Employment in Thailand: Upholding Equity and Compliance for a Stable Workforce

ADCO Law

The major laws of employment in Thailand that shape employment arrangements are Labor Protection Act B.E. 2541 (1998) (“Labor Protection Act”), Labor Relations Law B.E. 2518 (1975) (“Labor Relation Act”) and Civil and Commercial Code.

The Labor Protection Act  provides provisions that aim to protect the rights and benefits of employees. If the employment agreement, work regulation, rule or order of the employer result in the employer being in an excessively advantageous position, the Court shall have the authority to order such employment agreement, work regulation, rule or order of the employer to be enforceable only to the extent that it is fair and appropriate. The Labor Protection Act covers the definition of employer, unfair contract terms, working hours, holidays and leaves, wages, payment of overtime and work on holidays, payment of unused vacations, employment of women and children, discrimination, termination, severance pay, punishment and penalties.

The Labor Relations Law provides the relationship between employers and employees, and procedures to solve labor relations disputes.

Please note that there is no requirement for employment contracts to be in writing. They can be done impliedly or orally.

Employment contracts should include basic elements such as:

1. Position of employment,
2. The roles and responsibilities
3. Benefit packages
4. Compensation
5. Termination requirements

Termination Process

The employer may terminate the contract by providing written notice to the other party on or before the wage payment due date, with no requirement for more than a three-month advance notice.  Nonetheless, the employer may pay wages up to the time of termination of the employment contract specified in the notice, and the employee may be dismissed immediately. (known as “Payment in lieu of advance notice”)

Severance Pay

Employees who have worked for 120 days or more are entitled to severance pay if their employment is terminated without severe cause. The severe causes are stipulated under The Labor Protection Act Law.

Required Payments due to Termination

Normally, if the termination is due to severe causes, the termination will not be subject to advance termination notice and severance pay. It is however still subject to payment of unused annual leave and wages until the employee’s last day of work.

A termination without severe causes will be subject to statutory payments, such as wages until the employee’s last day of work, payment in lieu of advance notice, severance pay, and payment of unused annual leave.

If the termination is without appropriate causes, the termination may be considered unfair dismissal and is subject to additional unfair termination compensation to be determined by the court, or the court may order the employer to recruit the employee back to work.

There are several factors to consider for a severance package:

Severance pay

Section 118 of the Labor Protection Law stipulates that an employer shall pay the following severance pay to dismissed employees, as follows:

Unfair Termination Compensation

If the termination is without appropriate causes, it may be considered an unfair termination and is subject to the court’s discretion to set up unfair termination compensation. Usually, the court will determine compensation for one year working period amounting to one month’s wage; however, it is still on a case-by-case basis.

As such, the industry norm in determining the amount of compensation package for terminating an employee without appropriate causes is to jointly determine the severance pay under the law and the possible unfair termination compensation. Also, the employee is entitled to wages until the last day of work, payment in lieu of advance notice and payment for unused annual leave.

The Labor Protection Act provides provisions regarding criminal penalties for certain non-compliances. Penalties for violations of provisions in the Labor Protection Act range from a fine of between 2,000 and 200,000 Baht, imprisonment from 1 month to 1 year, or both.

To ensure that employers comply with the most up-to-date legal requirements,  employers should update the terms of their employment agreement and work regulations with reference to Thai laws and regulations, which are publicly available on the government website. Additionally, it is also recommended that employers consult with local lawyers to assist with employee recruitment, employment contracts, work regulation updates, and to provide legal analysis on lawful terminations.