2008 Benefits and Employment Terms. Taiwan. Watson Wyatt Data Services

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1 2008 Benefits and Employment Terms Watson Wyatt Data Services

2 Overview of Watson Wyatt Data Services Reports ASIA PACIFIC REPORTS Benefits Report Asia Pacific Employment Terms and Conditions Asia Pacific Asia Pacific Survey Report on Employee Benefits Car Policy Report Asia WorkAsia TM Benefits and Employment Terms by Country: Australia China Hong Kong India Indonesia Japan Korea Malaysia Philippines Singapore Thailand Vietnam Compensation Reports by Country: Australia Hong Kong India Indonesia Japan Korea Malaysia Philippines Singapore Thailand Vietnam Compensation Reports China: Local Chinese Nationals Western & Asian Expatriates Hong Kong Expatriates Director Remuneration & Corporate Governance An Analysis of Hong Kong and Mainland Companies Listed in Hong Kong Sales and Marketing Compensation Report Asia Pacific Foreign Sourced Employees Compensation and Benefit Policies Asia Pacific EUROPEAN AND NORTH AMERICAN REPORTS Global 50 Remuneration Planning Report Benefits Report Europe Employment Terms & Conditions Europe Benefits & Employment Terms Report By Country Company Car Report Europe Top Management Compensation Europe, Israel and USA Compensation Reports by Country: Argentina Austria Belgium Brazil Bulgaria Chile Colombia Costa Rica Croatia Czech Republic Denmark Dominican Republic EI Salvador Estonia Finland France Germany Greece Guatemala Honduras Hungary Ireland Israel Italy Kazakhstan Latvia Lithuania Luxembourg Mexico Netherlands Nicaragua Norway Panama Paraguay Peru Poland Portugal Puerto Rico Romania Russia Serbia and Montenegro Slovak Republic Slovenia Spain Sweden Switzerland Turkey Ukraine United Kingdom United States* Uruguay Venezuela * Focus reports by industry, job family and geographic location are also available. HR REFERENCE MANUALS Communications: Exhibit Book of Employee Opinion Surveys Exhibit Book of Employee Handbooks Exhibit Book of Compensation Communication Handbooks Exhibit Book of Benefit Communication Programs Exhibit Books of Position Descriptions Personnel Policies: Exhibit Books of Personnel Policies Exhibit Book of Alternative Work Arrangements Exhibit Book of Emergency Preparedness Protocols Exhibit Book of Expatriate Personnel Policies Exhibit Book of Employee Relocation Policies Exhibit Book of Employment Contracts and Severance Pay Programs Pay for Performance: Decision Maker s Guide to Salary Management The Complete Variable Pay Collection Manual of Sales Incentive Plans Exhibit Book of Annual Bonus Plans The Complete Long-Term Incentive Collection Exhibit Book of Employee Recognition Plans & Other Low Cost Reward Programs Exhibit Book of Performance Management Programs hrresource.watsonwyatt.com

3 Watson Wyatt Data Services Contact Us This report is produced by Watson Wyatt Data Services Asia Pacific, your gateway to human capital information resources. Serving clients worldwide, Watson Wyatt Data Services Asia Pacific is dedicated to producing timely and comprehensive reports on compensation, benefits and employment practices in the Asia Pacific region. We are always pleased to receive your questions, comments and suggestions concerning this report. Our colleagues who can give you a speedy reply are listed below. SINGAPORE Betty Chan Watson Wyatt Singapore Pte. Ltd. 135 Cecil Street #09 01 Singapore Tel: (65) Fax: (65) betty.chan@watsonwyatt.com HONG KONG Karen Nip Watson Wyatt Hong Kong Ltd 29/F., Sun Hung Kai Centre 30 Harbour Road Hong Kong Tel: (852) Fax: (852) karen.nip@watsonwyatt.com Josephine Chow Watson Wyatt & Company, Branch 5F, 205 Tun Hwa North Road Taipei 105, Republic of China Tel: (886) Fax: (886) / josephine.chow@watsonwyatt.com For more information concerning other regional reference reports and services, please contact us at the addresses listed on this page or refer to the Appendices section of this report for the Watson Wyatt office nearest to you. Alternatively, you could visit our website at License Agreement Copyright Wyatt Data Services, Inc. All Rights Reserved. This license agreement is entered into by and between Watson Wyatt Data Services ( WWDS ) and the Licensee. In consideration of the mutual covenants in this agreement WWDS and the licensee agree as follows: Grant of License. All WWDS publications contain the compilation of certain compensation data and materials provided to WWDS by its survey participants into analyzed and transformed information (the Transformed Data ). WWDS hereby grants the Licensee a nonexclusive, nontransferable, limited license to use the Transformed Data as permitted by this agreement. The license of any form of Transformed Data constitutes acceptance by the Licensee of the following terms and 2008 Benefits and Employment Terms iii

4 conditions: The Licensee has the right to manipulate and modify the Transformed Data and to reproduce and excerpt it in reports or memoranda created by the Licensee in the regular course of business. It may not distribute the Transformed Data for any other use. Any use of the Transformed Data that is included in any report or analysis for internal or external parties in the regular course of business must acknowledge the source of the Transformed Data as Watson Wyatt Data Services. Limitations on Use. Except as expressly provided in this Agreement, the Licensee may not, in any way or manner, reproduce, display, rent, lend or resell, relicense, commercially exploit, adapt, or redistribute in any fashion the Transformed Data. The Licensee must not permit public access to the Transformed Data. The Licensee shall not assign, sublicense, or otherwise transfer this license agreement without the prior written consent of WWDS. The Licensee may not use the Transformed Data in any form, the name of the Transformed Data reports or the name Watson Wyatt Data Services in any type of marketing or sales activities. Rights In Data. The Transformed Data is the confidential and proprietary information of WWDS and may not be reproduced, displayed, adapted, resold or distributed without WWDS s prior written consent. This License Agreement does not convey to the Licensee any proprietary or other ownership of the Transformed Data or the underlying compensation data. The Licensee acknowledges that WWDS and/or Watson Wyatt & Company own the underlying compensation data and Transformed Data including all copyrights, patents, trade secrets and other proprietary rights therein. Warranties Disclaimed. WWDS assumes no responsibility of any kind, oral or written, express or implied, including but not limited to, fitness for a particular purpose, accuracy, omissions, completeness, and currentness of information. WWDS shall in no event whatsoever be liable to licensee or any other party for any indirect, special, consequential, incidental, or similar damages, including damages for lost data or economic loss, even if WWDS or Watson Wyatt has been notified of the possibility of such loss. Some jurisdictions do not allow the exclusion or limitation of implied warranties or liability for incidental or consequential damages, in which case these provisions may not be fully applicable. This paragraph shall survive the termination of this license agreement. Term. This license agreement will have a term of 10 years. WWDS reserves the right to terminate this license agreement upon written notice to the Licensee if the Licensee breaches any of the terms of this Agreement. In addition, if WWDS, in its sole judgment, believes that the Transformed Data is being used for a purpose not approved by WWDS, that WWDSʹs rights are being jeopardized, or that the Licensee is in default under this agreement, WWDS may immediately terminate this agreement and the Licensee shall immediately return all Transformed Data, in whatever form, to WWDS. Governing Law. This License Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey. The Licensee hereby agrees that the United Nations Convention on Contracts for the International Sale of Goods shall not apply to any part of this license agreement. Entire Agreement. This License Agreement constitutes the entire understanding between the parties. This License Agreement supersedes any and all prior agreements, understandings, or other communications between the parties concerning the subject matter of this License Agreement. If any provision of this License Agreement is declared to be invalid, such provision shall be severed from this License Agreement and the other provisions hereof shall be in full force and effect Benefits and Employment Terms iv

5 TABLE OF CONTENTS About This Report...1 BENEFITS 1 Overview of Benefits Introduction New Developments Key Data Statutory Benefits Introduction Retirement Benefits Death Benefits Disability Benefits Worker s Compensation Healthcare Benefits Other Mandatory Employee Benefits Severance Payments Summary of Contributions Company Benefit Practice Overview Major Laws and Supervisory Bodies Funding Methods Customary Retirement Plan Structure Death and Disability Benefit Healthcare Benefits (Other Group Insurance Programs) Other Benefits Severance Payments Taxation of Benefits Contributions Benefits Taxable Income Comparison of Statutory Benefits and Company Benefits Retirement Benefits Death and Disability Benefits Worker s Compensation Healthcare Benefits Severance Payments Benefits and Employment Terms v

6 TABLE OF CONTENTS EMPLOYMENT TERMS 1 Overview Introduction New Developments Country Profile People and Population Government and Political Structure Economic and Business Environment Taxation Employment Law Legal Influence Hierarchy of Laws Employment Issues Contract of Employment Approval of Foreign Nationals Working Conditions Pay Working Hours Holidays and Leave Equal Opportunities Health and Safety Training Sickness and Disability, Pensions, and Life Assurance Secrecy, Patents, and Copyright Industrial Relations Bodies Involved With Industrial Relations Collective Bargaining Strikes and Other Industrial Actions Settlement and Mediation Proceedings Termination of Employment Change of Contract Types of Contracts Termination During Probation Types of Terminations Termination Benefits Unfair Dismissals Dismissals of Union Representatives Dismissals of Managerial Employees Collective Dismissals...93 Useful Addresses...94 Exchange Rates...95 Watson Wyatt in Asia Pacific Benefits and Employment Terms vi

7 ABOUT THIS REPORT 2008 Benefits and Employment Terms is divided into two main sections. The Benefits section sets out employee benefits law and practice covering retirement, death and disability, health care, social security benefits and severance pay. Supplementary retirement plan design, funding methods, market benefit practice and taxation of benefits are also included. The Employment Terms and Conditions section details employment law and practice covering contract of employment, working conditions, industrial relations and termination of employment. Benefits Overview of Benefits A discussion of the factors influencing the provision of statutory and company benefits, and a summary of new developments. Statutory Benefits A comprehensive review of mandatory benefits such as retirement, death, disability and medical schemes. Also included here are those company paid items mandated by law. Company Benefits Practice A detailed description of benefit practice among private employers with regard to retirement plan design, benefit amounts, contributions, vesting and portability and funding methods. The usual market practice of benefits and perquisites are also highlighted. Taxation of Benefits A quick reference guide to the taxation of benefits. Comparison of Statutory Benefits and Company Benefits A quick reference table comparing statutory and company retirement plans, death and disability benefits, worker s compensation, health care benefits, severance payments and perquisites. Employment Terms Overview and Country Profile A discussion of the demographics, political and economic environment of the country, factors influencing employment laws and a summary of new developments. Employment Law This section explains the legal basis for deciding matters related to employment conditions. Items covered here typically include the country s constitution, statutes, and royal or ministerial decrees. This is an especially useful section for readers who wish to know which sources of law are of increasing importance in the resolution of questions or disputes. Employment Issues The most significant aspects relating to the fundamental relationship between the employee and the employer are reported here. Key items covered include: definition of and conditions required for a valid contract, types of employees, and trial or probationary periods. This section also contains valuable information about work permits and visas Benefits and Employment Terms 1

8 ABOUT THIS REPORT Working Conditions This section covers laws pertaining to wages and salaries, working hours, holidays and leave, discrimination, occupational health and safety, training, sickness and disability benefits, pensions and life assurance, and patents and copyright. Industrial Relations The various labor councils and unions that are involved in or influence the country s industrial relations policies are discussed in this section. Also mentioned are the ramifications of collective bargaining that includes items which are legitimate matters of negotiation, the usual length of agreements, registration, interpretation and enforcement of agreement. The mechanisms of industrial relations, including the basic legal framework of strikes, lockouts, and other forms of employee or employer actions are also discussed. Termination of Employment This section addresses contract modification and suspension, individual termination, types of termination, severance pay and other termination indemnities, and collective and managerial dismissals. Also included are the various compensatory actions required or offered by employers in the event of wrongful dismissal and termination without notice. Appendix Contributors Useful Addresses Josephine Chow and Regina Chu Watson Wyatt josephine.chow@watsonwyatt.com regina.chu@watsonwyatt.com Tina Chen ( tchen@winklerpartners.com) is a senior paralegal who specializes in employment issues, work visas and immigration, as well as intellectual property and corporate matters including trademark enforcement and contracts. Lloyd Roberts ( lroberts@winklerpartners.com), Winkler Partners publications and promotions associate. Tina and Lloyd updated the chapter on with the help of a team of associates made up by Christine Chen, a senior associate who specializes in corporate, fair trade, labor issues and intellectual property law; Lewis Chen, Winkler Partners head librarian and legal researcher; Chih shan Lee, a senior associate who specializes in civil law, corporate law, anti trust issues, and securities law; Liu Yen ling, a senior associate who practices company law, securities law, labor law, and general civil and criminal law Benefits and Employment Terms 2

9 ABOUT THIS REPORT Also Available 2008 Benefits and Employment Terms by Country is available for 13 countries/locations in Asia Pacific. Clients who oversee the Asia Pacific region may wish to refer to the two reports mentioned below Benefits Report Asia Pacific provides employee benefit laws and practices for the 14 countries/locations in Asia Pacific, covering in detail topics such as retirement, death, disability, and medical schemes. Plan design, benefit amounts, funding methods and tax implications are also included Employment Terms and Conditions Asia Pacific sets out employment laws and practices for the same countries/locations (excluding Macau), covering in detail issues such as sources of law, start of employment, working conditions, industrial relations, termination of employment, residency requirements and many other topics. Contact Us It is always our pleasure to receive your comments, questions and suggestions concerning this report. For matters pertaining to a particular country, we suggest that you contact the respective Watson Wyatt office, as indicated in the end pages of this report. For all other matters, please contact Betty Chan in Singapore or Karen Nip in Hong Kong Benefits and Employment Terms 3

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11 BENEFITS TABLE OF CONTENTS 1 Overview of Benefits 1.1 Introduction 1.2 New Developments 1.3 Key Data 2 Statutory Benefits 2.1 Introduction 2.2 Retirement Benefits 2.3 Death Benefits 2.4 Disability Benefits 2.5 Worker s Compensation 2.6 Healthcare Benefits 2.7 Other Mandatory Employee Benefits 2.8 Severance Payments 2.9 Summary of Contributions 4 Taxation of Benefits 4.1 Contributions 4.2 Benefits 4.3 Taxable Income 5 Comparison of Statutory Benefits and Company Benefits 5.1 Retirement Benefits 5.2 Death and Disability Benefits 5.3 Worker s Compensation 5.4 Healthcare Benefits 5.5 Severance Payments 3 Company Benefit Practice 3.1 Overview 3.2 Major Laws and Supervisory Bodies 3.3 Funding Methods 3.4 Customary Retirement Plan Structure 3.5 Death and Disability Benefit 3.6 Healthcare Benefits (Other Group Insurance Programs) 3.7 Other Benefits 3.8 Severance Payments 2008 Benefits and Employment Terms 5

12 1 OVERVIEW OF BENEFITS 1.1 Introduction Under Social Security, an employee in is covered by two insurance programs, Labor Insurance (LI), including Employment Insurance (EI), and National Health Insurance (NHI). LI provides monetary compensation to workers in the case of nonoccupational and occupational illnesses or injuries, as well as disabilities, retirement, and death. Unemployment benefit is provided under EI. NHI provides non monetary medical care benefit coverage for both hospitalization and outpatient care, including dental and optical care. The NHI and LI (including EI) programs are two independent systems with different benefits, premium rates, insured salary caps, and administrative agencies. In addition to benefits covered by Social Security, private companies are stipulated by the Labor Standards Law and Labor Pension Act to provide other mandatory benefits to employees. Multinational companies typically provide benefits exceeding the local practice. In particular, additional coverage for life and accidental injury insurance, as well as medical benefits, is often provided. Several laws that set down statutory minimum provisions are the key determinants of the scope and amount of benefits to be provided to employees. The following are the seven main areas of legislation: (1) Labor Standards Law (2) Labor Pension Act (3) Labor Insurance Act (4) Employment Insurance Act (5) National Health Insurance Act (6) Gender Equality in Employment Law (7) Employee s Welfare Funds Act 1.2 New Developments The National Pension Act was promulgated on August 8, 2007 and will become effective October 1, Revision of the Labor Insurance Act has been scheduled and is awaiting legislative approval. The premium rate of Labor Insurance, including Employment Insurance, has been proposed to be increased to 7% from the current 6.5%. The premium rate of Employment Insurance has been proposed to be reduced from 1% to 0.5%. The minimum wage was increased from 15,840 NT dollars (TWD) to TWD17,280 effective July 1, See 2.1 See See See See Benefits and Employment Terms 6

13 OVERVIEW OF BENEFITS 1.2 New Developments Salary tables for Labor Insurance, the Labor Pension Act, and National Health Insurance have been revised following the increase in the minimum wage, effective July 1, A Labor Pension Fund Subcommittee has been formed under the Labor Pension Act. The employer paid occupational injury insurance premium under Labor Insurance has been amended and will become effective January 1, It ranges from 0.05% to 2.97%. The national holiday celebrating President Chiang Kai shek s birthday has been proposed to be removed. Parental leave allowance has been proposed under an amended provision of Employment Insurance. See 2.2.3, See See See See Key Data Population (millions) Unemployment rate 2 3.9% 3.9% 3.9% Consumer prices (% change per annum, average) 1 0.6% 1.1%* 1.4%* GDP (% real change per annum) 1 4.7% 4.3%* 4.4%* Marginal personal income tax rate % 40.0% 40.0% Compensation breakpoint for marginal personal income tax rate (effective July 1, 2007) 2 TWD3,720,000 TWD3,720,000 TWD3,720,000 * Estimates Sources: 1 Economist Intelligence Unit, July Taipei National Tax Administration, Ministry of Finance Benefits and Employment Terms 7

14 2 STATUTORY BENEFITS 2.1 Introduction Under social security, Labor Insurance (LI) covers retirement benefits, death payments, and worker s compensation due to non occupational and occupational illnesses, injuries, or disabilities. Employment Insurance (EI) covers the unemployment benefit. National Health Insurance (NHI) provides non cash medical care benefits coverage for both hospitalization and outpatient care, including dental and optical care. The LI and EI schemes, which are contributed to by employers, employees, and government, are independent systems with different administrative agencies. The National Pension Act, which will be effective October 1, 2008, was promulgated August 8, 2007 to ensure the basic insurances when employees become old and/or disabled, as well as the stability of the lives of their relatives, In addition to social security, private enterprises are required by the Labor Standards Law (LSL) and the Labor Pension Act (LPA) to provide mandatory benefits to employees. The LSL sets out the minimum requirements of employment benefits and conditions, such as retirement benefits, severance pay, leave of absence, and compensation for occupational disease and injury. The purpose of the LSL is to protect laborers /employees rights and interests, as well as to improve the social and economic development of the country. The LPA, which regulates a portable and defined contribution pension scheme, has been effective since July 1, 2005 and will eventually replace the LSL retirement scheme. Unlike plans under LI, the government does not contribute to the LSL and LPA Labor Insurance Act The Labor Insurance Act (LIA) was promulgated in It provides insurance coverage for non occupational and occupational illnesses or injuries, as well as for death, disabilities, and retirement. Employees between the ages of 15 and 60 and who are working for companies with five or more employees are required to participate in LI. This program provides the statutory base for the compulsory social security coverage of a large number of s workforce. The government has proposed extending LI coverage to all workers, regardless of the number of employees an employer has, in order to protect all employees. Amended provisions of the LIA are in the process of gaining legislative approval. The revised Act will also extend coverage to workers who have received old age benefit payments under LI and allow coverage up to the age of 65. Changing the payment option for the old age benefit from a lump sum payment to an annuity has also been discussed under the provisions. To improve the financing of LI, the Council of Labor Affairs has proposed changing the LI premium rate to 7% from the current 6.5%. This rate will comprise two parts: 6.5% is for LI and 0.5% is for Employment Insurance (see Employment Insurance Act) National Health Insurance Act NHI became effective on March 1, This mandatory system provides universal healthcare coverage to all people in. NHI provides family medical attention, including coverage for outpatient, inpatient, dental and maternity expenses preventative care, and sickness benefits Benefits and Employment Terms 8

15 STATUTORY BENEFITS 2.1 Introduction Labor Standards Law Labor Pension Act The LSL was promulgated in August Before May 1, 1997, it covered only 60% of industries, mainly in the areas of manufacturing, utilities, telecommunications, transportation, and mining. Coverage has been extended to almost all industries since the end of It is important to note that the retirement benefits required by the LSL are being replaced by the LPA. Since July 1, 2005, all businesses subject to the LSL are required to provide the new pension scheme under the LPA to all eligible employees. The LPA was promulgated on June 30, 2004 and came into effect on July 1, It was enacted to enhance employees standard of living after retirement, strengthening the relationships between employees and employers, and promoting social and economic development. All companies and employees covered by the LSL will be subject to the LPA, excluding employees whose pension funds shall be set aside in accordance with the Private School Law. The following individuals may voluntarily make contributions and claim for pension fund payments in accordance with this Act: domestic employees who are not subject to the LSL and have obtained their employers consent to contribute to the pension funds on their behalf employers who perform labor commissioned managers national employees who were subject to the LSL prior to July 1, 2005 and still work for the same business entity after that date may choose to remain subject to the pension mechanism under the LSL. Those employees also have the option of choosing between LSL or LPA pension schemes until July 1, However, once a national employee has opted to be subject to the LPA pension mechanism, he or she cannot revert to the pension mechanism under the LSL. His or her seniority prior to the enforcement of the LPA shall be maintained. However, if such employees leave their current employer and are re employed, they shall be subject to the pension mechanism under the LPA. Non national employees shall only be subject to the retirement plan under the LSL. After the inception of the LPA, some multinational companies provided a defined contribution top up plan to employees on top of the LPA retirement benefits. In summary, the LSL retirement regulations and LPA retirement regulations are as follows: Item Labor Standards Law (LSL) Labor Pension Act (LPA) Type of plan Defined benefit Defined contribution Employer contribution rate At least 2% of total payroll (applies only to employees hired before July 1, 2005) to the designated trust company, the Bank of. True cost is likely to differ from the minimum contribution rate and can only be appropriately estimated through actuarial valuation. No less than 6% of the employee s monthly wage with a maximum contribution salary of TWD150,000, subject to the Table of Monthly Wages and Contribution Rates in Labor Pension Act. Continue on next page 2008 Benefits and Employment Terms 9

16 STATUTORY BENEFITS 2.1 Introduction Item LSL LPA Cost sharing Full cost is borne by the employer. Employers minimum cost is targeted around 6% of employees salaries. The employee may make voluntary contributions of up to 6% of his or her salary, subject to a cap of TWD150,000 per month. Employee benefit 2 units* per year for the first 15 years of service; 1 unit per year for service after 15 years of service; Maximum of 45 units (at 30 years of service) (*unit = final monthly salary) Total amount accumulated in the employee s individual account plus investment return. Service credit Employer-dependent Portable Benefit type Lump sum If Individual Pension Fund Account Scheme is applied: lump sum or monthly payment, depending on years of service. Lump sum payment: age 60 with less than 15 years of LPA contribution service or death. Monthly payment: age 60 with more than 15 years of LPA contribution service. If Annuity Insurance Scheme is applied: annuity. Retirement eligibility Payment eligibility Voluntary retirement: at least age 55 with 15 years of service; or 25 years of service regardless of age. Mandatory retirement: upon reaching age 60; or disability that renders the employee incapable of performing work. Retirement eligibility or request for early retirement Same as LSL Age 60 Death Flexibility of funding Yes Yes, with minimum 6% Fund carrier Bank of Bureau of Labor Insurance Employment Insurance Act The Employment Insurance (EI) Act came into effect in January The main purpose of this Act is to enhance labor skills and facilitate the employment process. There are four allowances included in EI: unemployment allowance, advance employment subsidy, vocational training living allowance, and NHI premium subsidy Benefits and Employment Terms 10

17 STATUTORY BENEFITS 2.1 Introduction Under the amended provisions of EI, parental leave allowance is proposed to be provided and to be paid for up to six months at a rate of 40 50% of total average insured salary. 2.2 Retirement Benefits The major statutory systems that provide retirement benefits are the Labor Standards Law (LSL), Labor Insurance Act (LIA), Labor Pension Act (LPA), and National Pension Act (NPA), which will be effective October 1, LI coverage includes retirement, death, disability, unemployment benefits, and worker s compensation. Currently, an employee can receive benefits from two sources upon retirement if he or she works for a company covered by the LSL: the company must provide at least 45 months of full salary for 30 years of service under the LSL retirement plan; and Labor Insurance s (LI s) old age benefit provides up to 45 months of insured salary. Following the inception of the LPA in July 1, 2005, workers covered by the LSL may claim the retirement benefits set forth in the LPA, which requires an employer to contribute no less than 6% of the employee s monthly wages to a portable individual pension fund account Labor Insurance Eligibility LI provides retirement, unemployment, disability, and death benefits to cover ordinary risks as well as occupational risks (including work injury and occupational diseases) to workers in the 15 to 60 age group employed in organizations with five or more workers. Foreign workers are also covered under LI. An establishment cannot be withdrawn from coverage even if the number of employees or workers employed falls below five. Retirement Age Under LI, lump sum benefits are payable under any of the following conditions: when an insured male employee reaches age 60, or a female employee reaches age 55, provided he or she has accumulated at least one year of LI membership, when an employee with at least 15 years of LI membership reaches age 55, when an employee with at least 25 years of LI membership reaches age 50, when an insured employee has been in the plan for 25 consecutive years under the same insuring entity, and when an employee working for more than five years in certified dangerous conditions requiring physical labor reaches age 55. The retirement benefits of an insured employee who continues to work after age 60 are payable at age 65. The maximum amount cannot exceed 50 months insured salary even if he or she continues to work beyond age 65. Retirement Benefit Old age benefits (retirement benefits) under LI are calculated based on insured salary, currently capped at the ceiling of TWD43,900 per month. The insured salary ceiling was revised from TWD42,000 to TWD43,900 on July 1, 2006, and the minimum insured salary was revised from TWD15,840 to TWD17,280 on July 1, Benefits and Employment Terms 11

18 STATUTORY BENEFITS 2.2 Retirement Benefits The retirement benefit is a lump sum payment equal to one month s average insured salary per year of LI membership up to 15 years, plus two months average insured salary per year of LI membership beyond 15 years, up to a maximum payment of 45 months average insured salary. Average insured salary is defined as the average monthly insured salary over the last three years of LI coverage. An LI coverage of less than six months is counted as zero, but coverage of six months or more is counted as one full year. Contribution LI premiums are expressed as a percentage of the insured worker s monthly insurance salary up to a current monthly maximum of TWD43,900. (The minimum monthly insured salary is TWD17,280.) The LI premium rates are of two types: non work related accident and work related accident. For the first, the contribution is equal to 5.5% of the insured person s monthly insured salary, with 70% of it paid by the employer, 20% by the employee, and 10% by the government. Occupational injury insurance premium rates vary, ranging from 0.06% to 3% of the insured person s monthly insurance salary, as stipulated in the Table of Categories of Occupations and Premium Rates Applicable for Occupational Injury Insurance, which is only paid by the employer (implemented as of January 1, 2005 and adjusted at least once every three years). The new occupational injury insurance premium will take effect beginning January 1, 2008, and will range from 0.05% to 2.97% Labor Standards Law The LSL stipulates the minimum statutory standards on employment terms and conditions. It includes a defined benefit retirement scheme and compensation for occupational deaths, injuries, and disabilities. Retirement Age Under the LSL, an employee retires under the following conditions: Mandatory retirement: upon reaching age 60, or when he or she is mentally or physically disabled and unable to perform his or her duties. Voluntary retirement: when he or she is aged 55 or above with 15 or more years of service, or when he or she has 25 or more years of service. Retirement Benefits LSL retirement benefits are in the form of a lump sum payment, covering both local and foreign employees. This benefit is equal to two months of average earnings for each year of service up to 15 years of service, and to one month of average earnings for each year of service beyond the 15th year, with a maximum benefit of 45 months average earnings. The aforementioned year(s) of service refers to the service years covered under the LSL retirement plan. For this purpose, average earnings is defined as the average monthly full salary, including all regular remuneration over the last six months of employment. A fractional year of service of less than six months is counted as half a year, but as one full year for six months of service or more. Contribution Companies are mandated to make a minimum 2% contribution of the company s total payroll (only applied to employees hired before July 1, 2005) to its pension fund 2008 Benefits and Employment Terms 12

19 STATUTORY BENEFITS 2.2 Retirement Benefits account in the Bank of China (BOT, and formerly known as Central Trust of China) for LSL pension liability. The actual cost is subject to the number, salary, seniority, and turnover rate of a company s employees. Additional pension contribution has to be made over a period of five years from July 1, 2005 such that the company s pension fund in the BOT is sufficient to cover such employees pension liabilities Labor Pension Act The LSL sets forth the employer s obligation of providing retirement benefits to employees. However, the eligibility for the benefit is too stringent. The government therefore proposed to stipulate a portable pension system, the LPA, for new employees who are not likely to receive the LSL retirement benefit entitlement. Eligibility national employees who were subject to the LSL prior to July 1, 2005 and still work for the same business entity after this date may choose to remain subject to the pension mechanism under the LSL. Those employees also have the option until July 1, 2010 of choosing between LSL or LPA pension schemes. However, once a national employee becomes subject to the LPA pension mechanism, he or she cannot revert to the pension mechanism under the LSL. Their seniority prior to the enforcement of the LPA shall be maintained. However, if they leave their current employer and are re employed, they shall be subject to the pension mechanism under the LPA. Foreign (non national) employees are not eligible for this program and are subject to the LSL retirement plan. Retirement Age Those who are subject to the LPA may claim pension payments if they meet the following criteria: Age 60 and above with 15 or more LPA contribution years: entitled to monthly pension payments; and each installment is calculated based on the annuity life chart, average life expectancy, interest rate, and other factors. Age 60 and above, but with less than 15 LPA contribution years: entitled to a lump sum pension payment; and the principal and accrued return are claimed in full at one time. Retirement Benefits Under the LPA, there are two schemes to choose from: the Individual Account Scheme and the Private Annuity Insurance Scheme. An employer with over 200 employees may purchase annuity insurance according to the Insurance Law in lieu of contributing to any labor pension fund, provided that the employer obtains the consent of a labor union or of over half of its employees. If less than half of the employees decide to participate in the annuity insurance scheme, it shall not be implemented. Currently, the Individual Account Scheme is under the government s custody, which guarantees a minimum investment return at a two year time deposit rate. A Labor Pension Fund Subcommittee was formed on July 1, 2007 to monitor the capital gain of pension funds under the LPA. In the event that the fund has a lower return, the government Treasury will make up the difference. Contribution The Bureau of Labor Insurance also takes charge of the collection, payment, and custody of the Labor Pension Fund. Employers subject to the LPA are required to contribute to the employees individual accounts at the Bureau on a monthly basis Benefits and Employment Terms 13

20 STATUTORY BENEFITS 2.2 Retirement Benefits The rate of contribution shall not be less than 6% of the employee s monthly salary (see the Table of Monthly Wages and Contribution Rates, below). The maximum monthly salary from which the contribution is calculated is currently set at TWD150,000. (The minimum is TWD1,500.) The LPA also allows an employee to voluntarily contribute up to 6% of his or her monthly salary. Table of Monthly Wages and Contribution Rates Actual Monthly Salary (TWD) Amount for Contribution Computation (TWD) Actual Monthly Salary (TWD) Amount for Contribution Computation (TWD) Below and equal to 1,500 1,500 38,201 40,100 40,100 1,501 3,000 3,000 40,101 42,000 42,000 3,001 4,500 4,500 42,001 43,900 43,900 4,501 6,000 6,000 43,901 45,800 45,800 6,001 7,500 7,500 45,801 48,200 48,200 7,501 8,700 8,700 48,201 50,600 50,600 8,701 9,900 9,900 50,601 53,000 53,000 9,901 11,100 11,100 53,001 55,400 55,400 11,101 12,105 12,105 55,401 57,800 57,800 12,106 12,300 12,300 57,801 60,800 60,800 12,301 13,500 13,500 60,801 63,800 63,800 13,501 15,840 15,840 63,801 66,800 66,800 15,841 16,500 16,500 66,801 69,800 69,800 16,501 17,280 17,280 69,801 72,800 72,800 17,281 17,400 17,400 72,801 76,500 76,500 17,401 18,300 18,300 76,501 80,200 80,200 18,301 19,200 19,200 80,201 83,900 83,900 19,201 20,100 20,100 83,901 87,600 87,600 20,101 21,000 21,000 87,601 92,100 92,100 21,001 21,900 21,900 92,101 96,600 96,600 21,901 22,800 22,800 96, , ,100 22,801 24,000 24, , , ,600 24,001 25,200 25, , , ,100 25,201 26,400 26, , , ,500 26,401 27,600 27, , , ,900 27,601 28,800 28, , , ,300 28,801 30,300 30, , , ,700 30,301 31,800 31, , , ,100 31,801 33,300 33, , , ,500 33,301 34,800 34, , , ,900 34,801 36,300 36, ,907 and above 150,000 36,301 38,200 38, Benefits and Employment Terms 14

21 STATUTORY BENEFITS 2.2 Retirement Benefits New Pension Rule for Public Employees Retirement Benefits In an effort to narrow the gap between retirement benefits for the civil service and private sectors, a new rule caps pension and retirement benefits at 85% of monthly salary for all civil servants, teachers, and military personnel with up to 25 years of service. In addition to the 85% rule for those with up to 25 years of service, the new rule stipulates that civil servants with years of service will be entitled to 85% of their final salary plus an additional 1% for every year of service above 25 years. Those with more than 35 years of service will be entitled to 95% of their final salary. The cap for civil servants who fall between grades 12 and 14 starts at 75% of final salary for up to 25 years of service, plus an additional 0.5% for every year of service above 25 years. Those with more than 35 years of service will be entitled to 80% of their final salary. The Examination Yuan, the body responsible for the examination, employment, and management of civil service personnel, announced the new rule, which became effective on February 16, Death Benefits There are no death or survivor benefits regulated under the Labor Standards Law. The Labor Pension Act s individual account (as long as there is an outstanding balance in the account) will be payable upon the employee s death to the employee s beneficiary, who are either legal dependents according to the priority list as per the law, or an appointed beneficiary Survivor Benefits As provided by the Labor Insurance Act, survivor benefits for an employee s spouse, children, father, mother, or a dependent grandchild, brother(s), or sister(s) are 10 months of average monthly insured salary if the employee s accumulated Labor Insurance coverage is less than one full year, 20 months if the coverage is more than one full year but less than two full years, or 30 months if the coverage is more than two full years. 2.4 Disability Benefits Eligibility An insured person who has received medical treatment covered under the National Health Insurance (NHI) for at least one year, who has not recovered from the physical handicap, and who is diagnosed by an NHI hospital as being incurable may claim benefits in one lump sum payment based on his or her average monthly insured salary Benefit Amount Long Term Disability Long term disability benefits are available to employees who, following a nonoccupational injury or illness, are diagnosed in an NHI hospital as being permanently disabled. The benefit level will vary with the degree of disability. After the abovementioned short term disability benefit stops, an individual who continues to be disabled will be entitled to a lump sum payment, the amount of which varies from 30 days to 1,200 days of an insured s average salary, depending on the degree of disability. For this purpose, salary is averaged over the six months preceding disablement Benefits and Employment Terms 15

22 STATUTORY BENEFITS 2.4 Disability Benefits Sickness Benefit/Short Term Disability After salary continuation payment by an employer ceases, an employee is entitled to receive cash sickness benefits from the Labor Insurance scheme. These benefits, at the earliest, commence from the fourth day of work incapacity. The cash sickness benefit is equal to 50% of the employee s average monthly covered earnings. For this purpose, salary is averaged over the six months preceding the illness or accident. The benefit is paid for a maximum period of six months. In case the employee has at least one full year of insurance coverage prior to commencement of the injury or sickness, such benefits shall be payable for an additional six months. 2.5 Worker s Compensation The employer is required to pay the following in the event of an employee s occupational death, disability, injury, or sickness: full cost of medical treatment, full salary during his or her absence from work, and death benefit. The Bureau of Labor Insurance is required to pay the following in the event of an employee s occupational death, disability, injury, or sickness: full salary during his or her absence from work, disability benefits based on the disability benefit schedule listed in the Labor Insurance Act, and death benefit. The benefit payments due to occupational death under the Labor Standards Law (LSL) listed above can be offset by applicable benefits under Labor Insurance (LI) (see further below) Death Benefits Under the LI, in case an insured employee dies from an occupational injury or sickness, the Bureau of Labor Insurance shall pay a funeral grant equal to five months of an employee s insured salary, as well as a lump sum survivor benefit that is equal to 40 times an employee s insured salary. In case there is more than one eligible survivor, the lump sum benefit will be equally split between them. Under the LSL, in the event that an employee dies from an occupational injury or sickness, an employer shall pay a funeral grant equal to five months of the employee s average monthly salary, as well as a lump sum survivor benefit that is equal to 40 times the employee s average monthly salary. The formula is the same with LI, except that the salary definition differs. Impact on Benefits from Labor Insurance Death benefits paid by the employer due to occupational death under the LSL requirement listed above can be offset by death benefits paid by the Bureau of Labor Insurance Benefits and Employment Terms 16

23 STATUTORY BENEFITS 2.5 Worker s Compensation Disability Benefits Under LI, in the event of a temporary disability following a work accident or an occupational disease, an insured employee will be entitled to a temporary disability payment equal to 70% of his or her insured salary. For this purpose, insured salary is averaged over the period of six months preceding the disability. In the event that the employee does not recover from the illness or injury after one full year, the payment level is reduced to 50% of his or her insured salary for a maximum period of one year. In the event of a permanent disability following a work accident or an occupational disease, an insured employee will be entitled, after expiration of the benefits as mentioned in the previous paragraph, to a lump sum benefit of between 45 and 1,800 days of his or her insured salary, depending on the degree of disability. Contribution A new employer paid occupational injury insurance premium under LI will take effect from January 1, 2008, which ranges from 0.05% to 2.97%. Under the LSL, in the event of a temporary disability following a work accident or an occupational disease, an employee will be entitled to have his or her medical expenses paid by the employer. During the period of disability, the employer is required to pay the full amount of the employee s salary. But if after two years of medical treatment the employee has lost his or her original ability to work, the employer may pay him or her a lump sum allowance of 40 months of the employee s average salary and be exempted from further responsibilities of wage compensation. Impact on Benefits from Labor Insurance Wage compensation paid by an employer due to occupational injury or sickness under the LSL requirement listed above can be offset by a disability payment paid by the Bureau of Labor Insurance. 2.6 Healthcare Benefits National Health Insurance s medical and sickness benefits are provided under the National Health Insurance (NHI) and Labor Insurance. Eligibility The NHI Act covers all employees, including foreigners with an Alien Resident Certificate. It also covers government employees, teachers, the self employed, alien seamen, farmers, fishermen, veterans, military dependents, and the heads of low income households. nationals are covered if they have maintained a registered household in for four months or more. Coverage also includes dependents of those insured under NHI. NHI defines dependents of Group 1 (who are mostly employees) as unemployed spouse of the insured; unemployed lineal blood ascendants of the insured (i.e., grandparents or parents); or lineal blood descendants of the insured within the second degree of relationship who are under 20 years of age and unemployed, over 20 years of age but are 2008 Benefits and Employment Terms 17

24 STATUTORY BENEFITS 2.6 Healthcare Benefits incapable of making a living, or are in school without employment (i.e., children or grandchildren). For members of Group 1, group insurance applicants are the agencies, schools, enterprises, institutions, or employers they work for; or unions where they hold membership (Article 14, Paragraph 1). The insuring entity files an insurance application within three days after the employee meets all requirements; the insuring entity reports insurance suspension within three days after the cause for suspension arises (Article 16). The insurer is the Central Health Insurance Bureau. Insurance medical service institutes include the following (Article 55): contracted hospitals and clinics, contracted drug stores, other contracted medical service institutes designated by the regulatory authorities, and insurer appointed medical laboratory institutes. Outpatient and Emergency Care The insured and dependents shall pay 20% of outpatient or emergency care expenses. According to Article 33, if outpatient care is received directly without referral, the following rates apply: 30% at a district hospital, 40% at a regional hospital, and 50% at a medical center. The regulatory authorities have the power to adjust fees annually if needed. Hospitalization The insured and dependents will pay as follows: At an emergency ward: 10% for the first 30 days, 20% from the 31st to the 60th day, and 30% from the 61st day onward. At a chronic care ward: 5% for the first 30 days, 10% from the 31st to the 90th day, 20% from the 91st to the 180th day, and 30% from the 181st day onward (Article 35). For hospitalization in an emergency ward for 30 days or less, or in a chronic ward for less than 180 days, the regulatory authorities will determine the maximum amount to be paid by the insured. According to Article 36, no contribution is required from the insured or dependents for hospital, emergency, or outpatient care under the following conditions: major diseases or injury as defined by the regulatory authorities, confinement at childbirth, and preventative healthcare as provided by NHI (Article 32). Delivery and dispensing of medicine by a physician shall be handled in accordance with Article 102 of the Pharmaceutical Affairs Law (Article 31) Benefits and Employment Terms 18