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Business Topic

Labor Pension Program Established by the Labor Standards Act of 1984(Old System)

  1. Contents
    (1) Conditions for Retirement:
    a. Voluntary retirement:
    • When a worker has worked for 10 years and attains the age of 60.
    • When a worker has worked for 25 years.
    • When a worker has worked for 15 years and attains the age of 55.
    b. Forced retirement:
    • When a worker is physically or mentally incapacitated.
    • When a worker attains 65 years of age.

    (2) Calculation of work seniority
    A worker's seniority is the years of service for one and the same business entity. Under the following circumstances, however, the worker's seniority shall be combined for calculation purposes:
    a. If ownership of the company is transferred to another employer,and the workers to be retained through negotiations between the old and new employers.
    b. If the company is restructured.
    c. If the worker is transferred to another company belonging to the same employer.

    (3) Scale of benefits payments
    Corresponding to a worker's work seniority in service, a payment of two units for each year of service, with the payment scaled down to one unit per year starting from the 16 th year. Total units earned may not exceed 45 units. Any fraction of a year that is equal to or more than six months, shall be counted as one year of service, and any fraction of a year which is less than six months shall be counted as half a year of service.
    One unit equals the average wage for one month (average monthly wage of the six months prior to retirement).

    (4) Deduction/deposit scales of reserve fund of pension payments for workers
    The employer is required to deduct between 2% to 15% of a worker's total monthly wage and set aside this amount as a reserve fund for said worker's pension payments.

    (5) Managing financial agency
    The pension payments reserve fund contributed by the Department of Trust of Bank of Taiwan.

    (6) Ownership of pension payment account
    The employer shall have full ownership of the pension accounts. A worker claiming his/her pension payments shall apply directly with his/her employer.
  2. Shortcomings of the old labor pension system
    (1) The dynamism of Taiwan 's labor market, in which workers on average switch jobs every 8.3 years, which shows that the old system, which assumed "life-long employment" is outdated.

    (2) The small and medium-sized businesses which comprise over 97% of the country's business enterprises have an average lifespan of only 13 years. Business and factory closures make accumulating work seniority extremely difficult.

    (3) The penalties for non-participation in the old labor pension system are light. Studies showed that only 20% of business enterprises have set aside retirement funds while the majority do not.

    (4) The majority of participating businesses only contribute at the bare minimum rate of 2%, which means very low retirement pensions with slow growth.

    (5) Businesses are unable to ascertain the number of retired persons and the amount of wage given six months before retirement, which hinders the calculation of contribution rate and operating costs.
Last Update:2021-08-20