Pension system may be revised

By Stanley Chou  /  STAFF REPORTER

Fri, Feb 02, 2001 - Page 18

The Council of Labor Affairs (勞委會) proposed yesterday that the labor pension system be revised to match with the realities of today's working lifestyles.

According to the current system, workers in Taiwan have to work for the same company for 15 years and reach an age of 55 years old, or work consecutively for the same company for 25 years, before he or she could apply for retirement and get back money paid into the nation's Labor Pension Fund (勞退基金). This is good news for foreigners who often are in Taiwan on assignments that last between one and three years.

In addition, since the average medium and small companiy in Taiwan does not last more than 13 years, the majority of employees could not get their retirement pension under such system. According to reports from local media, so far less than 2 percent of workers have been able to apply for pension from the Labor Pension Fund.

According to a resolution by the Council of Labor Affairs yesterday, the current restriction that employees have to work for the same company for 15 or 25 years will be cancelled. The new rule is that as long as an employee is over 55 years old, or has a 25 year employment record -- regardless of the number of employers -- he or she will be able to apply for a retirement pension from the Labor Pension Fund.

The Council of Labor Affairs is working on a draft to revise the labor pension system (勞工退休金條例). After negotiating with repre-sentatives from labor unions, the draft will be submitted to the Executive Yuan for final review. This draft is expected to be submitted the Legislative Yuan in March.

Another important change is that the minimum percentage an employer must contribute to the Labor Pension Fund, according to an employee's salary (薪資提撥率), will be raised from 2 percent to 6 percent. There is no ceiling set by the resolution, the current ceiling is 15 percent.

This percentage change is likely to become a controversial issue between employers and labor unions in the near term. Currently, although the minimum percentage set by law is 2 percent, according to the Council only 7 percent of all companies in Taiwan pay this amount into the Labor Pension Fund. Part of the reason is that most employers do not think that their employees would work for them continuously for 15 or even 25 years. Since most of their employees will not be eligible for the pension, there is no point in paying the extra cost.

A major change in the latest draft is that the Labor Pension Fund will be changed into a system called a "personal pension account." It means that from now on, any pension contribution will be tied to the laborer, instead of the current employer. When a laborer changes jobs, his pension account will be automatically registered with his new employer.

However, since the draft would significantly raise operating costs for employers, especially those who pay their pension contribution currently, industry leaders are strongly against the new draft. They suggest that the minimum contribution rate should remain at 2 percent. The final decision will be left to the Executive Yuan and Legislative Yuan to decide.