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Retirement

  • Last updated:2022-01-25

Retirement

    To ensure post-retirement quality of life for seniors, the law provides Old-Age Benefits under the Labor Insurance and Labor Pension Plan.

    Old-Age Benefits is an insurance benefit provided in accordance with the Labor Insurance Act. The employee, employer and the government pay premiums to the Bureau of Labor Insurance each month based on a fixed percentage (20%, 70% and 10% respectively). When the insured qualifies for Old-Age Benefits, the Bureau will pay Old-Age Benefits in accordance with the rules.

    Labor Pension refers to the pension an employer provides to the workers upon retirement. It may be provided under the new system or the old system. The old pension system is handled in accordance with the Labor Standards Act, where the employer contributes 2% to 15% of the monthly wage to the labor pension reserve account in the Bank of Taiwan. When a worker meets the retirement condition and claims pension payment from the employer, the employer may pay the same from the account of labor pension reserve account.

    The Labor Pension Act (new pension system) was implemented on July 1, 2005, and provides that the employer must, each month, for applicable employees under the Act, contribute pension no less than 6% of the monthly salary to the individual labor pension account. The account is owned by each worker. When the worker attains the age of 60, the worker may claim the accumulated principle and profits in the individual account. To sum up the above, the old-age benefits under labor insurance and labor pension are two different systems.

The Old Pension System

The Labor Standards Act (old pension system) obligates the employer to pay for the labor pension. The employer, each month, contributes 2% to 15% of the monthly salary to the labor retirement reserve account. This fund is solely used for retirement and is owned by the employer. The Bank of Taiwan (Trust Department) handles the deposit, expense, safeguard and use of such funds. When a worker meets the retirement condition and claims pension payment from the employer, the employer may pay the same from the account of labor pension reserve account. After implementing the Labor Pension Act on July 1, 2005, for employees to whom the Labor Standards Act was applicable, who continued to serve in the same entity and decided to continue to be covered by the pension regulations under the Labor Standards Act or who opt for the pension system under the Labor Pension Act and reserve the years of service under the old system, the pension for the years of service under the old system will be handled in accordance with the Labor Standards Act.

Retirement Element

Retirement may be voluntary or mandatory. The distinction lies in that a worker initiates the voluntary retirement and the employer initiates the mandatory retirement. In the event the employer’s labor pension standards are more favorable to a worker compared to the rules, the employer’s standards may apply.

(1)  Voluntary Retirement (Art. 53 of the Labor Standards Act)
A worker may apply for voluntary retirement in any of the following situations:

  1. Where the worker attains the age of 55 and has worked for 15 years.
  2. Where the worker has worked for more than 25 years.
  3. Where the worker attains the age of 60 and has worked for 10 years.

Workers who meet the requirements for voluntary retirement are entitled to request retirement at any time. Even if the employer terminates the labor contract in accordance with Article 11 of the Labor Standards Act with an advance notice, he shall still pay pension according to Articles 55 and 84-2 of the same Act.

(2)  Mandatory Retirement (Art. 54 of the Labor Standards Act)

An employer cannot force a worker to retire unless any of the following situations has occurred:

  1. Where the worker attains the age of sixty-five.
  2. Where the worker is unable to perform his/ her duties due to disability.

A business entity may, according to Section 2, Article 54, request the central competent authority to adjust the age prescribed in Subparagraph 1 of the preceding paragraph if the specific job entails risk, requires substantial physical strength or otherwise of a special nature; provided, however, that the age shall not be reduced below 55.

Pension Payment Standard

Where the workers’ seniority satisfies the retirement element under Articles 53 and 54 of the Labor Standards Act, the pension for the years of service under the old system shall be paid in accordance with Articles 55 and 84-2 of the same Act. Labor pension payment criteria are set forth as follows:

(1) Two bases are given for each full year of service rendered, but for the rest of the years over 15 years, one base is given for each full year of service rendered. The total number of bases shall be no more than 45. The length of service is calculated as half year when it is less than six months and as one year when it is more than six months;

(2)  An additional 20% on top of the amount calculated according to the preceding subparagraph shall be given to workers forced to retire due to disability incurred from the execution of their duties.

  1. The retirement pension base, according to Section 2, Article 55 of the Labor Standards Act, shall be one month’s average wage of the worker at the time when his or her retirement is approved.
  2. Workers’ years of service will, according to Articles 57 and 84-2 of Labor Standards Act, be limited to years of employment by the same business entity. The years of service before and after the application of Labor Standards Act are combined for computation. However, the severance pay and pension payment before and after the application shall be calculated in sections in accordance with the non-retroactive principle. The years of service before the application will be computed in accordance with the laws then current. Where there are no applicable laws, it shall be determined by the retirement rules of each business entity or mutual negotiation. As for the years of service post the application, the severance pay and pension will be computed according to the Labor Standards Act, Labor Pension Act respectively.

 

  • Source:Department of Employment Welfare and Retirement
  • Publication Date:2021-05-14
  • Count Views:3526
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