Payroll in Taiwan

Payroll Process in Taiwan

To plan and manage payroll, you need to set up shop in Taiwan, as elsewhere.

For that, the three-phased payroll process — global and standardized — is a first step in making payroll a part of your business routine.

Pre-payroll Phase

This phase covers basic areas you need as a business not only to plan and manage payroll but also to formally define your activities as a licensed and legal entity. To become a legal business entity operating in Taiwan, you as an international employer need to follow some steps.  

Business Profile

This is an essential first step to defining yourself, legally and formally, as a business entity. That is, you register your new (or established elsewhere but new in Taiwan) entity by getting a number or code to identify your business for a wide range of regulatory, compliance, and communication purposes.

Work Location

Having established your legal presence, you also need to define your exact business address and subsidiaries to develop the area- or region-specific payroll-related policies along with regulatory and compliance purposes.  

Leave Policy

Leaves are part of work. That is, for whatever reasons — sickness, parental, education-related, etc. — employees are entitled to statutory leaves mandated by law. Additionally, employees could also enjoy additional leaves as perks or as a part of flexible work arrangements.

You need to ensure development of clear leave policies company-wide to avoid any staff mismanagement or worse, compliance misshapes. This would ensure hastle-free performance-monitoring and payroll calculation.

Attendance Policy

Like leaves, attendance is required for monitoring employee performance and payroll calculation. Nowadays, companies are increasingly using biometric devices to register attendance. Irrespective of the method, manual or biometrics, ensure you develop a solid and clear attendance policy to keep a tab on changes in payroll calculation and for later compliance requirements.  

Statutory Components

In Taiwan, you, as an international employer, not only need to be aware of payroll specifics in Labor Standards Act — which provides for labor relations and working conditions — but also be particularly vigilant to such crucial regulatory requirements as payroll taxes in Taiwan.

For that, you need to identify basic statutory payroll components — minimum compensation, social insurance, benefits, withholdings, deductibles, etc. — so that you can stay compliant with any mandated corporate and personal income taxes.

Salary Components

These include basic statutory components such as minimum compensation, social security, withholding or deductions for national funds, national emergency contributions, and benefits.

Additionally, you, as a smart-hiring international employer, could go above and beyond to make your brand attractive not only to prospective and existing employees but also to regulatory entities (by getting, say, tax exemptions).

Pay Schedule

Salary or wage payments are usually done on an hourly, weekly, or monthly basis. To comply with in-country labor laws and regulations, you should pay your different employee classes according to the mandated payment schedules.  

Employee Information

The payroll process involves a wide range of data-collection activities such as employee information collection including (employee name, department, subsidiary, role, and nationality). The information you collect about employees is not only important for processing payments but also for later compliance and reporting purposes.  

Payroll Calculation Phase

This is where you start your first steps to prepare your records for later compliance and reporting purposes.

Calculating payroll may be done manually (i.e., paper-based), in-house (using special software), or by outsourcing calculation (or possibly more payroll management components) to one or more payroll services in Taiwan. Irrespective of the method, you need to correctly and compliantly calculate your payroll.  

Post-payroll Phase

This phase is where you close out the payroll process. Done correctly and compliantly, you're all set as an international employer to operate penalty-free.

To close out your payroll process, you need to cover the following areas.

Salary Payments

This involves paying your employees or independent contractors set salaries or wages according to pre-determined payment schedules. You could use a corporate account into which deposits are made or outsource the payment process using a payroll service.

Payroll Accounting

Having paid salaries or wages, now you move on to accounting amounts in the payroll process.

For this, you as an employer should account all statutory payroll components — such as compensation, social security, and withholdings — and also any additional costs you incur processing payroll.

In case you opt for a payroll outsourcing solution, mind payroll costs in Taiwan to stay on budget and not make payroll outsourcing a challenge, not solution.

Payroll Reporting and Compliance

This final step is the most important in your payroll management journey.

Here, you should move on to filling in and reporting all required tax forms by mandated deadlines. You could keep a tab on all required forms and deadlines using an in-house legal team, although expensive and consuming.

You could reach out to us at Skuad to make payroll compliance a seamless and smooth routine.

Payroll Processing in Taiwan

The payroll processing process in Taiwan requires informed knowledge about in-country's payroll requirements, general labor law, regulations, and policies. In practice, most companies — depending on budget and market expansion intent — may opt for in-house legal expertise or outsource payroll processing end-to-end. In either case, always keep a vigilant eye on payroll tax in Taiwan while managing your payroll requirements.

Payroll Processing Company in Taiwan

You don't have to look further or wonder where to start and complete your payroll process from start to finish. At Skuad, we provide you with turnkey payroll solutions backed up with extensive in-country legal expertise. Drop us a line and all your payroll questions would get answered.

Payroll Management in Taiwan

Managing payroll in Taiwan, as elsewhere, has one major ultimate purpose: compliance.

So, all payroll management activities you perform as an international employer must comply with in-country tax laws and labor regulations in general.

The following is a non-exhaustive list of compliance considerations you must account for while managing payroll in Taiwan:

• Liability for Taiwanese tax based on residence status and duration
• A flat tax rate for non-residents at 18% of gross salary income
• Progressive tax rate for residents between 5%-40% of gross salary income
• Special requirements for work permits and visas of high-skilled workers

Payroll Compliance in Taiwan

Compliance is a big issue in any employment arrangement.

In Taiwan, failing to comply subjects employers to a wide range of tax penalties including but not limited to

• TWD (New Taiwan Dollar) $10,000,000 — for tax evasion
• TWD 60,000 — on tax collection agents for failure to report, under-report, under-collect, or withhold any tax
• TWD 3,000-TWD $7,500 — for failure to set up required bank accounts or enter required tax entries

TWD 3,000-TWD $30,000— for refusal to be subjected to a tax investigation

Payroll Components in Taiwan

Taiwan's Labor Standards Act provides for many labor- and payroll-related relations and requirements between employers and employees.

For current purposes, here is what matters most to you as basic statutory employee rights in Taiwan:

Compensation

• Set at a minimum of  TWD 24,000 per month and TWD 160 per hour as of January 1st,  2021

Working Hours

• Set at a maximum of 40 hours per week and eight hours per day
• Cannot exceed 12 hours per day
• Cannot exceed 46 hours of overtime work per month

Overtime Laws

Overtime work and pay are calculated as multiples of regular hourly payment under Taiwan's labor laws as follows:

• 2 hours — 1.34
• 2-4 hours — 1.67
• 8-12 hours — 2.67

Social Security

Shared as contributions from base salary or wage between employers, employees, and government as follows:

Employers

• National health insurance — 60%
• Labor insurance — 70%
• Employment service insurance — 70%
• Labor pension — 6%, capped at TWD 150,000 annually

Employees

• National health insurance — 30%
• Labor insurance — 20%
• Employment service insurance — 20%

Government

• National health insurance — 10%
• Labor insurance — 10%
• Employment service insurance — 10%

Sick Leave

Paid in full

• Up to 30 minimum days of non-hospitalized leave per two years
• Up to one year within a two-year period of hospitalized leave

Parental Leave

Taiwan has been extending parental leaves for working employees in more recent years to include

• A minimum of unpaid six months — for child-raising purposes
• From five to seven days of paid leave — for pregnant women to do prenatal health checks
• From five to seven days of paid leave — for husbands of pregnant women to accompany partners on prenatal appointments
• Six months to two years of unpaid leave — to employees, male or female, for childcare until a child is three years old

Public Holidays

December 31st, 2021 – January 2nd, 2022 — New Year's Day & Republic Day

January 19th – February 6th, 2022 — Chinese New Year

February 28th, 2022 — Peace Memorial Day

April 4th, 2022 — Children’s Day

April 5th, 2022 — Qing Ming Festival

May 1st – 2nd, 2022 — Labor Day

June 3rd – 5th, 2022 — Dragon Boat Festival

September 9th – 11th, 2022 — Mid-Autumn Festival

October 8th – 10th, 2022 — 10/10 Holiday

December 31st, 2022 — January 2nd, 2023 — Republic Day Holiday

Payroll Taxes

These are levied as a percentage of gross salary income for any Taiwan-source income as follows:

• 5%-40% — for all native Taiwanese, depending on salary amount and profession  
• 18% — for foreign workers residing in Taiwan for less than 183 days
• 6% — for foreign workers residing in Taiwan for less than 183 days but whose monthly salaries are less than TWD 36,000

Other Laws

In addition to Taiwan's Labor Standards act, some more important laws or regulations provide for and regulate labor relations in Taiwan (non-exhaustive):

• Regulations for Implementing Unpaid Parental Leave for Raising Children (enacted under Paragraph 5 of Article 16 of the Gender Equality in Employment Act)
• The Act to Promote the Employment of Middle-aged and Senior Workers
• Employment Service Act of 1992
• The Act for the Recruitment and Employment of Foreign Professionals of 2018

Taiwan: Final Takeaways

The openness Taiwan shows to international markets is reflected in local employment laws and regulations. This opportunity, any international employer like you should mind, comes at a cost not all employers can afford. Certainly, you may not be inclined to switch your attention — and resources — only to manage payroll in Taiwan.

So, let us at Skuad handle all your payroll needs in Taiwan and focus on what matters most to you as a growing business.

TWD exchange rate against USD is 0.034.