Key Takeaways:
- Employer obligations for labor insurance and health insurance
- Salary, tax, and employee benefits requirements
- How to avoid penalties for non-compliance
Introduction
Payroll management in Taiwan requires compliance with labor laws, social insurance, and tax regulations. This guide provides employers with the necessary information to manage payroll effectively.
Payroll Regulations in Taiwan
Payroll in Taiwan is governed by a number of labor laws and regulations that ensure employees are fairly compensated and receive the benefits they are entitled to. Employers must adhere to these rules, including those governing salary payments, overtime, bonuses, and statutory benefits.
Salary Payment Schedules and Overtime
Employers in Taiwan are required to pay their employees on a regular schedule, typically once a month. Salaries must be paid in full by the end of the month, with deductions such as taxes, labor insurance, and health insurance clearly outlined on the employee’s payslip. Failure to pay salaries on time can result in fines and disputes with employees, so it’s essential that businesses maintain a reliable payroll system.
Taiwan’s overtime laws require that employees be compensated for any work performed beyond the standard 40-hour workweek. Overtime pay is set at 1.33 times the regular hourly wage for the first two hours of overtime, and 1.66 times the hourly wage for additional overtime beyond that. Employers must accurately track employee hours to ensure that overtime pay is calculated correctly and paid on time.
Bonuses and Allowances
While bonuses are not legally mandated in Taiwan, they are a common practice, particularly the year-end bonus, which is typically paid during the Lunar New Year. This bonus, often referred to as the “13th-month salary,” is provided as a goodwill gesture and as part of employee retention strategies. Employers should ensure that any bonuses agreed upon in employment contracts are paid as scheduled.
Allowances, such as transportation or meal allowances, may also be included in employee compensation packages. These must be clearly stated in the employment contract and reflected in the employee’s payslip.
Labor Insurance and Health Insurance Contributions
Employers in Taiwan are required to contribute to several social insurance programs, including the Labor Insurance (LI) program and the National Health Insurance (NHI) program. These contributions are essential for providing employees with access to healthcare, retirement benefits, and unemployment support.
Employer and Employee Contribution Rates
As of 2024, the contribution rates for labor insurance and health insurance in Taiwan are as follows:
- Labor Insurance (LI): The employer contributes 70% of the total premium, while the employee contributes 20%, and the government contributes the remaining 10%. The total premium is calculated based on the employee’s monthly salary.
- National Health Insurance (NHI): The contribution rate for NHI is 5.17% of the employee’s salary. Employers cover 60% of the premium, employees cover 30%, and the government covers the remaining 10%.
These contributions are deducted from the employee’s salary and must be remitted to the relevant authorities. Employers must ensure that the correct amount is deducted from each employee’s paycheck and that contributions are submitted on time.
Deadlines for Labor Insurance and Health Insurance Contributions
Labor insurance and health insurance contributions are due by the 15th of the following month. Employers who fail to make these payments on time may face penalties, including fines and interest charges. To avoid non-compliance, employers should automate their payroll systems to ensure that contributions are calculated and submitted accurately and on time.
Income Tax Withholding
In Taiwan, employers are responsible for withholding income tax from their employees’ salaries and remitting it to the National Taxation Bureau. Employers must calculate the correct amount of tax to withhold based on the employee’s income and any applicable deductions or exemptions.
Employer Tax Reporting Obligations
Employers must calculate and withhold income tax from employees’ monthly salaries according to Taiwan’s progressive tax rates. The withheld tax must be remitted to the National Taxation Bureau by the 10th of the following month. In addition to withholding taxes, employers must provide employees with an annual tax statement by February of the following year, summarizing their total earnings and the taxes withheld.
Tax Brackets and Payroll Reporting
Taiwan’s income tax system is progressive, with tax rates increasing as income rises. The tax brackets for individual income tax in Taiwan for 2024 are as follows:
- 5% for annual income up to TWD 560,000
- 12% for income between TWD 560,001 and TWD 1,260,000
- 20% for income between TWD 1,260,001 and TWD 2,520,000
- 30% for income between TWD 2,520,001 and TWD 4,720,000
- 40% for income above TWD 4,720,000
Employers must ensure they are withholding the correct amount of tax based on the employee’s total income and applicable deductions. Failure to withhold the correct amount can lead to penalties from the tax authorities.
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Employee Benefits and Deductions
Employers in Taiwan are required to provide statutory benefits to employees, including paid leave, pension contributions, and social insurance coverage. These benefits must be properly accounted for in the payroll process to ensure compliance with labor laws.
Statutory Leave Entitlements and Benefits
Employees in Taiwan are entitled to various types of paid leave, including:
- Annual Leave: Employees are entitled to annual leave based on their years of service. After one year of continuous employment, employees are entitled to seven days of paid annual leave. This entitlement increases with length of service.
- Sick Leave: Employees are entitled to up to 30 days of paid sick leave per year at half pay. Beyond this, they may take unpaid sick leave.
- Maternity Leave: Female employees are entitled to eight weeks of paid maternity leave. Employers must ensure that maternity leave is fully paid and provided in accordance with labor laws.
In addition to these statutory benefits, employers must provide labor insurance and health insurance coverage for all eligible employees.
Labor Insurance, Health Insurance, and Pension Deductions
Employers must deduct labor insurance, health insurance, and pension contributions from their employees’ salaries. These deductions must be clearly itemized on the employee’s payslip, and the employer is responsible for submitting the contributions to the relevant authorities by the due date.
When Non-Compliance May Occur
Failure to comply with payroll regulations in Taiwan can lead to serious consequences, including fines, legal disputes, and damage to the company’s reputation. Below are some common areas where non-compliance may occur and how to avoid them:
Late Salary Payments
Employers must pay salaries on time, as outlined in the employment contract. Late payments can result in employee disputes and fines under Taiwanese labor law. Employers should implement reliable payroll systems to ensure that salaries are paid accurately and on time.
Missed Labor or Health Insurance Contributions
Employers who fail to make labor insurance or health insurance contributions by the deadline may face penalties, including fines and interest charges. To avoid missing these deadlines, businesses should automate their payroll processes and ensure that contributions are submitted on time.
Incorrect Income Tax Withholding
Employers are responsible for calculating and withholding the correct amount of income tax from their employees’ salaries. Failure to do so can result in penalties from the National Taxation Bureau. Employers must ensure that their payroll systems are up-to-date with the latest tax rates and regulations to avoid errors.
Non-Compliance with Employee Benefits
Employers who fail to provide statutory benefits, such as paid leave, labor insurance, or health insurance, may face legal claims from employees. It is essential to stay informed about Taiwan’s labor laws and ensure that all statutory benefits are provided as required.
How AYP Can Help
Managing payroll in Taiwan can be challenging, especially for businesses unfamiliar with the country’s labor and tax regulations. AYP provides comprehensive payroll services to help businesses stay compliant with local laws while minimizing the administrative burden of payroll management.
Professional Employer Organisation (PEO) Services
AYP’s PEO services allow businesses to outsource their payroll management, ensuring that salary payments, tax withholdings, and social insurance contributions are handled accurately and in compliance with Taiwanese regulations.
Employer of Record (EOR) Services
As an Employer of Record, AYP takes on the legal responsibility for your workforce in Taiwan. We manage payroll, tax reporting, and employee benefits, ensuring that your business remains compliant with local labor and tax laws.
Payroll Outsourcing Management (POM) Services
AYP’s Payroll Outsourcing Management (POM) services provide end-to-end payroll solutions, from calculating salaries and deductions to submitting labor insurance and tax contributions. By outsourcing payroll to AYP, businesses can focus on growth while ensuring compliance with Taiwanese payroll regulations.
