Hiring in Taiwan: Employment Laws & EOR Guide 2026

Taiwan is home to the world's leading semiconductor industry and a deep pool of engineering, manufacturing, and technology talent.  

This guide walks you through everything you need to know to hire compliantly in Taiwan, from employment contracts and payroll to leave entitlements and termination rules.

Overview

Employment in Taiwan is governed primarily by the Labor Standards Act (LSA), which sets minimum standards for wages, working hours, leave, and termination.

What to watch out for:

• Taiwan does not allow at-will employment. You need a statutory ground to dismiss an employee, and most dismissals require advance notice and severance pay.

• Employer social contributions typically add roughly 14% to 19% on top of gross salary, depending on salary level and contribution caps, plus a 2.11% supplementary health premium on bonuses and other pay above insured salary.

• The minimum wage rises every year. Taiwan has increased its minimum wage for ten consecutive years. Budget for annual increases of roughly 3% to 4%.

• Hiring employees in Taiwan requires a registered local entity or branch. Companies without one typically use an Employer of Record (EOR).

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Employment Contracts

Taiwanese law recognizes two types of employment contracts: indefinite-term and fixed-term. Indefinite-term contracts are the default and the strong legal presumption.

1. Indefinite-Term Contracts

Any work that is 'continuous' in nature must be covered by an indefinite-term contract. In practice, this covers almost all ongoing roles, including standard office, engineering, sales, and management positions.

1. Fixed-Term Contracts

Fixed-term contracts are only permitted for work that is genuinely temporary, short-term, seasonal, or tied to a specific project. You cannot use a fixed-term contract simply to avoid termination protections.  

If a fixed-term employee keeps working after the term expires without objection from the employer, or is rehired within 30 days with combined service exceeding 90 days, the contract is treated as indefinite by law.

What to Include in a Contract

Written contracts are not strictly mandatory for indefinite employment, but they are standard practice and strongly recommended. A compliant contract should cover:

1. Job title, duties, and work location

1. Salary, payment date, and payment method

1. Working hours, rest days, and leave

1. Contract term (if fixed-term) and probation arrangements

1. Termination, severance, and notice provisions

1. Confidentiality and, where used, non-compete terms
   

Contracts can be in English, but a Chinese version is advisable since Chinese-language documents prevail in local disputes and are expected by authorities.

Probation Periods

The LSA does not regulate probation, but probation periods are widely used and recognized by courts. A period of up to three months is standard.  

Important: employees on probation still receive full statutory protections, including social insurance enrollment from day one, and dismissal during probation still requires a legitimate reason, notice (after three months of service), and severance where applicable.

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Working Hours and Overtime

1. Standard hours: 8 hours per day, 40 hours per week.

1. Rest structure: In every 7-day period, employees must receive one mandatory day off (regular leave) and one rest day.

1. Overtime cap: Regular hours plus overtime cannot exceed 12 hours per day. Overtime is capped at 46 hours per month, extendable to 54 hours per month (within 138 hours per 3 months) with union or labor-management meeting consent.

Overtime Pay Rates

Overtime on a normal working day is paid as follows:

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Rest day work is expensive. Employees must receive premium pay, with rates increasing the longer they work:

• First 2 hours: 134% of normal pay  

• Hours 3–8: 167% of normal pay  

• Hours 9–12: 267% of normal pay  

Work on a mandatory day off or public holiday is usually allowed only in limited situations and generally requires an additional day's pay plus compensatory arrangements.

Employees may agree to convert overtime pay into compensatory time off, but the choice belongs to the employee and unused compensatory leave must be paid out.

Flexible Working Hour Schemes

Industries designated by the Ministry of Labor can adopt 2-week, 4-week, or 8-week flexible working hour arrangements that redistribute hours across the reference period, subject to union or labor-management consent.  

If you plan to use flexible scheduling, confirm your industry is on the approved list first.

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Minimum Wage

1. Monthly minimum wage: NT$29,500 (effective January 1, 2026)

1. Hourly minimum wage: NT$196 (effective January 1, 2026)

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The 2026 adjustment is a 3.18% increase over 2025 and marks the tenth consecutive annual increase. The minimum wage is reviewed every year by the Minimum Wage Deliberation Committee under the Minimum Wage Act, and the government has signaled an intent to push the monthly rate above NT$30,000.  

The monthly rate applies to full-time employees, and the hourly rate applies to part-time workers. Keep in mind that minimum wage increases also raise employer contributions for labor insurance, health insurance, and pensions, making the overall cost increase higher than the wage adjustment itself.

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Payroll and Taxes

Pay frequency: Wages must be paid at least twice a month unless the parties agree otherwise. Monthly payroll is the market norm by agreement, with salaries typically paid between the 25th and end of the month, or by the 5th of the following month, by bank transfer.

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Currency: Salaries are paid in New Taiwan Dollars.

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Payslips: Employers must provide itemized wage statements showing gross pay, deductions, and net pay.

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13th month salary: Not legally required, but a year-end bonus (commonly one to two months' salary paid before Lunar New Year) is a deeply rooted market expectation, especially in technology and finance.

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Income Tax for Residents

Employees who stay in Taiwan for 183 days or more in a calendar year are tax residents and pay progressive income tax. For income earned in 2026, the brackets are:

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Tax rates apply after generous exemptions and deductions. For 2026, a single resident employee can generally claim:

• A personal exemption of NT$101,000  

• A standard deduction of NT$136,000  

• A special salary deduction of NT$227,000  

Employers withhold income tax through payroll each month, while employees file their annual tax returns between May 1 and June 30 of the following year.

Income Tax for Non-Residents

Foreign employees who stay fewer than 183 days in a calendar year are non-residents and are taxed at a flat 18% on salary income, withheld at source, with no deductions.  

A reduced 6% withholding rate applies to employees earning no more than 1.5 times the monthly minimum wage (NT$44,250 in 2026). Employees become resident taxpayers once they have spent 183 days or more in Taiwan during the year.

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Social Security Contributions

Employers in Taiwan contribute to six statutory programs, plus a supplementary health premium on certain pay.  

Contributions are based on government-set salary brackets rather than an employee's exact salary. Each program also has its own maximum contribution threshold.

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In addition to regular NHI contributions, employers must pay a supplementary premium on certain payroll amounts. Employees may also owe supplementary premiums on large bonuses. Because bonuses are common in Taiwan, this is one of the most frequently missed payroll costs.

Moreover, not all foreign employees are covered by the standard labor pension system. Eligibility depends on factors such as residency and immigration status.

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Leave Entitlements

Annual Leave

Paid annual leave accrues with seniority under the LSA:

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Unused annual leave must be paid out at year-end or, by agreement, carried forward one year and then paid out if still unused. Employees choose when to take their leave, though timing can be negotiated for business needs.

Public Holidays

Taiwan observes national public holidays announced by the government each year, including Lunar New Year (the longest break), Tomb Sweeping Day, Dragon Boat Festival, Mid-Autumn Festival, and National Day.  

Amendments passed in 2025 added several holidays to the calendar, including Teachers' Day (September 28), Taiwan Retrocession Day (October 25), and Constitution Day (December 25), bringing the total to around 15 to 16 days per year.  

⚠️ Work on a public holiday requires employee consent and double pay.

Sick Leave

Employees are entitled to up to 30 days of non-hospitalized sick leave per year, paid at 50% of their regular wage. If the employee receives sickness benefits through labor insurance, the employer only needs to cover the difference needed to reach half pay.

Employees who are hospitalized may take up to one year of sick leave within a two-year period. This leave is generally unpaid by the employer, although labor insurance may provide partial income replacement.

Maternity Leave

Female employees receive 8 weeks of maternity leave. It is paid at full salary if the employee has at least 6 months of service, and at half salary if service is shorter. Employees are also entitled to 7 days of paid pregnancy checkup leave.

Related entitlements to be aware of:

1. Pregnancy rest leave: An employee whose doctor certifies she needs bed rest during pregnancy can take up to 30 days of pregnancy rest leave at half pay, with additional days unpaid. A dated medical certificate is standard practice and helps avoid disputes.

1. Miscarriage leave: 4 weeks for a miscarriage after 3 months of pregnancy, 1 week between 2 and 3 months, and 5 days under 2 months.
   

Paternity Leave

Fathers are entitled to 7 days of paid paternity (accompaniment) leave, which can be used to accompany prenatal checkups and taken within the 15 days around the birth.

Parental Leave

Employees with at least six months of service and a child under age three may take up to two years of unpaid parental leave per child.

Employees who have been covered by labor insurance for at least one year may also qualify for a parental leave allowance equal to 80% of their insured salary for up to six months per parent, per child.

Beginning in January 2026, parental leave can be taken more flexibly. Instead of taking leave in blocks of 30 days or more, parents may take it daily while continuing to receive the allowance and maintain insurance coverage.

Other Statutory Leave

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Employee Benefits

Statutory Benefits

The mandatory contribution programs fund several core benefits:

• Healthcare through NHI  

• Retirement savings through the labor pension  

• Income replacement for sickness, maternity, unemployment, and occupational injury through labor and employment insurance.

Common Supplementary Benefits

To compete for talent, especially in technology, employers commonly offer:

1. Year-end bonus of one to two months' salary (near-universal market practice)

1. Group medical and life insurance on top of NHI

1. Meal allowances (tax-exempt up to a statutory monthly limit)

1. Performance bonuses, profit sharing, or employee stock plans

1. Festival bonuses or gifts for Dragon Boat and Mid-Autumn festivals

1. Flexible or hybrid work arrangements

⚠️ Companies with 30 or more employees must establish work rules and file them with the local labor authority. Larger employers must also contribute to employee welfare funds under the Employee Welfare Fund Act.

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Termination Requirements

Employers can’t simply fire someone at will in Taiwan. You need a valid legal ground, follow the required notice process, pay severance when applicable, and usually notify the authorities.

Grounds for Termination

The LSA recognizes two categories:

• Termination with notice and severance (Article 11): Allowed for business suspension or transfer, operating losses or contraction, force majeure, business changes with no suitable alternative role, or proven incompetence.  

• Immediate dismissal without severance (Article 12): Allowed for serious misconduct, including material breaches of the contract or work rules, violence or gross insults, imprisonment, or unauthorized absence for 3 consecutive days or 6 days in a month. The employer must act within 30 days of learning of the misconduct.

Courts treat performance dismissal as a last resort. Employers should show that the employee received warnings, training, or reassignment opportunities before termination. Document all performance management steps carefully.

Notice Periods

Statutory minimum notice for employer-initiated termination under Article 11:

 
Employers can pay in lieu of notice. During the notice period, employees can take up to 2 paid days per week to look for a new job.  

Employers must also report involuntary terminations to the labor authority and public employment service at least 10 days before the employee’s last day.

Severance Pay

Severance depends on which pension system covers the employee:

1. New system (Labor Pension Act, most employees): 0.5 month of average wage per year of service, prorated for partial years, capped at 6 months' wages.

1. Old system (LSA, service accrued before July 2005): 1 month of average wage per year of service for old-system service years, with no 6-month cap.
   

Average wage means the average of the 6 months before termination, including regular allowances and overtime. No severance is owed for Article 12 dismissals or voluntary resignations.

Unemployment Benefits  

Employees dismissed under Article 11 may qualify for unemployment benefits through employment insurance. Benefits generally equal 60% of their average insured salary for up to 6 months, with longer coverage for some employees aged 45+ or with disabilities. Dependents may also increase the benefit.

Employees need an involuntary separation certificate to claim, so issue it promptly when they leave. Delays or refusals can lead to disputes.

Mass Layoffs

Large-scale redundancies may trigger additional requirements, including filing a layoff plan 60 days in advance and consulting employee representatives. Thresholds vary by company size, so check the rules before announcing a restructuring.

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Hiring Through an Employer of Record (EOR)

To hire employees directly in Taiwan, you need a locally registered entity, tax registration, and enrollment with the labor insurance, health insurance, and pension authorities.  

An Employer of Record (EOR) offers a simpler alternative. In this setup, the EOR becomes the legal employer of your team members in Taiwan, handling all the formal responsibilities on your behalf. That means signing compliant local employment contracts, running payroll, withholding the right taxes, and enrolling employees in labor insurance, National Health Insurance, and the pension system. It also takes care of statutory leave entitlements and termination requirements, so everything stays aligned with Taiwan's labor laws.

An EOR is especially helpful when you:

1. Want to hire in Taiwan quickly without setting up a company

1. Are hiring a small team and cannot yet justify entity costs

1. Need to test the Taiwanese market before committing

1. Want local compliance expertise for the LSA's termination and leave rules

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If you plan to build a large permanent operation in Taiwan, establishing your own entity usually becomes more cost-effective over time. Many companies start with an EOR and transition employees to their own entity later.

Knit provides EOR, payroll, and compliance support in Taiwan and across 172 countries and regions, handling contracts, statutory contributions, and ongoing HR administration so you can hire without setting up a local entity. Curious how this would work for your setup? Get in touch with Knit.

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Frequently Asked Questions

Do I need a local entity to hire in Taiwan?

Yes. Employing staff directly requires a registered Taiwanese entity or branch enrolled with the tax and social insurance authorities. Without one, you can engage contractors (with misclassification risk) or hire through an EOR.

How much does an employee in Taiwan really cost?

Plan for roughly 14% to 19% on top of gross salary for statutory contributions, plus the near-universal year-end bonus of one to two months' salary and the 2.11% NHI supplementary premium that applies to bonuses and pay above insured salary. Because labor insurance caps at NT$45,800 of insured salary, the statutory percentage falls at higher salary levels.

Is a 13th month salary mandatory in Taiwan?

No law requires it, but a year-end bonus paid before Lunar New Year is such a strong market norm that omitting it will hurt recruitment and retention. Budget at least one month.

Can I put a new hire on a fixed-term contract to keep flexibility?

Not for ongoing work. Fixed-term contracts are legal only for genuinely temporary, seasonal, or project-based roles. A fixed-term contract for a continuous role will be treated as indefinite, and the termination protections apply anyway.

How difficult is it to terminate an employee in Taiwan?

You need a statutory ground under Article 11 or 12 of the LSA, statutory notice (or pay in lieu), severance for Article 11 terminations, and a report to the local authorities 10 days before the last working day.  

For performance dismissals, courts expect documented warnings and improvement opportunities first. Mutual separation agreements are a common lower-risk route.

What is the probation period in Taiwan?

Typically 3 months by agreement. Probation is not regulated by statute, and probationary employees keep full statutory protections, including social insurance and severance rights.

Do foreign employees pay the same taxes?

Foreign employees who stay 183 days or more in a calendar year are taxed as residents at progressive rates of 5% to 40%. Those staying fewer than 183 days pay a flat 18% withholding on salary (6% if monthly salary is at or below 1.5 times the minimum wage). Most foreign employees also need a work permit sponsored by the employer before starting work.

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The Takeaway

The main compliance traps for foreign employers in Taiwan are underestimating the NHI dependent multiplier, misusing fixed-term contracts, mishandling the pension treatment of foreign hires, and terminating without a statutory ground. Get those right, whether through your own entity or an EOR, and Taiwan is one of the most rewarding hiring markets in Asia.  

Want to explore other countries? Check out Knit's hiring guides.

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