HR professionals in Taiwan are struggling to deal with a new ‘one mandatory day off, one flexible rest day’ working week, setting the island economy’s labour market at odds with the world’s general trend toward greater flexibility.

Under the new rule, introduced at the start of the year, employees must not work on fixed days off for any reason except during emergencies such as earthquakes and accidents.

Meanwhile, work on flexible rest days must be compensated with 233 per cent of the hourly rate for the first two hours and 267 per cent of the hourly rate for the rest of hours, compared with the previous flat overtime rate of 200 per cent.

In another element of the new rule, penalties for violations of the labour standards act have been raised significantly, although different grace periods apply to sectors. Some fines have gone from TWD300,000 (US$9,800) under the old system to TWD1 million (US$32,700) under the new regime.

This has created headaches for Taiwan’s HR departments, judging by the latest official earnings and productivity statistics released by the government. These showed that average overtime pay increased by nine per cent in the first four months of the year compared to the same period a year before, whereas the average overtime hours stayed unchanged.

“The new rule presents a headache to HR departments because there was a very short lead time from the announcement of this rule through to the date it became effective,” said Shaun Cronin, head of Taiwan at Michael Page. Indeed, the new system was only announced in December last year and began on 1 January 2017.

“It complicates wage cost management and overtime policy, and employers are likely going to need to recruit more workers,” he added.

Dispatch worker agencies may benefit from the rule. According to Cronin, Michael Page expects there to be a positive impact on the temporary recruitment market within the most impacted sectors, namely retail, hospitality and manufacturing. With organisations wanting more flexible work arrangements, temporary positions – which are not covered by the new rules – are likely to grow in number.

“This may have a negative impact on the creation of new permanent roles within these sectors,” he said.

Chun-Nan Liu, Taipei-based HR business partner at international pharmaceutical company AstraZeneca, pointed out that the labour standard act amendment has been reported on intensely by local media, leading to greater awareness of working rights among the Taiwanese.

Speaking to People Management in a private capacity, Liu said that it forces companies to be more compliant with the act.

“I think it is a good trend that the general public is now much more aware of their working rights so that they will talk to employers or even take legal action when they believe they are treated in an unfair way,” Liu said.

Nevertheless, taking a view on the overall economic impact, the American Chamber of Commerce in Taipei (AmCham Taipei), argued that the ‘one fixed day off, one flexible rest day’ policy is a step backward in Taiwan’s aim to transform its industries, as the scheme is better suited to managing “old economy” factory workers and moves away from ongoing efforts to promote services and knowledge-based industries.

“The new labour rules bring needless obstacles to the workings of fledgling start-ups, whose engineers require the flexibility to balance lulls and overtime,” said AmCham Taipei chairman Albert Chang when releasing AmCham Taiwan’s White Paper last month.

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