What you need to know
Have you ever wondered whether you are paying the correct amount in insurance and pension contributions every month? This handy guide will help you find out.
By Chang Feng-yi (張烽益), Executive Director of Taiwan Labor and Social Policy Research Association (TLSA)
Every employee is eager to receive their first wage slip after working in a new job for the first month – but on their slip, they will discover that a percentage of their salary has been deducted for things like labor or health insurance. Because this is mandated by law, many people feel this is normal and do not make a serious effort to check and make sure the amount withheld is correct – nor do they always understand why the money is withheld, and what sort of benefits they receive from paying this tax.
Many employers know this. It is common for employers to meddle with these mandatory, government levied taxes by under-reporting salary amounts, making employees pay fees that should be covered by their company, or not paying employees at all – all of which save costs for employers, but violate the rights of employees.
Every employee should carefully check the deductions from their pay check for accuracy to make sure their statutory rights are not violated. If you’re wondering how to do this, here’s a short guide to help you out:
Labor insurance is mandatory from the first day of work
According to the terms of Taiwan’s Labor Insurance Act, any employer with more than five employees must include new staff members in the labor insurance roll from their very first day of work. Everyone in the company must be covered – including employees on three-month probation periods, part-time staff, and even summer interns.
Labor insurance in Taiwan is critical for employees as it covers occupational injuries, childbirth, hospitalization, disability, death and old age. If employers fail to cover their workers from day one, they are breaking the law.
But exactly how much should I pay for labor insurance? Are my deductions correct?
Fear not: It is easy to check this yourself. At present, the rate for labor insurance premiums is 9.5 percent, plus 1 percent for employment insurance – an amount equivalent to 10.5 percent of your salary.
Of this 10.5 percent, your company is on the hook for 70 percent. Another 20 percent comes out of your pocket, while the final 10 percent is covered by the government.
Taiwan’s minimum monthly salary is NT$22,000 (US$716) – scheduled to increase to NT$23,100 (US$752) on Jan. 1, 2019. The minimum wage is classified as a Grade 1 labor insurance salary. There are 17 grades altogether – the highest, Grade 17, peaks at NT$45,800 (US$1,491).
If we use a NT$22,000 salary as an example, then the employee must pay NT$462 (22,000 x 10.5 percent x 20 percent) per month. The employer must pay NT$1617 (22,000 x 10.5 percent x 70 percent) per month.
For those working on a part-time basis, the Labor Insurance Bureau allocates nine insurance salary grades between NT$11,000 and NT$22,000. Therefore, if the salary of the insured is NT$11,000, they must pay NT$231 per month and their employer must pay $809.
Have I overpaid for my labor insurance?
Employees can use their own salaries to check whether their companies are paying their fair share – or trying to evade paying their part of the insurance premiums by declaring an amount less than the employee’s salary. (For instance, declaring the NT$22,000 insurance salary grade for a worker who makes NT$35,000.)
Most workers do not notice if their company is tinkering with the numbers, unless they have tried working it out for themselves – or worse, they find out once they try to claim compensation for any of the services covered and realize their employer has failed to make their legally required contributions.
Anyone can check with the Labor Insurance Bureau and ask for their personal insurance payment records to make sure this has not happened to them. Of course, this may lead to disputes due to different opinions on official terminology – for example, whether certain financial allowances need to be included in the final wage.
We can also refer to the Labor Standards Act (LSA). In Article 2, paragraph 3, it defines the two important criteria for judging if someone is receiving a wage: “the remuneration which a worker receives for his/her services rendered” and “regular payments.”
Oh no... I’m paying too much! Why is this happening?
There are two possible reasons:
First, it is possible that the employer has included a worker into an occupational union, completely ridding the employer of responsibility. Members of a trade union usually have “no definite employer” or are “self-employed,” but can claim and pay into labor insurance through the union.
However, in cases like these, workers are instead responsible for 60 percent of the taxes, and the government is responsible for 40 percent.
If employers use these illegal means to secretly skip out on making insurance payments, it means workers will pay three times the premium – while the employer pays nothing.
Second, it is possible that the company makes an employee pay the 70 percent rate that the employer is obliged to pay, on top of the 20 percent the worker already pays from their own wages – leaving the employee paying 90 percent, 4.5 times the amount they should.
Should my pension contribution from my employer be deducted from my salary?
In July 2005, Individual Labor Pension Accounts were included in the Labor Pension Act. The new regulations stipulate that if someone is employed in a company and covered by the LSA, then employers must pay at least the equivalent of 6 percent of the worker’s monthly salary into the employee’s Individual Labor Pension Account.
Under the LSA’s old pension scheme, the employer set aside between 2 percent and 15 percent of a worker’s wage and put it into the company’s pension reserve fund account every month. Only after working for said company for 25 years and meeting all retirement criteria would an employee receive their pension.
However, because of the high rate of labor mobility, the 12-year average lifespan of Taiwanese companies, and insufficient contributions by employers, many workers wound up not having a pension fund to retire on. The old pension scheme was thus reformed into personal ownership accounts with mandatory monthly employer contributions.
Pension contributions under the new system are exclusive of your monthly salary, and they are your employer’s responsibility. Employees should confirm with their companies that the 6 percent is not being withdrawn from their own salaries.
For example, if an employee’s salary is NT$30,000 (US$977), the employer must make an additional NT$1,800 (US$58.60) deposit into the worker’s labor pension account.
Besides the 6 percent employer contribution, staff members can also make voluntary added payments into their accounts of up to 6 percent. However, the volunteered amount from workers must be clearly distinguished from the employer’s legally mandated contribution.
How much do I have to pay for National Health Insurance?
Employees also must pay for National Health Insurance every month. This will also appear on your paycheck – and again, you should check whether the amount deducted is correct.
At present the rate for health insurance is equivalent to 4.69 percent of your salary – where 60 percent is covered by your employer, and 30 percent is covered by you, multiplied by the number of dependents in your household.
Using a monthly salary of NT$30,000 (US$977) as an example, the salary comes under Income Tier 8 (ranging from NT$28,800 to NT$30,300), under which the health insurance premium for employees is NT$405 (US$13.19), or NT$810 (US$26.37) if they have one child to support.
Employees should also verify whether this number is correct because, again, if the amount does not match up, then it may mean your company is under-declaring your actual salary or reporting you as part of an occupational union – which would mean you are being subjected to the same tax premiums as before of 40 percent from the government and 60 percent from your own pocket.
If you go to the doctor’s office and discover that your health insurance card suddenly doesn’t work, it is very likely that your company has not paid your health insurance premiums and owes a backlog of payments to the Ministry of Health and Welfare.
If you catch your company doing this, you must pay extra attention to your employer’s operations. There are many unscrupulous enterprise owners who will first stop paying the social security increases, then take the next step of withholding wages from employees, then end by finally ceasing operations and fraudulently declaring bankruptcy. If your health insurance card doesn’t work, this may be a precursor to bankruptcy fraud – so pay close attention to these payments!
So what else should I know?
One important thing to remember: If someone’s take-home salary is lower than the minimum wage after the deduction of these insurance amounts, it does not mean their employer has broken the law. These are fees that all working citizens must pay for themselves.
Most employers only deduct what is necessary and transfer those amounts as requested by the government. Nevertheless, it is the employee’s responsibility to clearly account for all of the numbers that appear on their wage slip and double-check if their employer is paying or deduction the correct amounts, rather than offloading those fees on staff members.
Overall, social security is a corporate social responsibility. Every enterprise must provide this to its employees so they have the basic insurance to cover the risks of serious injury and sickness, sudden unemployment, and other occupational hazards. Therefore, every staff member should pay close attention to their wage slips and check the amounts being withheld.
This article originally appeared on the Chinese-language Taiwan edition of The News Lens. The original can be found here.
Translator: Zeke Li
Editor: Nick Aspinwall (@Nick1Aspinwall)
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