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Business Topic

The Collection and Disbursement of Wage Arrears Payment Fund Program

In order to secure the rights and interests of workers and to stabilize their lives, Article 28 of the Labor Standards Act promulgated and effective in July 1984, stipulates that workers who are laid off because their employer closes down is liquidated or goes bankrupt, are entitled to claim their wages for up to six months from the Wage Arrears Payment Fund provided their request of wages arrears payment is denied by the employer; it is imperative that the employer should return the wages arrears to the Wage Arrears Payment Fund within the fixed time. To further protect employees' rights and to reduce labor disputes, on February 4, 2015, the amendment to Article 28 expanded the scope of payments the Fund covers, with the Fund now covering retirement pension and severance pay required by the provisions of Labor Standards Act, and the severance pay required by the provisions of Labor Pension Act (the total amount shall be no more than six months of average wage.) The purpose of this act is to create a risk sharing society in which all businesses contribute to the Fund and use it as an advance to finance unforeseen costs when management difficulties occur.

With the Fund, laid-off workers are able to claim their wages without the risk of depression from unemployment, while the inflicted businesses can be assisted in going through the crisis-a win-win measure for creating harmonious labor-management relationships. Collection of the fund started in November 1986, with its rate set at 0.05 percent of the total Labor Insurance salary. From July 1 1996, after a certain amount was secured for the Fund, the rate was lowered to 0.025 percent as a means to reduce the financial burden on employers.

Applications for advance payment began on February 1 1987; since then the restrictions for application were gradually relaxed after constant review to fulfill the mission of the Fund as a means to protect the lives of workers.

With the smooth operation of the Fund, the Ministry of Labor gradually expanded the applicable scope of the Labor Standards Act coverage from 1998, so that the entire labor force in the public and private sectors, with the exception of a few businesses, was covered by the program. This system, in short, has made significant contribution to the stability of workers' lives, labor-management relationships and the security of society.

Last Update:2024-03-07