A Brief Introduction to Employment Termination and Severance Payment Systems in Taiwan: A Reference Model for Japan’s Reform of Labor Mobility

Taiwan, similar to Japan, is regarded as one of the jurisdictions in Asia Pacific region where it is difficult for employers to unilaterally terminate employment. However, in Taiwan, there is no lifetime employment and in general the labor mobility is high. From the legal perspective, there are also several noteworthy aspects which differentiate Taiwan’s employment practice from Japan’s. That is, in Taiwan: (1) there are clear statutory grounds for employers’ unilateral employment termination. Though these statutory grounds are not easy to meet, they provide a degree of predictability for employers who intend to proceed with employment termination; (2) there is statutory severance which reduces uncertainty and disputes regarding monetary compensation claimed by employees when they are terminated; and (3) there are clear statutory retirement allowances (a.k.a. pensions in Taiwan) which will be made to the employees in one lump sum (for employees under the Old or New Pension Scheme) or monthly installments (for employee under the New Pension Scheme) when the employees meet certain statutory retirement thresholds. In this paper, we present a brief introduction to employment termination and severance payment systems in Taiwan from a legal perspective for your reference.