• Last updated:2024-08-28

Where a labor contract terminates pursuant to Articles 11, 13 proviso or 14 and 20 of the Labor Standards Act or Labor Occupational Accident Insurance and Protection Act, the employer shall pay aworker severance pay. The severance pay is calculated based on years of service, which are limited to the years of employment by the same business entity and begins on the day the employment began, according to Articles 57 and 84-2 of the Labor Standards Act. After the Labor Pension Act (new system) implemented on July 1, 2005, the severance pay payment shall be calculated respectively according to the years of service under the applicable new system and those under the pension system of Labor Standards Act (old system). 

Old Severance Pay System

(1)  Worker: Employed by the same business entity prior to July 1, 2005 and chooses to continue with the old system or opts for the new system while preserving the years of service under the old system.

(2)  Calculation: In accordance with Section 1, Article 17 of the Labor Standards Act, severance pay is equal to one month’s average wage for each year of service. The severance pay for the months remaining after calculation in accordance with the foregoing, or for workers who have been employed for less than one year shall be calculated proportionally; any period of employment less than a month shall be calculated as one month.

Average Wage: According to Paragraph 4, Article 2 of the Labor Standards Act, it means the figure reached by taking the total wages for the 6 months preceding the day on which an event requiring that a computation be made occurs, divided by the total number of days in that period. In the case of a period of service not exceeding six months, it means the figure reached by taking the total wages for the service period divided by the total number of days of that period. In the case of wages which are computed on a daily, hourly, or piecework basis, if the figure reached according to the preceding formula is less than 60% of a figure determined by dividing the total wages for the particular service period by the actual number of work days, the average wage in this case shall be the 60% figure.

(3)  Example: Worker A has an average wage of NTD 30,000 and the period of service the Labor Standards Act applies to is 3 years 6 months and 15 days. Then the severance pay under the old system is about NTD 107,500.

 Formula: 30,000($)×{3+〔（6＋1）÷ 12 〕}＝30,000($) × （3+7/12） ≒107,499.9($)

 The New Severance System

(1)  Worker: Person who, since July 1, 2005, opted for the new system, is employed for the first time, re-employed or employed by an entity designated to be governed by Labor Standards Act from July 1, 2005.

(2)  Calculation: In accordance with Section 1, Article 12 of the Labor Pension Act, an amount equal to half a month of average wages for every full year of employment, and in proportion for a period of employment lasting less than one full year; the foresaid severance shall not exceed more than six months of average wages.

 ♦Average Wage: According to Paragraph 4, Article 2 of the Labor Standards Act, it means the figure reached by taking the total wages for the 6 months preceding the day on which an event requiring that a computation be made occurs, divided by the total number of days in that period. In the case of a period of service not exceeding six months, it means the figure reached by taking the total wages for the service period divided by the total number of days of that period. In the case of wages, which are computed on a daily, hourly, or piecework basis, if the figure reached according to the preceding formula is less than 60% of a figure determined by dividing the total wages for the particular service period by the actual number of work days, the average wage in this case shall be the 60% figure.

(3)  Example: Worker A has an average wage of NTD 30,000 and the seniority the Labor Pension Act applies to is 3 years 6 months and 15 days. Then the severance pay under the new system is about NTD 53, 125.

 Formula: 30,000($)×1/2×{3+〔（6＋15/30）÷ 12 〕}＝30,000($)× (1+37/48) ≒53,124.9($)

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• Source:Department of Employment Welfare and Retirement
• Publication Date:2021-08-03
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