Reform Impacts Overtime, Leave, and Shift Patterns

The Taiwanese government proposes rolling back changes made last year to how employers calculate overtime, organize work hours, and manage annual leave allowances. The new rules are likely to come into force during 2018.

The administration of President Tsai Ying-wen wishes to amend Taiwan’s Labor Standards Act following criticism that amendments made in December 2016 failed to deliver the desired flexibility and caused upset among both employers and employees.

Under current Taiwanese law, employees are granted one rest day and one flexible day off per week. Employees who agree to work on their flexible day off are entitled to overtime pay calculated in four-hour blocks. In other words, an employee that works between one and four hours receives four hours’ overtime pay, and an employee that works between five and eight hours receives eight hours’ overtime pay, and so on. Critics—including both employers and employee organizations—complained that while the overtime compensation scheme sounds generous, many companies were reluctant to grant employees’ requests to work overtime hours, thereby reducing the income potential of employees. The new rules will reverse the overtime compensation scheme, and instead, employees will only be paid overtime for actual hours worked.

In addition, new rules for overtime limits have been set. The amendments prohibit employees from working more than 54 overtime hours in 1 month or more than 138 hours over 3 months.

The government has also proposed changes to shift schedules. Subject to approval from the Ministry of Labor, employees may agree to work up to 12 days consecutively without taking a rest day. In addition, the minimum required rest time between shifts would be reduced from 11 hours to 8 hours. Again, this change was at least partly in response to employee complaints that the old regime unnecessarily restricted their earning potential and the difficulty some employers had in organizing work schedules.

In order to make these shift schedule changes, an explicit agreement must be obtained by either the relevant labor union or labor-management conference (whichever exists). Moreover, companies with more than 30 employees must report such changes to their local labor authorities.

Annual leave rules will also be modified so that any unused leave may, subject to agreement with the employer, roll over to the following year. However, it must be cashed out at the end of the second year or when the contract ends if earlier.

Comment

Not all employee groups are in favor of the changes. There were protests organized by labor unions in late 2017 rallying against what they perceive as the erosion of labor rights and the kowtowing of government to business interests. 

In almost all cases, an explicit agreement between the employer and affected employees is required to enable the employee to benefit from these amendments. In the case of larger companies, these changes must be reported to the local labor authority to avoid penalties.  

Written by Christine Chen of Winkler Partners and Roger James of Ogletree Deakins