Understanding Taiwan Severance Pay
Under Taiwan's Labor Standards Act (LSA), employees whose employment is terminated by the employer — or who terminate the contract themselves under LSA Article 14 due to an employer violation — are entitled to severance pay ("資遣費") based on their length of service and average wage. This calculator helps you estimate your severance benefits under the two pension systems that apply in Taiwan today. Severance pay is an important financial safety net designed to support workers during job transitions.
Severance Payment Rules in Taiwan
Since the Labor Pension Act took effect on July 1, 2005, most employees are covered by the "new system": severance is calculated at half a month's average wage for each full year of service, capped at a maximum of six months' average wage, no matter how many years the employee has worked. Employees who chose to retain their pre-2005 seniority under the old Labor Standards Act system instead receive one full month's average wage per year of service, with no cap. In both systems, an employee who resigns voluntarily is generally not entitled to severance pay.
Calculating Your Severance Amount
To calculate severance pay, the calculator first determines your "average wage" — your monthly base salary plus one-twelfth of your annual bonuses or incentives (a simplified version of the average-wage concept in LSA Article 2). It then multiplies that average wage by the number of months owed under your applicable pension system (new system: 0.5 month per year, capped at 6 months; old system: 1 month per year, uncapped). This mirrors the calculation Taiwan's labor authorities use to determine statutory severance entitlements.
Factors Affecting Severance Compensation
Several factors influence your final severance amount: your monthly base salary, total years of continuous service, the reason for termination, which pension system applies to you, and any performance bonuses or incentive payments you received during employment. Employees with longer tenures generally receive higher severance amounts, though the new pension system caps total severance at six months' average wage. The nature of termination — an employer-initiated layoff, an employee-initiated termination for cause under Article 14, or a voluntary resignation — significantly affects whether severance is owed at all.
How to Use This Calculator
Enter your monthly base salary in the first field, which should reflect your regular wages excluding bonuses. Input your total years of service with your current employer. Select the reason for termination, then select which pension system applies to you — most workers hired after July 2005 are on the new system. Include any annual bonuses or incentive payments you received, as these are averaged into your "average wage" for the calculation. The calculator will instantly display your estimated severance pay and break down how it was calculated.
Important Considerations
This calculator provides estimates based on the Labor Standards Act and the Labor Pension Act and should not be considered legal advice. Actual severance amounts may vary depending on company policies, collective agreements, and the specific circumstances of your employment or termination. For precise calculations or disputes regarding severance pay, consult with a labor attorney or contact Taiwan's Ministry of Labor. Keep all employment records and correspondence to support your severance claim if needed.
FAQ
What is severance pay under Taiwan labor law?
Severance pay ("資遣費") is compensation paid when an employer terminates an employee, or when an employee terminates the contract under LSA Article 14 due to an employer violation. Under Taiwan's Labor Standards Act and Labor Pension Act, it is calculated from your average wage and years of service, using either the new or old pension system.
What is the difference between the new and old pension systems?
Under the new pension system (effective July 1, 2005), severance is 0.5 month of average wage per year of service, capped at a maximum of 6 months total. Under the old system, which only applies to workers who retained pre-2005 seniority, severance is 1 month of average wage per year of service with no cap. Employee resignations generally do not qualify for severance under either system.
Are annual bonuses included in severance pay calculations?
Yes. Annual bonuses and performance incentives are averaged over 12 months and added to your monthly base salary to form your "average wage," which is the base figure multiplied by your months of entitlement. This can increase your final severance amount, so it's important to include them when using this calculator.
Is there a cap on how much severance I can receive?
Only under the new pension system, where total severance is capped at 6 months' average wage regardless of how many years you have worked. Workers who retained old-system seniority have no cap — severance keeps accruing at 1 month per year for their entire length of service.
What should I do if my employer disputes my severance calculation?
If there is a dispute, consult with a labor attorney or contact Taiwan's Ministry of Labor for clarification. Keep all employment records, salary slips, bonus documentation, and termination notices. This calculator provides an estimate based on the statutory formulas but should be verified with official sources for accuracy.