Tue, Jun 15, 2004 - Page 10 News List

Businesses grumble over new pension law

ECONOMIC BROADSIDE Small and medium-sized businesses say raising pension-fund contributions to 6 percent of employees' salaries may cost people jobs

By Jessie Ho and Joyce Huang  /  STAFF REPORTERS

Representatives of small and medium-sized enterprises (SMEs) said yesterday the newly passed Laborers' Pension Law (勞工退休條例) may hurt the economy.

The law, passed by the legislature last Friday and to take effect in July next year, requires employers to direct 6 percent of employees' salaries per month -- up from 2 percent -- to an individual retirement labor pension fund.

The new system allows employees to continue to build up the fund even if they change jobs, and draw a monthly pension after they retire.

It is estimated that Taiwanese companies will have to set aside as much as NT$2.6 trillion to top up their retirement reserve funds for employees within five years, according to estimates by the General Chamber of Commerce (全國商總).

Theodore Huang (黃茂雄), chairman of the Chinese National Association of Industry and Commerce (工商協進會), yesterday urged the government to come up with measures to prevent SMEs from leaving Taiwan as a result of rising labor costs.

Huang made the remarks after the association's annual members' meeting yesterday.

After receiving a petition from the association, Premier Yu Shyi-kun yesterday promised that Council of Labor Affairs Chairwoman Chen Chu (陳菊) and Minister of Economic Affairs Ho Mei-yueh (何美玥) would exchange views with the business community.

Chen Po-chih (陳博志), chairman of Taiwan Thinktank (台灣智庫), said the bill's passage may harm the nation's economy.

Chen, who was in charge of discussing the bill with business when he was chairman of the Council for Economic Planning and Development, said that the government had previously agreed to a grace period of three years for businesses to top up pension accounts.

The lack of a grace period may lead to outsourcing and layoffs, Chen said.

He said the new system, in effect, raises labor costs by 6 percent, which is equivalent to appreciating the New Taiwan dollar by nearly 3 percent.

Chen said he can only cross his fingers and hope that the economic recovery is strong enough for businesses to continue to perform.

He said the pension funds should be used to refinance domestic investments and help the economy.

Wu Chung-chi (吳忠吉), an economics professor at National Taiwan University, said it is topping up pension funds that will clobber SMEs.

Those who failed to allocate pension funds for their employees in the past -- 448,000 of the more than 500,000 SMEs in the country, according to the Council of Labor Affairs -- are required to make up the amount for their current staff based on their work period with the companies within five years of the law taking effect.

As a result, employers may lower salaries to compensate for the outlay, Wu said.

Joseph Hsu (許繼峰), an associate professor at National Chung Cheng University's Institute of Labor Research, said businesses needn't worry too much, however, because there may be ways to reduce the law's impact.

"We've made several major changes to labor policies to ensure labor interests in the past, but employers can always find loopholes," Hsu said. "The heavier fine to be imposed on the violators is of no use."

The new law stipulates that employers that fail to contribute 6 percent of salaries to employees' pension funds will be fined NT$20,000 to NT$50,000 per month per employee.

Hsu said the government lacks the manpower to inspect the huge number of SMEs, and that employees tend not to report wrongdoing for the sake of their careers.

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