Employment Contract in Taiwan: The 2026 Guide to Wages, the Labor Pension & Severance

An employment contract in Taiwan is the document that turns a job offer into an enforceable relationship, and Taiwan’s labour framework is detailed and protective of employees. The Labor Standards Act, the Labor Pension Act and related statutes fix the basic wage, working-hour limits, a mandatory 6% pension contribution, special leave and the narrow grounds on which an employer may dismiss — and most of these cannot be contracted away. If you also employ people in the Emirates, our UAE payroll and WPS services keep that side compliant while you apply Taiwan’s rules here — the two systems diverge sharply on income tax, social insurance, severance and wage protection.

This guide walks through what a compliant Taiwan contract contains, who must adopt Work Rules, how fixed-term and indefinite contracts differ, how the basic wage, labor insurance, National Health Insurance and the labor pension work, and how special leave, notice, severance and lawful dismissal are handled — then closes with a practical Taiwan-versus-UAE comparison for employers building teams in both markets. Country-specific figures that change frequently are flagged [VERIFY] so you confirm the current number with Taiwan’s Ministry of Labor before relying on it.

Is a written employment contract required in Taiwan?

An oral employment contract is legally valid in Taiwan, but written terms are effectively essential. Employers must specify the key working conditions — wages and how they are calculated and paid, working hours, rest days and leave, and the rules on termination — and employers above a certain size must also adopt and file Work Rules. Failing to meet these obligations exposes the employer to penalties and to disputes it is poorly placed to win.

In practice every serious Taiwanese employer issues a full written contract. It is the first line of defence: it fixes salary, hours, probation and the labor-pension and severance treatment before a disagreement arises, rather than leaving them to be argued afterwards under Taiwan’s narrow, statute-driven dismissal rules. A contract also lets the employer set out confidentiality, IP assignment and any reasonable restrictive covenant clearly and enforceably.

The controlling principle is that a contract cannot fall below the law or below the employer’s approved Work Rules. Where a clause offers less than the LSA minimum — on the basic wage, leave, notice or severance — it is void to that extent and the statutory floor applies. Bilingual (Chinese and English) contracts are common for foreign-invested employers, but the Chinese-language terms typically govern.

What must a Taiwan employment contract include?

A compliant contract records the statutory working conditions plus the commercial terms in one place. The table below sets out the essentials employers are expected to put in writing.

Beyond these, employers commonly add confidentiality and IP-assignment clauses and, where genuinely justified, a reasonable non-compete (Taiwan law only upholds post-employment non-competes that meet strict conditions, including compensation to the employee during the restricted period). Getting the mandatory items right at the outset avoids the most common source of disputes: ambiguity about what was actually agreed.

Are Work Rules required in Taiwan?

Yes, above a size threshold. An employer that ordinarily employs 30 or more workers must establish Work Rules, submit them to the local competent labour authority for approval, and publicly display them [VERIFY] the current threshold. Work Rules cover wages, working hours and rest, leave, discipline and grounds for dismissal, benefits and other core matters.

Work Rules matter beyond compliance: once approved and publicised, their terms bind the employment relationship, and an individual contract cannot undercut them. They must be kept consistent with the LSA and updated when the law changes. For a growing company, adopting clear Work Rules early — and aligning every individual contract to them — prevents the mismatches that so often trigger labour disputes.

Confirm the current employee-count threshold and the filing/approval procedure before deciding Work Rules are not needed [VERIFY]. A mismatch between an individual contract and approved Work Rules is a frequent and avoidable source of disputes.

Fixed-term vs indefinite: what contract types exist in Taiwan?

The Labor Standards Act draws a sharp line between fixed-term (definite) and indefinite (non-fixed-term) contracts, and the distinction is not a matter of free choice. Fixed-term contracts are only permitted for temporary, short-term, seasonal or specific work; work that is continuous or regular in nature must be on an indefinite contract. This is the opposite of a “default to fixed-term” approach and catches many foreign employers out.

Misclassifying an employee as an independent contractor to avoid labor insurance, National Health Insurance and the labor pension is equally risky — Taiwanese authorities look at the substance of the relationship (subordination, direction, integration), not the label. This mirrors the UAE choice between a MOHRE employment contract and a freelancer engagement, which our payroll team helps structure correctly.

What are the basic wage and working-hours rules in Taiwan?

Taiwan sets a statutory basic wage (minimum wage) that is reviewed annually and expressed as both a monthly figure and an hourly figure, now formalised under a dedicated Minimum Wage Act. Standard working time is 8 hours per day and 40 hours per week, organised around Taiwan’s “one fixed day off and one flexible rest day” weekly structure.

Because the monthly and hourly basic wage are adjusted every year, always confirm the current amounts with the Ministry of Labor before running payroll [VERIFY]. Overtime is tightly controlled: total daily working time including overtime is capped, and monthly overtime is limited (commonly 46 hours, extendable to a higher monthly cap within a three-month total if agreed through the proper labour-management or union process) [VERIFY]. Overtime carries premium pay — broadly an uplift for the first hours of overtime and a higher uplift beyond that, with still-higher rates for rest-day and holiday work [VERIFY] the exact multipliers.

How do labor insurance, NHI and the labor pension work in Taiwan?

Taiwan runs several parallel systems, and an employer must enrol staff in all the applicable ones. The core three are Labor Insurance (covering benefits such as injury, disability, maternity and old-age), National Health Insurance (NHI), and the Labor Pension — a defined-contribution scheme under which the employer must contribute at least 6% of the employee’s monthly wage to the employee’s individual pension account. Employment Insurance and occupational-accident coverage also apply. The employer also withholds personal income tax from salary.

Worked example: cost of a local hire

Assume an employee on a monthly wage of NT$50,000. On top of gross pay, the employer owes at least 6% to the labor pension (about NT$3,000 per month), plus its share of Labor Insurance, NHI and Employment Insurance premiums — together commonly adding a further meaningful percentage of the insured salary [VERIFY]. So an NT$50,000 wage might cost the employer on the order of NT$54,000–56,000+ [VERIFY] per month before bonuses, while the employee’s net is lower after their own premium shares and income tax. The exact figures depend on the insured-salary brackets and current rates and must be confirmed [VERIFY] — but the shape matters: budget the 6% pension plus employer insurance on top of gross.

What annual special leave and statutory leave apply in Taiwan?

Employees earn paid “special leave” (annual leave) that scales with length of service. Typical statutory entitlements are 3 days after six months, 7 days after one year, 10 days after two years, 14 days after three years, rising further with longer service up to a statutory maximum [VERIFY]. Employers must let employees schedule this leave and must pay wages for any special-leave days left untaken at year-end (or on departure).

Beyond special leave, employees are entitled to national holidays, statutory sick leave (with defined pay treatment), personal leave, and family-related leave such as marriage, bereavement, maternity, paternity and parental leave under the Act of Gender Equality in Employment [VERIFY] the current durations and pay. Because untaken special-leave days must be paid out, tracking leave accurately is a real payroll obligation, not an afterthought.

What notice period and severance pay apply in Taiwan?

Two obligations arise when an employer ends the contract on statutory business grounds. First, advance notice that scales with service; second, statutory severance pay. Both apply to lawful “business reason” terminations; a lawful dismissal for serious worker misconduct can be made without notice or severance.

The employer may pay wages in lieu of notice, and during the notice period the employee is entitled to paid time off to look for new work. On severance, the current labor-pension system generally gives half a month of average wage for each year of service, capped at six months of average wage in total; employees still covered by the old system may have more generous, uncapped terms [VERIFY].

Worked example: severance on business-ground termination

An employee with 6 years’ service and an average monthly wage of NT$50,000, under the current pension system, would receive roughly 0.5 month × 6 years = 3 months’ average wage ≈ NT$150,000 in severance — comfortably within the six-month cap. Add the required advance notice (30 days here) or pay in lieu. Because the exact average-wage basis and old-vs-new-system status change the result, compute it carefully [VERIFY] — but the takeaway is clear: severance and notice on a business-ground exit are real, quantifiable costs to plan for.

How do you terminate employment lawfully in Taiwan?

Taiwan does not permit arbitrary at-will dismissal. An employer may only terminate an indefinite contract on a statutory ground, and the ground determines whether notice and severance are owed. There are two broad routes: dismissal on “business reasons” (for example, business suspension or transfer, operating losses or contraction, a change in business nature requiring workforce reduction with no suitable alternative role, or the worker being demonstrably unable to perform the job) — which requires advance notice and severance; and dismissal for serious worker misconduct — which can be immediate, without notice or severance, but must be exercised within a short statutory window after the employer learns of the cause.

Certain protected periods restrict business-ground dismissal — for instance during an employee’s medical treatment for an occupational injury, or during maternity/childbirth leave. Because a dismissal on the wrong ground, without the required notice, or during a protected period can be found unlawful (exposing the employer to reinstatement and back pay), employers frequently prefer a negotiated, mutually-agreed separation to reduce risk. Whichever route is used, getting the ground, timing and procedure right is essential.

How does hiring a foreign employee in Taiwan differ?

A non-Taiwanese generally needs a work permit from the Ministry of Labor plus the appropriate visa and an Alien Resident Certificate (ARC) before working. For white-collar professionals, the employer typically applies for the work permit, and there are salary and qualification thresholds the role and candidate must meet. Taiwan also offers streamlined routes for sought-after talent, notably the Employment Gold Card, which combines work permit, residence and visa for qualifying professionals.

Work-permit categories, salary thresholds and Gold Card criteria are adjusted periodically, so treat any specific requirement as provisional until checked with the Ministry of Labor and the National Immigration Agency [VERIFY]. Foreign employees are generally enrolled in the applicable insurances and pay Taiwanese tax on Taiwan-sourced employment income, subject to any treaty relief. This contrasts with the UAE, where work authorisation runs through MOHRE (or the free-zone authority) and there is no personal income tax on salary — the subject of the comparison below.

Taiwan vs UAE: what changes when you hire in the Emirates?

Taiwan and the UAE are both attractive bases, so companies often build teams in both. But the compliance machinery is very different, and applying Taiwanese habits to a UAE hire (or vice versa) leaves gaps. If you employ people in the Emirates, our UAE payroll and WPS setup handles the local mechanics; here is what actually differs.

Three differences matter most day to day. First, the UAE has no personal income tax and no pension for expatriates, so there is no monthly PAYE withholding, no 6% pension contribution and no labor-insurance deduction on an expat salary — instead an end-of-service gratuity accrues and is paid on exit, and only UAE and GCC nationals join GPSSA. Second, UAE salaries must flow through WPS, a MOHRE-monitored transfer system, and non-compliance can block new work permits. Third, UAE dismissal, while regulated, is not confined to Taiwan’s narrow statutory grounds. On the corporate side, employers should also keep UAE corporate tax and, where turnover crosses the threshold, VAT in view. If you’re standing up a UAE entity to employ people, our company incorporation team and payroll specialists set the whole stack up correctly.

Common employment-contract mistakes to avoid in Taiwan

The disputes we see almost always trace back to a handful of avoidable drafting and process errors. Fixing these at the contract stage is far cheaper than a labour dispute later.

• Using a fixed-term contract for continuous work — it can convert to indefinite, bringing notice and severance obligations [VERIFY] the conversion rules.
• Contract that conflicts with approved Work Rules — the more protective standard wins; keep the individual contract and Work Rules consistent.
• Missing the 6% labor-pension contribution — it is mandatory on top of gross wage; under-contributing is a common and penalised error.
• Breaching overtime caps or premiums — monthly caps and the correct multipliers are enforced regardless of the contract [VERIFY].
• Dismissing without a statutory ground — Taiwan has no at-will dismissal; use the correct Article 11 or Article 12 basis and respect protected periods.
• Copy-pasting a foreign template — a UAE contract routed through WPS with a gratuity clause is not a Taiwan contract with Work Rules, the labor pension and statutory severance; use the right template for each jurisdiction.