Hiring in Taiwan: labour law for Italian employers

How employment is classified: substance over naming

Italian practice leans toward treating overseas arrangements as consultancy or agency, especially in a small team with a country manager and a sales engineer or two. This is neither unusual nor obviously wrong under Italian law; it is familiar and light. Taiwanese labour law sees it differently.

In Taiwan, the classification of a working relationship is decided by its substance, not by what the contract says. An arrangement that operates as employment is employment in law, regardless of whether the paperwork calls it agency, consultancy, independent contracting or a fixed-term service agreement. The labour authorities will not accept a contract label as a defence; they will examine how work is actually performed and who controls it.

This matters because the consequences of misclassification are substantial and retrospective. They arise not when the relationship ends, but when an inspection occurs, when the individual makes a complaint, or when the arrangement later fails and is litigated. By that point the employer's exposure runs back years.

The factors that define employment rather than independent contracting

Taiwanese labour law looks to several factors to determine whether a relationship is employment. No single factor is decisive, but together they paint a picture of dependence and subordination that points toward employment.

Control over the manner and hours of work is the weightiest. If the employer dictates when, where and how the work is performed, and the individual answers to a supervisor, that points to employment. Integration into the organisation is the next significant factor: does the individual work only for you, use your premises and equipment, and work as part of your team? An integrated worker who works only for you looks like an employee. Exclusivity and economic dependence cut the same way: an individual who must work only for you and cannot take on other clients is economically dependent on you in a way that signals employment.

Provision of tools, premises and equipment is a practical marker. If you supply the office, the computer and the tools, the individual depends on you for the means of production. If they bring their own setup, they look more independent. The summary of these factors is economic dependence: if the individual's income depends entirely on you and they cannot easily leave without losing their income, the relationship is likely employment regardless of the contract label.

What goes wrong when a long-term arrangement is reclassified

A country manager or sales engineer hired on an agent or consultancy contract for two years may perform the role in a way that looks exactly like employment: based in your Taiwan premises, reporting to you, working set hours, using your equipment, exclusively on your business. The individual does the job and does it well. The arrangement works.

At some point, the individual files a labour dispute, or a factory inspection occurs and discovers the arrangement, or the relationship ends and the individual claims they were wrongfully dismissed as an employee rather than disengaged as a consultant. The labour authority or court examines how the work was actually done and concludes it was employment.

Once that reclassification is made, the employer is liable for years of unpaid labour insurance contributions, health insurance contributions, pension fund contributions and employment insurance, all calculated from the start of the relationship. The individual is entitled to statutory severance. The employer may owe damages. This is not a fine applied going forward; it is a debt that accrues retroactively from day one.

Small teams take the risk lightly because they are far from a labour inspection and the individual is trusted and well-treated. That obscures the exposure. The cost of reclassification, even with a small team and a short tenure, is typically substantial. It is enough to create serious financial exposure for a small office.

The employment contract: indefinite is the rule, fixed-term is the exception

Taiwanese law presumes employment is indefinite unless there is a specific statutory ground for a fixed-term contract. The grounds are narrow: the contract may be fixed-term if it is for a specific project with a defined end date, or for replacement of another employee on leave, or for a seasonal or temporary need with a genuine end point. A contract for 'the duration of an employee's satisfactory performance' does not qualify.

In practice, many Italian employers treat first hires as probationary or temporary arrangements that can be ended quickly if the fit is poor. Taiwanese law does not support this by contract. You can offer a fixed-term contract only if you have statutory grounds to do so; if you do not, the contract is indefinite regardless of what you intended.

An indefinite employment contract is not the same as an employment-at-will relationship. The individual can resign at any time with notice, but the employer cannot simply end the arrangement at will. Termination requires grounds and severance, which are covered below.

Statutory leave, public holidays and time off

All employees accrue annual leave that increases with length of service. The amount is set by law and changes annually. Leave accrues from day one of employment, not after a probation.

Public holidays in Taiwan are numerous and are set administratively each year. If work is required on a public holiday, the employee is entitled to additional compensation or a replacement day off, not merely pay for the day itself. Casual disregard for public holidays is a compliance issue that draws attention from labour inspectors.

Employees are also entitled to bereavement leave, marriage leave, and maternity or paternity leave, all set by statute with specific durations. These are not negotiable and not discretionary. An employer cannot waive them in contract or substitute other arrangements; the statutory minimum applies.

Working time, overtime and rest days

Taiwan sets maximum weekly working hours and requires minimum daily and weekly rest. These are enforced. An employer cannot contract out of them, and exceeding them without proper overtime payments or compensatory time is a violation.

Overtime work is permitted but is subject to both hour caps and compensation requirements. Working over the legal maximum requires additional pay or time off in lieu, and both are subject to limits set by statute. Voluntary agreement by the employee to work overtime for no extra pay does not make it legal.

This is particularly worth noting for a small overseas team whose working pattern may drift toward always-on responsiveness to the home office or continuous coverage of markets. What is feasible with a trusted colleague in Italy may be unlawful with a Taiwanese employee.

Mandatory contributions: the real cost of employment

When an Italian employer calculates the cost of hiring someone in Taiwan and settles on a salary, that salary is not the total cost. Taiwan requires contributions to four insurance and pension schemes, all mandatory and all borne by the employer in addition to salary.

The first is labour insurance, which covers work-related injury. The second is health insurance, which is national and universal. The third is a government-administered pension fund. The fourth is employment insurance. All four are calculated as percentages of salary and remitted monthly to the government.

For a small team, the practical effect is that the real cost of an employee is substantially higher than the monthly salary. An employer planning to hire on the basis of salary alone will discover a shortfall in the first payroll.

These contributions are not a choice or a benefit arrangement. They are statutory and they are inescapable for any employee. Avoiding them by misclassifying the individual as a contractor reintroduces the reclassification risk discussed above.

Dismissal: grounds, notice and severance

An employee cannot be dismissed at the employer's pleasure. Dismissal requires a statutory ground, written notice of a specified length and severance calculated at a rate set by law and depending on length of service.

Statutory grounds include serious misconduct, repeated minor violations despite written warning, incompetence after a reasonable opportunity to improve, and force majeure making the job impossible. A disagreement over strategy, a personality conflict, or a change in business needs do not constitute grounds.

An employee also has the right to resign, and if they do, the employer has no severance obligation. If the employer terminates, severance is mandatory. These are not negotiated in a mutual termination; they are statutory entitlements. Italian small businesses often operate on a basis of mutual respect and informal understanding within a trusted core team. Taiwanese labour law does not delegate these decisions to mutual consent or good faith. The grounds, notice and severance are set by statute, and dismissal and worker classification should not be attempted from a guide; seek legal advice before the first termination.