Newsletter
RULING ON CASHING OUT SERVICES YEARS
In an interpretation dated 11 March 2005, the Council of Labor Affairs stated that if a worker and employer wish to make an agreement for the cashing out the employee's service years retained from the old pension system under the Labor Standards Act, they must wait until the new Labor Pensions Act (LPA) takes effect on 1 July 2005, because the labor laws currently in force provide no legal basis for such an agreement.
The interpretation also stated that under the La-bor Standards Act (LSA), a worker's entitlement to the annual leave is calculated on the basis of the number of service years with the employer. However, the Labor Pension Act (LPA) does not provide that the employee's entitlement to annual leave is cancelled by such an agreement, nor does the agreement terminate the employment contract between the worker and employer. Therefore when an employer cashes out under the old system according to the statutory criteria, the employee's service years for the purposes of calculating annual leave entitlement are counted continuously, and thus there should be no ad-verse impact on the employee's right to annual leave.