Newsletter
USE OF RETIREMENT FUND FOR SEVERANCE PAYMENTS
In view of the growing number of disputes where downsizing enterprises are unable to fund worker severance payments, the CLA has recently con-vened a meeting to discuss issues related to making such payments out of worker retirement funds. The meeting passed a resolution recom-mending that where the retirement reserve funds deposited with the Central Trust of China by a company are adequate to meet its existing em-ployees' future entitlement to retirement pay-ments, the company should be allowed to draw on such funds to make severance payments.
However, to protect the rights of existing em-ployees, the amount needed to cover their re-tirement payments must be calculated on the basis of all current employees remaining with the enterprise until retirement. Only any excess over the amount so calculated can be withdrawn for severance payments. Furthermore, such use will require the consent of the retirement fund su-pervisory committee of the enterprise in question, and the approval of the local competent authority. From these criteria it would appear that not many firms will be able to satisfy these conditions.
Because implementing the resolution will re-quire amendments to the Worker Retirement Reserve Fund Allocation and Management Regulations, the CLA will draft amendments to the relevant provisions as soon as possible and submit them to the Executive Yuan for approval.
With the growing tendency for enterprises in Taiwan to operate within a group structure, it has also become common practice for companies to set up subsidiaries which then take over their original personnel. Accordingly, the CLA will allow part of a company's worker retirement fund to be transferred to the retirement fund account of its subsidiary on a pro rata basis, according to the number of employees transferred to the sub-sidiary and their number of years with the com-pany.