Key Takeaways
- A layoff must be supported by a valid statutory ground.
- Employee notice and government reporting are separate requirements.
- If full notice is not given, wages in lieu of notice are generally required.
- Severance depends on whether the employee is covered by the new pension system, the old pension system, or both.
- Final payroll may include salary, overtime, unused leave payout, and severance.
- Wages generally cannot be withheld because handover is incomplete.
- Additional procedures may apply if the layoff qualifies as a mass redundancy.
A layoff in Taiwan involves more than issuing a termination notice. In most cases, employers must confirm the legal basis for termination, determine the correct notice period, complete any required layoff reporting, calculate severance properly, and settle final salary items such as unused annual leave and overtime. If the case reaches the threshold for a mass redundancy, additional filing and notification requirements may also apply.
What makes a layoff legally valid in Taiwan?
A layoff must be based on a valid statutory ground. Common examples include:
- business closure or transfer
- financial loss or business downsizing
- suspension of operations for more than one month due to force majeure
- business changes requiring a reduction in workforce where no suitable reassignment is available
- situations where the employee is unable to perform the assigned role competently
Not every termination is treated as a layoff. Disciplinary dismissal, mutual separation, and other termination scenarios may follow different legal rules. Employers should verify the legal grounds for termination before proceeding with notice, reporting, or severance calculations.
How much notice must an employer give before termination?
The applicable notice period varies according to the employee’s years of service. A simple summary is set out below.
|
Length of Service |
General Notice Period |
|
More than 3 months but less than 1 year |
10 days |
|
1 year to less than 3 years |
20 days |
|
3 years or more |
30 days |
For employees with less than 3 months of service, the law does not clearly specify a notice period. In practice, employers usually assess the issue based on the employment arrangement and the facts of the case.
What happens if the full notice period is not given?
If the full statutory notice period is not given, the employer must generally pay wages in lieu of notice. This means the employee must still be compensated for the portion of the notice period that was not provided.
Once valid notice has been given, the employee may also take paid leave during working hours, up to two working days per week, to look for new employment. From a practical perspective, this means the notice period should be planned carefully, both legally and operationally.
How does layoff reporting work?
In most cases, layoff reporting is required. Employers are generally expected to file a report with:
- the local competent authority, and
- the public employment service agency.
This is usually required at least 10 days before the employee’s termination date. If the layoff is caused by a natural disaster, emergency, or other force majeure event, the filing timeline may instead fall within 3 days after termination. Notice to the employee and reporting to the government are separate compliance steps and should not be treated as the same thing.
How is layoff reporting filed in practice?
Layoff reporting may usually be completed online or in writing. Many employers can use the Workforce Development Agency’s online system. However, if the employee’s actual place of work is in Taipei City, New Taipei City, or Taichung City, a separate local platform may apply.
Because filing channels can vary by work location, employers should confirm the correct reporting method before filing. This is particularly important for businesses with employees in more than one city.
What if layoff reporting is not completed?
Failure to complete layoff reporting may result in an administrative fine ranging from NT$30,000 to NT$150,000. Reporting should therefore be treated as a legal compliance requirement, not just an internal HR formality.
For employers, this means the layoff process generally includes two separate action tracks:
- notice to the employee
- reporting to the authorities
Both should be completed correctly and on time.
How is severance calculated?
Severance depends on whether the employee is covered by the new pension system, the old pension system, or has years of service under both.
Under the new pension system
- generally 0.5 month of average wages for each full year of service
- pro rata treatment for incomplete years
- capped at 6 months of average wages
Under the old pension system
- generally 1 month of average wages for each full year of service
- pro rata treatment for incomplete years
- any period of less than one month is generally counted as one full month
If service falls under both systems, each portion must be calculated separately and then combined. This is why pension coverage and service dates should be confirmed before finalizing the severance amount.
What counts as “average wages”?
Average wages do not necessarily mean base monthly salary. As a general rule, they are calculated using the employee’s total wages earned during the 6 months before the relevant event, divided by the total number of days in that period.
If the employee has worked for less than 6 months, the calculation is based on the actual period of employment. For employees paid by day, hour, or piece, additional minimum threshold rules may also apply. In practice, this means the final severance figure may depend on the employee’s full wage structure rather than base pay alone.
What should final payroll include?
Final payroll usually includes more than severance. Employers should generally review:
- final salary
- accrued overtime
- payment for unused annual leave
- severance, where applicable
If annual leave remains unused at termination, those days generally need to be paid out. As a general rule, severance should be paid within 30 days after termination, while unused annual leave should generally be settled upon termination or no later than the regular payday if not paid on the last working day.
Can wages be withheld if handover is incomplete?
No. Earned wages must generally be paid in full and directly to the employee. An employer should not withhold salary because the employee has not completed handover or departure procedures.
If the employer believes that an incomplete handover caused loss or damage, that issue should be addressed separately through the appropriate legal process. It should not be resolved by withholding earned pay. In addition, if the case meets the legal threshold for a mass redundancy, extra steps such as a dismissal plan, authority notification, and public announcement may also be required.
Final Note
A layoff in Taiwan usually involves several connected obligations: confirming the legal basis for termination, determining the notice period, completing layoff reporting, calculating severance, and settling final payroll items. The objective is not only to complete the process, but to do so in a way that is accurate, compliant, and properly documented. Clear planning and consistent execution can help reduce disputes and support a smoother termination process.