2020-11-16

Latest Interpretation of Labor Standards Act / Advance Notice Period & Advance Wages Calculation Standards

Due to Covid-19 causing many corporations to lay off employees, some corporations have chosen to issue advance wages in place of the normally required legal advance notice.  The Ministry of Labor issued an Interpretation Order (Order No. 1090128292A) on 29 October 2020 per Article 16 of the Labor Standards Act, in which it was announced that the advance wage calculation method will be changed to a “dual-track system” under which the employee can select the track that is more beneficial.
 
Pursuant to the provisions of the Labor Standards Act, employers are required to give different periods of notice according to the workers’ seniorities when labor contracts are terminated.  Those workers with seniority of 3 months but less than 1 year must be notified 10 days in advance; those with seniority of more than 1 year but less than 3 years must be notified 20 days in advance, while those who have worked for more than 3 years must be given 30-days notice in advance.  However, the Labor Standards Act also allows employers to pay workers advance wages in place of the aforesaid provision of advance notice.
 
Previously in 2004, the Council of Labor Affairs defined in an Interpretation Order (Order No. 0930005665) the total amount of the advance wages as the daily wage amount stipulated in the labor contract multiplied by the number of days in the advance notice period.  As a result of this latest interpretation issued by the Ministry of Labor, employers are now required to apply the higher of the calculation results of “the salary of the month before the termination of the labor contract” and “the average salary of the six months immediately before the layoff”.  The competent authority believes that the new regulations are more beneficial to workers whose monthly overtime pay has increased significantly, and provide a more comprehensive protection of labor rights.
 
In addition, the Ministry of Labor also clearly defined the calculation method for the period of advance notice.  According to the authority’s interpretation, the period shall be counted from the date on which the employers notify the workers (not including the notification date) until the last date on which the workers should provide labor services in accordance with the labor contract.
 
The Ministry of Labor has stated that the new regulations will take effect immediately and will apply to all workers specified in the Labor Standards Act.
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