The Ministry of Labor issued clarifications on questions concerning whether wages for unused special leave days which are deferred should be included in the calculation of average wages (Taiwan)

2018.4.11
Debby Yu

The Ministry of Labor issued the Lao-Dong-Tiao-Two-Zi-1070130350 Circular of April 11, 2018 (hereinafter, the “Circular”) to clarify questions concerning whether unused special leave days which are deferred should be included in the calculation of average wages.

Article 38, Paragraph 4 of the Labor Standards Act (hereinafter, the “Act”) provides: “For special leaves of workers which are not used due to the close of a year or termination of employment contract, the employer shall pay wages, provided that for unused annual paid leaves at the end of a year which are to be deferred to the following year according to the agreement by the employer and the employee, the employer shall pay wages for the unused days at the end of the following year or upon termination of the employment contract.”  Article 24-1, Paragraph 2 of the Enforcement Rules of the Labor Standards Act is excerpted as follows: “1…(3) if the employer and the employee negotiate deferral to the following year pursuant to the proviso in Paragraph 4, Article 38 of the Law, the calculation and payment shall be based on the wage payable for the original special leave at of the end of the year.”  Article 2, Subparagraph 4 of the Labor Standards Act is excerpted as follows: “‘Average Wage’ means an amount obtained by dividing the total wages for the six months prior to the day on which the reasons for the calculation take place by the total number of days in such period.”   」。

According to this Circular, in case of deferred special leave days agreed by the employer and the employee, the employer shall pay the wage for the deferred special leave days, with respect to the number of unused leave days, at the end of the following year or upon termination of employment contract pursuant to Paragraph 4, Article 38 of the Act and Article 24-1 of the Enforcement Rules of the Labor Standards Act.  As for whether the wage, which is by nature a compensation for the employee’s work on leave days which were not used in the previous year (the previous year for the original special leave), need to be included in the calculation of the average wage should depend first on whether “the end of the year for the original special leave” takes place within six months prior to the day on which the reasons for calculating the average wage take place.  If such timing falls within the period for average wage calculation, since the wage is a compensation for work on unused holidays in the entire year for “the original special leave,” the law is silent about how the wage for how many unused days should be included in the average wage calculation.  The employer and the employee may determine this through negotiation.  If the timing of the end of the year for the original special leave which does not fall within the period for average wage calculation, such wage does not have to be included.