退休年齡延長，企業應及早準備

Plan Ahead on Retirement Age Change from 60 to 65

In order to plan for the aging society, on April 25, 2008, the Legislative Yuan in Taiwan passed the third reading of revised Article 54 of the Labor Standards Law (LSL), which is expected to be promulgated by the President and enforced shortly. This revised regulation increased the mandatory retirement age from age 60 to 65 while other retirement criteria remain unchanged. The details of the LSL retirement criteria are listed below.

Taiwan’s workforce structure is expected to change along with this amendment. In the future, manpower resources offered by middle-to-senior age people may be better utilized and may reduce the pressure of labor shortage caused by low birth rate in Taiwan. However, companies may need to deal with the raising operational cost, and the fierce competition of talents among scarce workforce market.

From the standpoint of employee benefit, the extended mandatory retirement age is believed to benefit most employees. Not only does a worker earn 5 more years’ salary opportunity, but he/she can continue to gain pension benefit. Nevertheless, some employees who plan to be made retired at age 60 and receive a lump sum benefit will have to work for some more years, if voluntary retirement is not applicable to them.

From the standpoint of company's operational cost, to extend retirement age to 65 will eventually add on the company’s pension cost, as accumulating service year accruals will increase the company’s possible retirement benefit payment in the future. Nevertheless, this situation may not apply to all companies. Actuarially, some companies may even enjoy pension cost reduction, due to having longer period for accounting amortization and pension reserve preparation.

From the standpoint of workforce structure in organization, raising the mandatory retirement age can be beneficial for companies with greater workforce requirement or those facing workforce gap. However, for companies with minor recruitment difficulties and/or intend to keep healthy employee turnover may face unwanted issues such as ageing organization, decreasing production effectiveness, and vague promotion opportunities due to the prolonged service years of senior managerial levels. Given such, it is critical for companies to re-assess the workforce structure in order to diminish the aforementioned negative impact. Besides, an early retirement program (including amendment of voluntary retirement criteria) may also be considered to avoid limited promotion opportunities and smooth down talents’ career development issues, which could eventually hinder the development of business. For companies facing workforce gap, if the extended mandatory retirement age cannot solve such issue, a phased-in retirement program may help the organization to transmit the experiences and skills among the company.

Companies are recommended to take the “Evaluate and Communicate” strategy to cope with this labor-law change. Firstly, companies should study the impact on organization, concerning cost increase, company’s ability to attract and retain talents, as well as the potential influence on different degrees of ageing organization. Secondly, management levels and headquarters should be fully communicated on the abovementioned issues. For companies with higher average age and longer service years are suggested to plan as soon as practical since they are more likely to be influenced by this amendment.

Watson Wyatt will continuously provide our professional insights and recommendations regarding the impact to your organization brought by this amendment.

We are always pleased to receive your questions, comments, and suggestions concerning this newsletter. Our contact information are as follow:
Chris Lin: (886) 2-2718-3314 ext. 605
KoChien Hsu: (886) 2-2718-3314 ext. 610