Interpretation of the Definition of “Entry-Level Employees” in TWSE/TPEx Listed Companies (Taiwan)

Pursuant to Article 14, Paragraph 6 of the Securities and Exchange Act (the “SEA”), amended in August 2024, TWSE/TPEx listed companies are required to stipulate in their Articles of Incorporation the allocation of a certain percentage of annual profits for salary adjustments or compensation distribution to “entry-level employees.” According to the Financial Supervisory Commission’s (the “FSC”) Directive No. 1130385442, issued in November 2024 (the “Directive”), the term “entry-level employees” is defined as follows:

1. Individuals who are not classified as “managers” under the FSC’s Directive No. 1120384295, issued on October 4, 2023; and

2. Individuals whose salary level is below a specified threshold. This threshold may be determined by companies based on their operational conditions and industry characteristics but must not fall below the salary level defined for “entry-level employees” under the Regulations Governing Salary Cost Additions and Deductions on Wage Increases for Employees in Small and Medium-Sized Enterprises (SMEs).

In other words, entry-level employees in TWSE/TPEx listed companies are those who do not otherwise hold responsibilities for corporate management or signing authority, and whose rank or title is not any of the following:

• General Manager or equivalent positions;
• Vice General Manager or equivalent positions;
• Assistant Vice General Manager or equivalent positions;
• Heads of Finance Departments; or
• Heads of Accounting Departments.

Additionally, the Ministry of Economic Affairs (the “MOEA”) is tasked with annually announcing the salary level of entry-level employees in SMEs. For instance, according to the MOEA Directive No. 11354001310, issued on December 31, 2024, the average monthly salary for full-time, local employees under indefinite-term contracts in SMEs is NT$63,000. Consequently, when TWSE/TPEx listed companies determine the full-time employees’ salary standard as a specified threshold for identifying entry-level employees, this threshold must be no less than NT$63,000.

Moreover, regarding the “scope of entry-level employees,” TWSE/TPEx listed companies must obtain board resolutions and conduct regular reviews to determine if the scope needs to be adjusted. In addition, the Directive requires TWSE/TPEx listed companies to incorporate, as part of their internal control procedures, the submission to the board for approval of the scope of “entry-level employees” and to periodically assess whether such scope requires adjustment. By the 2025 shareholders’ meeting, TWSE/TPEx listed companies must amend their Articles of Incorporation in compliance with Article 14, Paragraph 6 of the SEA.