Survey of Global Firms in Taiwan Blasts Labor Laws, Warns on Talent

Survey of Global Firms in Taiwan Blasts Labor Laws, Warns on Talent
Photo Credit: Depositphotos
What you need to know

Taiwan-based business leaders from global companies suggest the country is slipping behind in the regional race.

Listen
powered by Cyberon

A survey of overseas companies based in Taiwan highlights the costs of conforming to the 2016 Labor Standards Act (LSA) amendments, difficulty finding talent and weakness in the communication of government policy.

The research, conducted by Australia-based Independent Marketing & Research, polled 201 Taiwan-based executives from companies headquartered in the U.S., Europe and Asia-Pacific on their thoughts about doing business in Taiwan.

Issues with Taiwan’s bureaucracy was ranked as having most impact on business last year, followed by a lack of flexibility and clarity over the amendments to the LSA pushed through in 2016, commonly known as the “one fixed day off and one flexible rest day” policy (一例一休), and frustration at the continued impasse in cross-Strait relations.

Representatives of medical devices, chemicals and pharmaceutical companies were the most vociferous in suggesting that the situation regarding Taiwan's labor laws and cross-Strait relations had regressed in the last three years.

Despite current revenue and profitability appearing stable for overseas firms, and in markedly better shape than Taiwan-headquartered companies, the survey's five-year outlook suggests a downtrend.

Recurring bugbears of businesses everywhere, but especially Taiwan, such as an overly complicated bureaucracy, short-term and voter-led policymaking as well as inconsistent regulatory interpretation were also prominent complaints.

The fact these have appeared many times before on such surveys spotlights Taiwan’s continued lack of progress in liberalizing its economy, bringing into sharper relief fears that Taiwan is slipping behind regional rivals such as Hong Kong, Shanghai, Singapore and South Korea. Many of the surveys anonymous comments also suggested that the ongoing freeze in cross-Strait communication negates Taiwan's advantages as a business hub.

A lack of flexibility attached to the LSA changes was ranked the most severe issue, with many respondents also saying that costs associated with compliance exceeded NT$600,000 (US$20,000), which was the maximum bracket on the survey.

Three-quarters of respondents said they had incurred additional overtime fees, with about a third also registering higher accounting, consultant, legal and staff fees, as well as other costs.

Survey chief Gordon Stewart, a former Nielsen executive who previously conducted a similar poll of American Chamber of Commerce in Taipei members, told The News Lens that the changes had been, “enormously disruptive and occupied an incredible amount of management time.”

“Many [respondents] underscore the same message: ‘We're not happy with the labor regulation or the way that it was communicated,” he said.

The survey gives voice to pressure from the corporate sector likely felt by Taiwan’s Executive Yuan to roll back the changes, as indeed the ruling Democratic Progressive Party succeeded in doing with the January passage of new LSA amendments which are due to come into force on March 1.

The latest changes will undoubtedly reduce businesses’ overtime costs but are more complicated than those they override, leading Stewart to suggest that similar complaints may do the rounds come the end of 2018. Various political parties have suggested they may use new powers to call a referendum on the changes, even as polls suggest the public is divided on the issue and unions lead workers’ rights protests.

Stewart also said that the survey reflects frustration at the Tsai administration’s inability to communicate, as well as inconsistency of regulatory interpretation and a tendency to “shift the goalposts” over issues such as energy policy.

That inconsistency is particularly notable at municipal level, where executives complained of differing interpretations of national laws. “It is clear the municipal governments do not understand environmental laws. Their irrational orders on industry enhance mistrust and often do not enhance environmental improvements,” said one survey comment.

The survey also presented a randomized selection of Tsai administration policy goals and asked respondents to rate the relevance they had to their business and their opinion on the progress made so far as Tsai heads into the second half of her term.

Responses indicated deep dissatisfaction over labor laws and cross-Strait relations, but welcomed progress on expanding the digital economy and efforts to improve Taiwan's Internet of Things industry.

According to Stewart, the sheer breadth of major policy goals available highlight President Tsai’s tendency to “try to do too much and fix everything at once” instead of making significant progress on core issues.

Respondents largely still praised the work ethic and character of Taiwanese employees, but also pointed to difficulty in recruiting talent, with some highlighting a lack of creative thinking and initiative, as well as unsatisfactory English language ability. “The quality of new workforce entrants continues to fall. The competition is not only against others in Taiwan; it is against other markets in Asia,” one commentator said, summing up a worrying series of similar complaints over the shallowness of Taiwan's talent pool and its lack of international exposure.

Taiwan’s issues retaining talent are well documented, but problems finding it in the first place should exacerbate concerns over a skills deficit in the workforce.

Finally, respondents flagged a lack of safety on pedestrian crossings as being the issue they would most like to see local governments and police forces address. The survey noted this was the “strongest negative response we have seen in eight years”.

Full results of the survey can be found here.

Read Next: TAIWAN: New Data Offers Ammo to Labor Rights Groups