Complete Guide to Employee Termination Costs in Taiwan (2025)

Under the new Labor Pension Act (applicable to employment after July 1, 2005): severance = 1/2 month's average wage per year of service, up to a maximum of 6 months' average wage. Under the old LSA system (employment before July 2005): severance = 1 month's average wage per year of service with no cap. Many long-tenured employees have entitlements under both systems calculated separately and added together.

Average wages include all regular compensation received in the 6 months preceding termination, divided by the number of days in that period.

The LSA requires advance notice of termination: 3 months to 1 year of service = 10 days, 1-3 years = 20 days, 3+ years = 30 days. Employees are entitled to 2 hours per week of paid job-search leave during the notice period. Employers must also pay prorated year-end bonuses (if contractually required), accrued but unused annual leave, and any outstanding wages.

Taiwanese employers commonly offer outplacement services (TWD 30,000-80,000), extended health insurance (TWD 3,000-6,000/month for 3-6 months), career transition training (TWD 20,000-50,000), and reference letter guarantees. Mental health counseling and gardening leave are also increasingly common.

For a Taiwanese employee with 8 years post-2005 service earning TWD 60,000/month: severance = TWD 60,000 x 0.5 x 8 = TWD 240,000. Adding 30 days' notice pay (TWD 60,000), prorated bonus, accrued leave, and supplementary benefits, total costs can reach TWD 350,000-400,000.

The Msure Layoff Calculator models these costs accurately, including dual-system calculations for employees with service under both the old and new pension systems.