Taiwan public construction projects routinely have high demand for foreign labor due to a shortage of local laborers willing to undertake high-risk and labor-intensive projcts. Under the current statutory framework, only those public construction projects valued at more than NT$10 billion (approximately US$320 million) can legitimately use foreign laborers to carry out works. Often, only the general contractor of the entire project is able to meet this high threshold to qualify for hiring foreign laborers.
Subcontractors need to meet a NT$1 billion (approximately US$32 million) threshold for the particular contracted portion of a project in order to be eligible to hire foreign labor. Subcontractors of smaller portions of a project, although facing the same labor shortage problem, often find themselves unable to meet this threshold.
In current practice, subcontractors often seek to have the general contractor hire foreign laborers on behalf of and for use by the subcontractors. However, Taiwan's Employment Services Act requires that an employer who hires foreign labor must be the actual employer responsible for providing all required employee benefits, such as labor and health insurance. Therefore, the practice of any general contractor of a public construction projects hiring foreign laborers on behalf of a subcontractor may run afoul of the law. If the general contractor routinely seeks to contractually pass all employer-related responsibilities to the subcontractor who actually uses the foreign laborers, this may further evidence a violation of the Act on the basis that the subcontractor is the actual employer, not the general contractor.
A more compliant way of relieving subcontractors' demands for use of foreign labor is to rely on a 2005 Ministry of Labor (formerly the Council of Labor Affairs) ruling (No. 940500913), which allows foreign laborers hired by a general contractor to be seconded to a subcontractor in the same construction project. In such a case, the general contractor is still the actual employer and bears all the responsibilities and liabilities as an employer. The general contractor may contractually seek indemnification and reimbursement from the subcontractor to protect its interests. It is critical for foreign and local contractors interested in bidding for public construction projects in Taiwan to have a thorough understanding of the availability of and regulations governing the use of foreign labor.