How do you terminate an employee in Taiwan in 2026?
Taiwan runs two severance rates side by side. Staff hired on or after 1 July 2005 earn 0.5 months of average wage per year, capped at 6 months. Older service is paid at 1 month per year with no such cap, so long-tenured exits cost far more.
· Taiwan guide
Illustration · Taipei, Taiwan
You can only dismiss a Taiwan employee on the grounds the law lists. There is no general right to fire at will. Use a ground outside that list and the dismissal is not valid (Labor Standards Act, Articles 11 and 12).
Severance depends on when the person was hired. Staff hired on or after 1 July 2005 earn 0.5 months of average wage per full year. That payment stops at 6 months. Service before July 2005 is paid at 1 month per year with no cap.
Notice scales with service. It runs 10 days under one year, 20 days from one to three years, and 30 days after three years. You can pay it out instead. Severance is due within 30 days of the exit.
When can you lawfully terminate in Taiwan?
You need a legal ground to dismiss. Taiwan has no fire-at-will rule. The law gives a closed list of with-notice grounds and a closed list of summary grounds.
Pick a reason outside those lists and the dismissal is not valid. The employee can be reinstated with back pay. (Labor Standards Act, Articles 11 and 12)
Taiwan employment ends lawfully only on the grounds written into the Labor Standards Act. Article 11 sets out the with-notice grounds, where the employer gives advance notice and pays severance. Article 12 sets out the summary grounds, where the employee is dismissed for serious fault with no notice and no severance.
Article 11: with-notice grounds (notice and severance owed)
- Business suspended or transferred, where operations stop or the business changes hands
- Operating losses or contraction, where the business is shrinking
- Force majeure that suspends operations for more than one month
- A change in business nature that needs fewer staff and no suitable role can be offered
- Clear inability to perform, where a worker cannot do the job to a reasonable standard
Article 12: summary grounds (no notice, no severance)
These cover serious misconduct: misrepresentation at hiring, violence or grave insult, a criminal conviction, a serious breach of the contract or work rules, and unexplained absence for three days running or six days in a month. The employer must act within 30 days of learning of the cause.
Dismissal for pregnancy, for taking maternity or parental leave, or as retaliation is barred under the Act of Gender Equality in Employment. There is no separate punitive payout for an unlawful dismissal. The remedy is that the dismissal does not stand, so the worker is reinstated and owed back pay plus the notice and severance that were always due.
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Confirm a lawful ground
Anchor the dismissal to an Article 11 with-notice ground or an Article 12 summary ground. A reason outside those lists makes the dismissal invalid and risks reinstatement with back pay.
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Document the evidence
Record the facts that support the ground, whether it is business contraction, inability to perform, or serious misconduct. For summary grounds, act within 30 days of learning of the cause.
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Serve notice or summary dismissal
For Article 11 grounds, give the right notice for the worker's service band or pay it out. Summary dismissals under Article 12 need no notice and carry no severance.
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Calculate dual-system severance
Work out new-system service at the half-month rate up to the six-month cap, and any pre-July-2005 service at the old-system rate. Add accrued leave and any pay in place of notice.
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Pay within the deadline
Settle notice, severance, and final wages within 30 days of the contract ending. For a mass layoff, file the redundancy plan with the labour authority before letting people go.
How much notice must you give a Taiwan employee?
Notice rises with service. It is 10 days for three months to under one year. It is 20 days from one to three years. It is 30 days once service passes three years.
You can pay the notice out instead of working it. This applies to Article 11 dismissals, not summary dismissals. (Labor Standards Act, Article 16)
| Length of continuous service | Minimum employer notice |
|---|---|
| 3 months to under 1 year | 10 days |
| 1 year to under 3 years | 20 days |
| 3 years or more | 30 days |
These periods are set by Article 16 of the Labor Standards Act and apply to with-notice dismissals under Article 11. A worker on the job under three months gets no statutory notice. Contracts can offer longer notice. They cannot drop below these floors.
Paid leave to job-hunt during notice
During the notice period the worker may take paid time off to look for a new job, up to two days a week. The employer pays for that time. This sits alongside the notice itself, not instead of it.
Paying notice out
Either side can end the contract early by paying the wages the worker would have earned across the notice window. Pay in lieu of notice is treated as ordinary income and runs through payroll under the rules set by the National Taxation Bureau.
How is Taiwan severance pay calculated?
It depends on the hire date. Staff hired on or after 1 July 2005 earn 0.5 months of average wage per full year. That total is capped at 6 months.
Service before July 2005 is paid at 1 month per year with no cap. Long-serving staff who span both systems get both calculations. (Labor Pension Act, Article 12)
Taiwan moved to a new pension system on 1 July 2005, and severance follows the same split. The hire date and the worker's chosen pension system decide which rate applies. Many long-tenured workers carry service under both, so each part is worked out on its own rule.
New system: hired on or after 1 July 2005
Under Article 12 of the Labor Pension Act, severance is 0.5 months of average wage for each full year of service, with part-years counted in proportion. The total cannot exceed 6 months. So a worker with twelve full years still tops out at the 6 months ceiling.
| Full years of service (new system) | Severance entitlement |
|---|---|
| 1 year | 0.5 months average wage |
| 4 years | 2 months average wage |
| 12 years | 6 months average wage (capped) |
Old system: service before 1 July 2005
Service banked under the old Labor Standards Act pension is paid at 1 month of average wage per year, under Article 17 of the Labor Standards Act. There is no six-month ceiling on the old-system part. That is why a worker hired in the 1990s can generate far more severance than the headline new-system rate suggests.
What counts as average wage
Average wage is based on the six months before termination and includes regular pay components. Severance under both systems must be paid within 30 days of the contract ending. Late payment exposes the employer to a labour complaint and a fine.
Are there extra rules for mass layoffs in Taiwan?
Yes. Large layoffs trigger the Act for Worker Protection of Mass Redundancy. The employer must file a plan and notify the labour authority before letting people go.
The plan must go in 60 days ahead of the layoffs. Skip the filing and the authority can step in and order negotiation.
A with-notice dismissal needs an Article 11 ground, the right notice for the worker's service band, and severance paid within 30 days. New-system staff earn 0.5 months average wage per year, capped at 6 months. Old-system service is paid at 1 month per year with no cap.
Source: Labor Standards Act, Laws and Regulations Database of the Republic of China (Taiwan)
Beyond the everyday rules, Taiwan has a separate framework for mass layoffs. The Act for Worker Protection of Mass Redundancy applies when an employer cuts a set share of the workforce inside a short window, for example a large block of staff at one site over 60 days. The exact headcount triggers turn on the size of the business.
Where the framework applies, the employer must produce a written redundancy plan and submit it to the local labour authority and to the workers or their union at least 60 days before the layoffs begin. The plan covers the reason, the numbers, the selection method, and the severance terms. Both sides then negotiate.
If the employer skips the notification or refuses to negotiate in good faith, the labour authority can intervene and require talks. That delays the layoff and raises the cost of getting the process wrong. The everyday severance and notice rules above still apply on top of the mass-redundancy steps.
Can you agree a mutual exit in Taiwan?
Yes. An employer and employee can agree to end the contract by consent. A written agreement records the exit date and the final payments.
Mutual exit sidesteps the Article 11 grounds test. But the worker still expects severance-level terms, so it rarely comes cheap.
A negotiated exit is a common route in Taiwan when neither summary dismissal nor a clean Article 11 ground fits. Both sides sign an agreement that ends the contract on agreed terms. Because the worker gives up the protection of the grounds test, the package usually matches or beats the severance they would have received.
Typical components of a Taiwan mutual exit:
- Severance-equivalent payment, often pitched at or above the 0.5 months per year the new system would have paid
- Pay in place of notice, covering the 30 days a long-serving worker would otherwise get
- Accrued annual leave, paid out at the daily rate
- Reference wording, agreed in advance
- A mutual release, where the worker waives future claims tied to the employment
The agreement should be in writing and signed before the last working day. Final pay, including any severance, is due within 30 days of the contract ending. Getting the agreement done early avoids a dispute over the timing of payment.
How Teamed runs Taiwan terminations
Teamed is your legal employer of record in Taiwan. The cost is from $599 per employee per month, with zero FX mark-up in any currency. Every Taiwan termination runs through Teamed's operations team.
We handle the grounds test, the notice maths, the dual-system severance, and the labour-authority steps for a mass layoff. It all runs on one platform. The decision on who to let go, and why, stays yours.
Real HR and legal experts handle your Taiwan hires, from the first contract through every payroll run and statutory contribution. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee, and employer cost passes through at cost, itemised on every invoice.
The split of responsibilities under EOR for Taiwan terminations:
| What Teamed handles | What the client decides |
|---|---|
| Confirming a valid Article 11 or Article 12 ground before any exit | Whether to dismiss, why, and on what timeline |
| Notice maths across the 10 days, 20 days and 30 days bands | Performance standards and what counts as serious fault |
| Dual-system severance at 0.5 months per year capped at 6 months, plus old-system service at 1 month per year | Whether to offer terms above the legal minimum |
| Mass-redundancy plan filing and the 60-day labour-authority notification | Communication with the wider team |
| Final payroll within 30 days: notice, severance, accrued leave, pension and insurance | Reference wording and the shape of any mutual exit |
Taiwan's two-rate severance is the trap most foreign employers miss. A worker who joined before July 2005 can owe far more than the 6 months new-system ceiling. Teamed checks the hire date and the pension system on every exit so the number is right the first time.
EOR, contractors, and entity employees all live on one platform. A Taiwan hire on Teamed's network can graduate to your own legal presence when headcount makes entity formation the right call, until it isn't. Run the Crossover Calculator to see when the model flips. Start from the Taiwan hiring overview.
Key sources: Labor Standards Act, Labor Pension Act, and the Ministry of Labor.
Frequently asked questions
Can you fire an employee at will in Taiwan in 2026?
No. Taiwan has no fire-at-will rule. An employer can only dismiss on the grounds listed in Articles 11 and 12 of the Labor Standards Act. Article 11 covers with-notice grounds such as business contraction or a worker's clear inability to perform, where notice and severance are owed. Article 12 covers summary grounds for serious misconduct, where no notice or severance applies. A dismissal outside those lists is not valid, and the worker can be reinstated with back pay.
How is severance pay calculated in Taiwan?
It depends on the hire date. Staff hired on or after 1 July 2005 sit under the new Labor Pension Act and earn 0.5 months of average wage per full year, with the total capped at 6 months. Service banked before July 2005 under the old Labor Standards Act pension is paid at 1 month per year with no cap. A worker who spans both systems gets both calculations added together.
How much notice must you give a Taiwan employee?
Notice rises with service under Article 16 of the Labor Standards Act. It is 10 days for three months to under one year, 20 days from one to three years, and 30 days once service passes three years. You can pay the notice out instead of working it. During notice, the worker may take up to two paid days a week to look for a new job.
When must severance be paid in Taiwan?
Severance must be paid within 30 days of the contract ending, under both the Labor Pension Act and the Labor Standards Act. That covers new-system severance at 0.5 months per year up to the 6 months cap and any old-system service at 1 month per year. Late payment exposes the employer to a labour complaint and a fine.
Is there a separate unfair dismissal payout in Taiwan?
No. Taiwan does not set a fixed punitive payout for an unlawful dismissal. The law works through a closed list of valid grounds rather than a damages tariff. If the employer dismisses without a lawful ground under Articles 11 or 12, the dismissal does not stand. The remedy is reinstatement with back pay, plus the notice and severance that were always due.
What extra steps apply to a mass layoff in Taiwan?
Large layoffs fall under the Act for Worker Protection of Mass Redundancy. Where it applies, the employer must file a written redundancy plan with the local labour authority and the affected workers at least 60 days before the layoffs begin. The plan covers the reason, the numbers, the selection method, and the severance terms. The everyday notice and severance rules still apply on top of these steps.
The Taiwan mistake we see most is treating severance as one flat rate. It is two. A worker hired before July 2005 carries old-system service at a full month per year with no cap, on top of the capped new-system part. Miss the hire date and the final number is wrong before you start.
Taiwan hides a second severance rate behind the headline one. Staff from before July 2005 cost a full month per year, no cap.
Most employers price the 0.5 months new-system rate and stop there.
Check the hire date first. The pension system the worker sits in decides the whole bill.
Get the number right before the conversation starts.
