EMPLOYER ACTION CODE: ACT

Amendments to the Labor Standards Act (LSA) pertaining to working time, rest days, public holidays, annual leave and overtime compensation were passed by the Legislative Yuan and signed by the president in December. The amendments took effect on December 23, 2016, except for the new public holiday schedule and annual leave changes, which apply from January 1, 2017.

KEY DETAILS

Previously, regulations on rest days required only that employers grant one regular day off every seven days, with exceptions for certain industries eligible for flexible working hour arrangements. Under the amended LSA, employers are required to grant a regular day off and a rest day every seven days. Flexible working hour arrangements under which normal work time may be distributed unevenly across the workweek are still possible, but the changes are certain to affect companies operating on shifts.

Other changes to working time, paid time off and overtime include:

  • Specific categorizing of the two nonworking days of the week as a regular day off and a rest day (normally Sunday and Saturday, respectively). The distinction is significant because employees cannot be required to perform overtime on a regular day off, whereas overtime is possible on a rest day (subject to union or labor-management agreement).
  • Daily overtime is now calculated in four-, eight- and 12-hour increments rather than actual hours worked (e.g., overtime from hours one to three are counted as four hours). Monthly overtime hours cannot exceed 46 hours (excluding natural disasters and emergencies, among other points).
  • The rate at which overtime is payable has not changed (133% of normal pay for the first two hours, increasing to 167% from hour three to hour eight. Overtime work from the ninth hour on is compensated by an additional 167% of the regular hourly wage on top of the regular hourly wage). However, the amount of overtime compensation payable will greatly increase under the 4/8/12 hour incremental approach to crediting overtime. The schedule for accruing annual leave based on completed years of service has been amended to increase leave entitlements in the first five years of service. Leave and service breakpoints are now:
    • Three days after six months of service (previously seven days after 12 months)
    • Seven days after 12 months (no change)
    • 10 days after two years (previously increased only after three years)
    • 14 days after three years (formerly five years)
    • 15 days after five years (formerly 14 days)
    • One additional day per year of service from year 10 up to a maximum of 30 days.
  • Employees now have the right to determine when to take their annual leave, subject to advance notice or as otherwise agreed in writing with the employer.
  • Statutory unused leave will have to be cashed out at the end of the calendar year.
  • The number of annual public holidays has been reduced from 19 to 12. (In practice, the majority of companies already observe 12 public holidays per year as part of a shorter or flexible workweek.)

EMPLOYER IMPLICATIONS

Aside from the cost implications resulting from the change in overtime compensation, the wide-ranging nature of the new rules on working time, overtime hours and annual leave entitlements will have a significant effect on internal policies, including work rules and employee handbooks. The amendments also place a greater expectation on employers to maintain written records of leave entitlements and use, including an explicit burden of proof placed on the employer in the event of any disagreement on leave notice, agreements and entitlements. Employers should review their leave policies.