Contingent worker misclassification risk information | Taiwan | Contingent Worker Misclassification Risk Map & Comparison Tool

Is there any specific legislation that determines that contingent workers should be treated as employees for (a) employment, (b) tax/social security or (c) pension purposes?

(a) Yes. Although Taiwan law does not define "contingent workers," Taiwan has specific legislation/rulings for contractors for the gig economy below:

The Guidelines for Determination of A Labor Contract ("Guideline")
Checklist for Determination of Subordination of A Labor Contract ("Checklist")

The critical issue for using contingent workers is that the contingent workers might argue that they are de facto employees of the company rather than contractors ("Misclassification Risk").

The rule for determining whether a worker is an employee or contingent worker is whether the worker is "subordinated" to the company. If yes, the worker is an employee; if no, the worker is a contingent worker.

The Guideline and Checklist above promulgated by the Ministry of Labor set forth the items the labor authority would review to determine the degree of subordination.

(b) No

(c) No

Is there a safe harbor for contingent workers for (a) employment, (b) tax/social security or (c) pension purposes? Safe harbor means being expressly excluded from the legislation or a particular category/classification under the legislation if certain conditions are met.

(a) No

(b) No

(c) No

How clear is the law on classifying contingent workers from an employment perspective, based on a rating of 1-5, with 1 being clear and 5 being unclear?

3

How clear is the law on classifying contingent workers from a tax / social security perspective, based on a rating of 1-5, with 1 being clear and 5 being unclear?

N/A

Are there any new developments coming up in relation to contingent workers? If so, please briefly describe along with the timing.

Nothing specific, but with the rise in digital platform services, we are seeing an increasing global trend in case law and legislation aimed at protecting platform workers' labor rights. For more insight on these developments, along with other employment law updates, click here.

Outline the maximum penalties from an employment perspective.

A finding that an individual is an employee affords them greater employment law rights, including the right not to be unfairly dismissed, the right to statutory redundancy pay, etc. An employee has some employment rights, including holiday, working time, and minimum wage rights. Misclassification will carry higher costs for the employer, potential reputational risk and more restrictions on managing the relationship.

Outline the maximum penalties from a tax perspective.

Penalty of 100% to 300% of the amount of tax (or shortfall of tax) that should have been withheld but was not.

Outline the maximum penalties from a social security perspective.

National Health Insurance

If a company fails to carry out a subscription to this insurance for the employee or their dependents, it shall be punished with an amount equivalent to two to four times of the payable premiums in addition to the unpaid premium.

Labor insurance

A company failing to enroll its employees for employment insurance shall be imposed a fine four times the total of premiums for the period from the date of employment to the date of the actual enrolment or the date of termination of employment.

Outline the maximum penalties from a pensions perspective.

When an employer fails to apply contribution, etc., the employer shall be notified to rectify within a given period; failure to rectify by the end of a given period shall result in a fine of no less than NTD 20,000 (approx. USD 715) but no more than NTD 100,000 (approx. USD 3,571). The fine shall be consecutively imposed every month until it is rectified.

Are there any wider tax compliance risks, e.g., senior accounting officer or corporate criminal offense of facilitating tax evasion?

Yes, if employees are seen to be facilitating the tax evasion of contingent workers, the company could be liable for a corporate criminal offense.

What is the risk of criminal sanctions applying?

Potential for an employer to be liable for a criminal offense if they knowingly facilitate contingent workers' tax evasion.

What are the main employment law risks that may arise for contingent workers?

The critical issue for using contingent workers is that the contingent workers might argue that they are de facto employees of the company rather than contractors.

What are the main tax risks that may arise for contingent workers?

There is no additional tax risk as the company's withholding obligation for the employees and contingent workers are the same.

What are the main social security risks that may arise for contingent workers?

Misclassification risk leading to liability for failure to pay employer social security contributions.

What are the main risks from a pensions (or other regulator) perspective?

Misclassification risk leading to liability for failure to pay employer pension contributions.

Risk commentary - Employment

6

Although the labor authority has promulgated guidelines for classification, there is still room for interpretation. In general, the labor authority tends to interpret the rules more favorably for the workers.

Risk commentary - Pension

6

The risk is for the employer to misclassify employees as contractors and therefore omit its pension obligations.

Risk commentary - Social Security

6

The risk is for the employer to misclassify employees as contractors and therefore omit its social security obligations.

Risk commentary - Tax

1

Taiwan tax law does not treat hiring employees and contingent workers differently. Therefore, there are no special risks in this regard.

Contingent Worker Misclassification Risk Map & Comparison Tool

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