-based, white-collar workers. Thus, LSL based on labor-intensive methods has become outdated and must be revised to better serve white-collar, knowledge-based workers.

In their position paper in the American Chamber of Commerce in Taipei’s 2017 Taiwan White Paper, the Human Resources Committee recommends two primary amendments to the LSL aimed at increasing working-hour flexibility: the extension of the “four-week flexible working hours option” to more industries and the expansion in scope of Article 84-1, which exempts specific categories of workers from provisions of the LSL and allows them to enter into individual agreements with their employers regarding work hours and vacation time.

The “four-week flexible working hours option” provides a total number of flexible working hours over a four-week period for specific industries selected by the MOL. The committee advocates for extending the “four-week flexible work hours” option to multiple industries, as many industries require a degree of flexibility in determining working hours.

Article 84-1 exempts certain categories of workers, especially “supervisory, administrative, and professional workers,” from restrictive working-hour regulations in the LSL, and allows them to negotiate working hours, regular days off, holidays, and female workers’ night work with their employers directly. The committee contends that individuals at or above a certain salary level do not need the protections of LSL regulations and that the excessive protections actually limit their rights. An amendment to the LSL should expand the scope of Article 84-1 to exempt high paid individuals from certain provisions of the LSL and allow them to enter into overtime work negotiations with their employers directly.

In revising overtime time regulations, the committee recommends the labor authority grant employers more discretion in defining an “unexpected event” that necessitates overtime work. Under the current LSL, when a natural disaster, accident, or unexpected event requires employees to work outside of normal hours, the employer must notify the labor union or competent authority within 24 hours of the commencement of overtime work. Additionally, if an unexpected event interrupts workers’ leave, the employer must report the details of this interruption to the local authority. However, due to the ambiguous definition of “unexpected event” companies have struggled to effectively assess whether local authorities would view a situation as an “unexpected event”. Often, authorities reject company labeling of a situation as an “unexpected event”, thereby dramatically increasing the company’s compliance costs. As unexpected events in each industry vary substantially, it is neither plausible nor practical to define a standard definition of “unexpected event”. Thus, labor authorities should allow employers the discretion to define an “unexpected event” in a manner that suits specific industry operations and meets the expectations of both employers and employees.

Recent amendments to the LSL significantly increased worker overtime entitlements, granting workers the choice between higher overtime pay and actual rest. However, overtime payment is based on an impractical formula set by the LSL that places a high financial burden on employers. The committee suggests that the LSL be further amended to ensure that overtime hours are commensurate with actual working time. The committee also recommends that the LSL stipulate that overtime details must be pre-approved by employers, in order to ensure that employers can anticipate personnel costs.

The committee would also like to see clarification on regulations governing annual leave and recommends provisions such as the pre-arrangement of annual leave and clearer protocol regarding untaken annual leave.

Taiwan’s shift toward a knowledge-based white-collar economy necessitates the revision of policies related to non-conventional types of labor. The committee recommends that the labor authority hold public hearings on all potential revisions and extend the post-amendment grace period in order to maximize the consultation process and minimize the disruptive effects of amendments.

To read the full Human Resources position paper, click here.