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Taiwan Employer of Record (“EOR”) Services Do Not Allow Fixed Term Contracts

GoGlobal has seen constant requests for fixed term contracts in Taiwan for EOR services. These are not allowed in Taiwan after amendments to the Taiwan Labor Standards Act (“TLSA”) effective June 21, 2019 designed to strengthen the protection of dispatched employees. Workers working for one firm but effectively directed and controlled by a 3rd party within country or outside is considered dispatched.

Pursuant to Article 9, Paragraph 1 of the TLSA, “Labor contracts may be divided into two categories: fixed term contracts and non-fixed term contracts. A contract in nature for temporary, short-term, seasonal or specific work may be made as a fixed term contract, but a contract for continuous work, should be a non-fixed term contract. The labor contract between a dispatching entity and a dispatched worker shall be a non-fixed term contract.”

Dispatching entities, whether to clients abroad without a legal entity in Taiwan or within Taiwan are based on the registered articles of incorporation (“AOI”) as well as the substance of the business and contracts with the employees. Removing the business mandate on the AOI (e.g., consulting our outsourcing services) does not change the substance of an EOR business. An employer who is in violation of the said article “shall be subject to fines between NT$20,000 and NT$300,000” (Article 79 Paragraph 3 of TLSA) and “the competent authority shall publicly announce the name of such business entity or its owner(s), the person(s) in charge, the date of the disposition, the violation of the provisions and the amount of the disposition, shall also order such business to make improvements within a given period; failure to make improvements shall be fined consecutively” (Article 80-1 Paragraph 1).

Being publicly announced may lead to possible investigation by Taiwanese authorities and subject other (client) employees of the EOR to scrutiny along with parent companies of clients that utilize their services abroad. This has both labor and permanent establishment tax implications to those companies utilizing EOR services in Taiwan.

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