Sat, Jan 01, 2005 - Page 3 News List

Top 10 Taiwan Stories: Pension system reformed

By Cody Yiu  /  STAFF REPORTER

On June 11, the Laborers' Pension Law (勞工退休條例) cleared the Legislative Yuan and took effect in July 2004.

The law requires an employer to deposit a minimum of 6 percent of an employees' monthly salary into an individual retirement fund.

As for funds that have been incurred five-years prior to the law coming into effect, an employer must deposit an equivalent amount into a common government-managed retirement fund.

Under the new system, an employee may continue to build up his or her retirement savings if he switches companies.

The current Labor Standards Law (勞基法) stipulates that an employee's retirement fund contributions must be paid into a common fund managed by the government, but an employees lose the benefits if they switch places of employment.

Upon the passage of the law -- which took more than a decade to pass -- opposition arose from both employers and labor groups.

While employers viewed the monthly deposit requirement as a financial burden, older employees feared they would lose their jobs, as the pension's amount is calculated based on the number of years an employee has worked.

According to the Council of Labor Affairs (CLA), once an employee reaches 60 and has worked for at least 15 years, he or she will receive a pension via monthly payments. For an employee who reaches 60 but has worked less than 15 years, the pension will be paid out in a lump sum.

This new law has caused a stir among labor groups, as salary cuts and lay-offs may take place among middle-aged or elderly workers so an employee does not poses an enormous financial burden for their employers.

In response, some employers have decided to offer salary increases or cut back on benefits in order to compensate for the additional labor costs incurred by the new pension system.

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