Understanding Labour & Employment Law
What are the different types of employment contracts in Thailand?
Thailand’s employment regulations allow for both fixed-term and permanent contracts, whether in written or verbal form. While it is not obligatory, it is highly recommended to meticulously prepare an employment contract for any new hires in Thailand.
Contracts play a crucial role in safeguarding the interests of both the employee and the employer, minimizing the potential for legal disputes. Notably, the Thai legal system tends to favor employees when a well-defined contract is absent. It is advised against using generic online templates, as they may pose greater risks when hiring internationally, especially if they fail to incorporate specific in-country requirements.
Key elements that should be incorporated into employment contracts include:
- Clear delineation of the employee’s role and responsibilities.
- Specification of benefit packages.
- Outline of compensation expectations.
- Stipulation of termination requirements.
Work hours & overtime compensation
Regular working hours consist of eight hours per day or 48 hours per week, whereas hazardous work involves seven hours per day and 42 hours per week. All employees have the right to a minimum one-hour rest period after working continuously for five hours.
For any hours worked beyond the standard eight hours in a regular workday, employees are entitled to compensation at 150% of their hourly wage. In the case of work performed on a holiday or day off, up to eight hours are compensated at a rate of 200% of the base hourly wage, while any additional hours during these periods are compensated at a rate of 300% of the base hourly rate.
How to hire employees with disabilities?
Public holidays
Employees in Thailand have the right to a minimum of 13 public holidays provided by their employer.
How to hire employee?
Setting up a local entity to hire staff
Using a PEO to be the employer of record
Utilizing the services of a Professional Employer Organization (PEO) proves highly advantageous when you are not yet prepared to commit to establishing a physical presence in Thailand but require a local workforce. A PEO can efficiently ensure full registration of your employees on your behalf.
A PEO is a third-party company with the expertise to hire, manage, and handle payroll for employees in global markets on your behalf, offering the service of an Employee of Record (EoR). The EoR service streamlines the entire process by overseeing payroll, managing benefits, and addressing risk factors associated with your workforce, ensuring your compliance with local regulations and labor laws. Consequently, this arrangement allows you to share all hiring-related risks and obligations without the necessity of establishing a separate local entity.
When you decide to formalize your expansion in Thailand and are prepared to make the necessary investment, you can initiate the incorporation process and smoothly transition your employees from the PEO contractor to your newly registered entity.
What foreign businesses should know before hiring employees in Thailand
1. Employment contracts
Thailand’s employment legislation allows for both fixed-term and permanent contracts, whether in written or verbal form. While it is not mandatory, it is highly recommended to create a comprehensive employment contract for any new hires in Thailand.
Contracts play a crucial role in safeguarding the interests of both the employee and the employer, minimizing the potential for legal disputes. Notably, the Thai legal system tends to favor employees when a well-defined contract is absent. It is advised against using generic online templates, as they may pose greater risks when hiring internationally, especially if they fail to incorporate specific in-country requirements.
Employment contracts should encompass fundamental parameters, including:
- Clearly defined role and responsibilities of the employee.
- Specification of benefit packages.
- Outline of compensation expectations.
- Stipulation of termination requirements.
2. Additional requirements for hiring foreign employees
Before being eligible to recruit foreign employees in Thailand, companies must fulfill certain requirements. These include:
- Official registration in Thailand: the company must be officially registered in Thailand.
- Employee ratio: there should be a ratio of four local employees to one foreign employee.
- Tax ID and VAT registration: the company must have applied for a tax ID and VAT registration.
- Minimum paid-up capital: the minimum paid-up capital requirement varies based on ownership:
- For a company with foreign majority ownership, there must be a minimum paid-up capital of THB 3 million per foreign employee.
- For a company with Thai majority ownership, the minimum paid-up capital is THB 2 million per foreign employee.
- Minimum Salary Requirement: Foreign employees should receive at least the minimum salary as stipulated by the Order of Royal Thai Police No.327/2557.
What do foreigners need to work legally in Thailand?
In order to work legally in Thailand, foreigners must possess a valid visa, specifically a Non-Immigrant B or Business Visa, along with a valid work permit. These documents are essential to ensure legal authorization for employment within the country.
To obtain a non-immigrant B visa, individuals must follow a specific process, which typically involves securing the visa from the Thai Embassy or consulate in their home country.
It is advisable to apply for the non-immigrant B visa at least 30 days before the planned travel to Thailand. Upon approval and issuance of the visa, the individual is granted a temporary stay in Thailand for 90 days.
You will find the full list of supporting documents to be provided in the section dedicated to visas and work permit.
Please note that certain occupations in Thailand are restricted to Thai citizens only, and there are specific requirements that foreigners must meet to apply for certain employment opportunities.
These restrictions are categorized into four lists under the Prescription of the Prohibited Occupations for Foreigners:
- Strictly prohibited occupations for foreigners: these are occupations that are strictly prohibited for foreigners.
- Prohibited occupations with conditions: foreigners may be allowed to work in certain occupations under international agreements or obligations to which Thailand is bound by law.
- Prohibited occupations with conditions for skilled or semi-skilled work: Certain occupations may be prohibited for foreigners unless they are engaged in skilled or semi-skilled work while employed by a specific employer.
- Prohibited occupations with conditions under immigration law: foreign workers may be permitted to perform specific occupations under the conditions of having employers and entering Thailand under agreements between the Thai government and foreign governments.
Are foreign employees entitled to social security in Thailand?
A Thai-registered company employing individuals aged 15 to 60 is required to register and submit their employees’ Social Security Fund applications to the Social Security Office within 30 days from the date the employee commences work with the company.
Additionally, foreigners who are legally employed in Thailand must also register with the Social Security Office. They are entitled to the same benefits as Thai employees under the social security system.
How to terminate employees?
Thailand’s Labour Protection Act guarantees the basic rights of employers, including provisions relating to holiday entitlement, remuneration, overtime, working hours, contributions to funds and procedures for dismissing employees.
An employer is entitled to terminate a contract of employment with an employee for legal reasons. However, if an employee is dismissed without legal grounds, the employer is obliged to pay the employee the compensation provided for by law.
Common termination scenarios
In Thailand, there are two types of redundancy: fixed-term employment or ongoing employment.
1. Fixed-term employment
Fixed-period employment refers to a contractual arrangement that specifies the commencement and conclusion of an employee’s work period. The duration of work under fixed-period employment contracts must not exceed two years.
Such contracts are applicable to the following types of work:
- Special projects outside the regular business or trade of the employer.
- Work with a predetermined schedule for initiation and completion.
- Seasonal work as required by the employee.
Once the stipulated work duration is fulfilled, the contract cannot be extended; otherwise, it loses its classification as a fixed-period employment contract.
Severance pay is not obligatory when terminating a fixed-period contract.
2. Ongoing employment
Termination of employment for roles not under a fixed term can encompass:
- The company preventing an employee from continuing work and receiving basic pay, whether due to the termination of an employment contract or any other reason.
- The situation where an employee cannot work and be paid because the company is no longer able to operate its business.
Notification of the termination of an ongoing employee must be provided by the employer before or on the salary payment date. The termination period starts on this date and continues until the subsequent pay date.
For instance, if a company pays salaries at the end of each month and intends to dismiss an employee on June 30, notification must be given no later than May 30. The same timeline applies if the employee decides to resign.
In cases where companies need to dismiss an employee immediately, they are not required to wait for the termination date and can proceed with dismissal while providing severance pay.
However, certain cases exempt companies from these general rules.
Reasons for employment termination
The Thai Labour Protection Act oversees fundamental rights of employers, including provisions on leave entitlement, compensation, overtime, work hours, fund contributions, and procedures for employee termination.
An employer is permitted to end an employment contract with an employee based on statutory reasons. Yet, if an employee is terminated without a statutory cause, the employer is obligated to provide statutory payments to the employee.
Wrongful dismissal
Wrongful dismissal occurs when an employer terminates or lays off an employee in a manner that infringes upon the employee’s rights as defined by the Labour Protection Act.
If an employer violates the provisions of the Labour Protection Act, they may face fines ranging from THB 5,000 to THB 200,000 and/or imprisonment for a maximum period of one year.
The following circumstances are considered wrongful dismissals:
- Immediate dismissal without a clear and comprehensive explanation of the reason or termination of the agreement without a justifiable cause or provision of severance pay.
- Termination of the agreement without payment for unused annual leave.
- Termination of the agreement based on the (alleged) violation of work regulations by the employee without prior warning.
Notice period
Dismissal procedure for termination without statutory cause
Terminating an employee without statutory causes is a more complex process compared to dismissing an employee with statutory cause. According to Thai labor law, the employer must adhere to the following steps. Employers also have the option to follow additional procedures outlined in the company’s policies.
1. Providing a dismissal notice
The employer is required to furnish a written dismissal notice containing pertinent information, the reason for termination, and the date of dismissal.
2. Notifying the employee in advance
As stipulated in Section 17 of the Labour Protection Act, a written notice must be given at or before the due date of wage payment for it to take effect on the subsequent wage payment date.
3. Paying statutory payments
The employer is obligated to make wage and overtime pay payments within three days after the date of termination. Other benefits, including severance pay, reimbursement for unused vacation time, and payment in lieu of advance notice, must be disbursed on the day of dismissal.
4. Issuing the withholding tax certificate
The Revenue Code mandates that the employer issue a withholding tax certificate for the compensation paid to the employee. This certificate is issued after deducting the withholding tax from compensation resulting from the termination.
5. Issuing a job certification
As per Section 585 of the Civil and Commercial Code, the employer is obligated, upon the request of the employee, to furnish a job certificate. This certificate should encompass information related to the employee’s work history, including the number of years they have been employed by the company.
6. Closing the provident fund
In accordance with Section 23 of the Provident Fund Act, the employer is required to notify the fund manager of the employee’s termination. This notification is essential for the fund to be disbursed to the employee in line with the Articles of Association of the fund. The payout should be completed within 30 days from the membership termination date.
Severance pay
Employment in Thailand can be terminated without a specific cause, and the termination process may be governed by the terms outlined in the employment contract or prevailing labor laws.
| Employment Period | Severance Pay |
|---|---|
| 120 days – 1 year | 30 days salary |
| 1 – 3 years | 90 days salary |
| 3 – 6 years | 180 days salary |
| 6 – 10 years | 240 days salary |
| 10 – 20 years | 300 days salary |
| 20 years and more | 400 days salary |
How much does an employee cost?
Salary costs
1. Minimum wage
The determination of the minimum wage in Thailand takes into account various factors, such as the cost of living, inflation rate, labor productivity growth rate, and other macro and microeconomic considerations. As of October 1, 2022, the new minimum wage for employees in Thailand varies depending on the province and ranges from 354 THB to 328 THB. This reflects regional variations and economic conditions across different areas of the country. It’s important for employers to stay informed about minimum wage updates to ensure compliance with labor regulations in their specific location.
| Province | Daily minimum wage (THB) |
|---|---|
| Chonburi, Phuket, Rayong | 354 |
| Bangkok, Nonthaburi, Nakhon Pathom, Pathum Thani, Samut Prakan, Samut Sakhon | 353 |
| Chachoengsao | 345 |
| Phra Nakhon Si Ayutthaya | 343 |
| Chaing Mai, Khon Kaen, Krabi, Lopburi, Saraburi, Nong Khai, Prachin Buri, Phangna, Nakorn Ratchasima, Trat, Suphan Buri, Songkhla, Surat Thani, Ubon Rachathani | 340 |
| Chanthaburi, Kalasin, Mukdahan, Sakon Nakhon, Samut Songkhram, Nakhon Nayok | 338 |
| Ang Thong, Kanchanaburi, Bung Kan, Chai Nat, Loei, Buriram, Nakhon Phanom, Phayao, Surin, Roe Et, Phattalung, Nakhon Sawan, Prachuap Kiri Khan, Phitsanulok, Sa Kaeo, Petchburi, Uttaradit, Yasothon | 335 |
| Amnat Charoen, Chiang Rai, Chumpon, Chaiyaphum, Kampaeng Phet, Mae Hong Son, Sisaket, Nong Bua Lamphu, Lampang, Lamphun, Mahasarakham, Sing Buri, Satun, Phrae, Sukothai, Ratchaburi, Tak, Nakhon Si Thammarat, Sisaket, Ranong, Phichit, Uthai Thani | 332 |
| Narathiwat, Nan, Pattani, Yala and Udon Thani | 328 |
2. Minimum wage for foreign employees
The prescribed minimum income for foreign employees depends on the employee’s nationality.
| Nationality | Minimum wage / month (THB) |
|---|---|
| Europe (including the United Kingdom), Australia, Canada, Japan and the United States of America | 50 000 |
| Hong Kong, Malaysia, South Korea, Singapore and Taiwan | 45 000 |
| China, India, Indonesia, the Middle East and the Philippines | 35 000 |
| Africa, Cambodia, Laos, Myanmar and Vietnam | 25 000 |
3. Overtime payment
In Thailand, the regulations regarding overtime pay stipulate the following:
- Overtime during Regular Work Hours:
- Employees who work more than their regular work hours are entitled to receive 150% of their hourly compensation for the additional hours worked.
- Overtime on Holidays or Days Off:
- Up to eight hours of work during a holiday or day off are paid at a base rate of 200% of the employee’s hourly compensation.
- Any additional hours worked beyond the initial eight hours during a holiday or day off are paid at a rate of 300% of the base hourly rate.
These provisions ensure that employees are compensated at a higher rate for working beyond their regular hours, especially during holidays or days off. It’s important for employers to comply with these regulations and accurately calculate and disburse overtime pay as per the specified rates.
Paid leave entitlement
In Thailand, employees are entitled to various types of paid leaves after completing one year of service. Examples of leaves provided to employees include:
- Annual Leave: Employees are typically granted annual leave for a specified number of days, which may increase with the number of years in service.
- Sick Leave: Employees are entitled to take paid leave for medical reasons, and this often includes a certain number of sick days per year.
- Maternity Leave: Female employees may be eligible for maternity leave, allowing them time off around the birth of a child.
- Paternity Leave: Some employers may offer paid leave for fathers to support their partners during and after childbirth.
- Public Holidays: Employees are entitled to take paid time off on public holidays recognized by the company or the government.
- Bereavement Leave: Paid leave may be granted to employees in the event of the death of a close family member.
The specific details and duration of these leaves can vary based on the company’s policies, employment contracts, and compliance with labor laws in Thailand. It’s important for employers and employees to be aware of and adhere to the applicable regulations and policies regarding leave entitlements.
Social security contributions
Both employer and employee are required to contribute to the Social Security Fund (SSF), with the current contribution rate set at 5% of the employee’s salary. The calculation takes into account a minimum salary of THB 1,650 and a maximum of THB 15,000. The minimum contribution is therefore THB 83 and the maximum THB 750. Even if an employee’s salary exceeds THB 15,000, the contribution is capped at THB 750.
Employers are required to pay a total of 10% of the employee’s salary into the SSF. All new employees must be registered with the Social Fund within 30 days of joining the company. Conversely, if an employee leaves the company, he or she must be removed from the social fund within 15 days of leaving.
Social security in Thailand covers the following benefits:
- Family allowances
- Death benefits
- Invalidity benefits
- Accident and sickness benefits
- Maternity benefits
- Old-age benefits
- Unemployment benefits