Employees Management

An employee is a person who receives a remuneration, the salary, in exchange for work. In Thailand, employment is a regulated form of work organization. Therefore, an employee has a protected status under the labor law. Salaried employment implies a legal relationship of subordination between employees and the person who employs him.

A system of employees participation in the company’s results is mandatory if the company has at least 50 employees. The employee and the company must pay social security contributions to finance the national social security system. Wages and social security contributions are recorded as expenses in the accounts. Wages represent fixed costs for the company, as the amount to be paid for wages does not vary with the number of goods or services the company produces.

In Thailand, an employer is a natural or legal person who employs another person: the employee. This includes people working for the employer or as an agent of a company. The Labor Protection Act gives a relatively broad definition of the term “employer”. Contractors may also be subcontractors, and they may delegate to other subcontractors the performance of work for them. Along with the third party subcontractors, these contractors are jointly and severally liable for wages, compensation and other obligations owed by the subcontractor. Contractors are also responsible for all social security payments and wages of subcontractors. They must also pay severance and other compensation in lieu of notice. If you hire a subcontractor, you should always think about the financial risk.

According to Article 13 of the Labor Protection Act, in the event of a merger or acquisition of a company, or a change in the person employed as a result of succession or other comparable changes, employment will not be systematically transferred to the new legal entity, but only after the last employee has given his or her explicit consent. The new employer will assume all rights and obligations of the former employer.

Contractors, who entrust someone with the task of hiring people to work in any aspect of their business or production process, will be considered the employers of those employees.

Employers or general managers must comply with their obligations. If they do not, as stipulated in Article 158 of the Labor Protection Law, they will be prosecuted.

The most relevant regulations of the Thai labor law are the following:

Regular/Standard Hours: Under the provisions of section 23 of the Labour Protection Act, the regular working hours are 8 hours per day and 48 hours per week. Some types of work have additional departmental regulations regarding regular hours of work.

Some types of work are subject to additional departmental regulations regarding regular hours of work. The average working hours for hazardous work and work which may present a risk to the health of the employees must not exceed seven hours per day and 42 hours per week (Article 23 of the Labour Protection Act). A catalog of activities subject to this restriction is established by ministerial decree (for example, work involving radiation, chemicals, intense cold or heat).

Time spent working beyond normal working hours is considered overtime, and the employer will have to give a corresponding reward. For more details, see the chapter “Overtime and Work on Holidays”.

The employer must define and announce regular work schedules. If the employer has ten or more employees, he/she must establish and announce the work regulations in writing in Thai language. The work rules must define overtime, vacation, severance pay and disciplinary sanctions. According to the provisions of Section 108 of the Labor Protection Act, the employer must publish these rules at the workplace.

Rest Time: After five continuous hours of work, an employee must be given a one-hour break. If the employee and employer agree, the break time may be spread over the entire workday, but may not be less than one hour in total. If overtime in excess of two hours is scheduled, the employee is entitled to a 20-minute break in lieu of overtime before the overtime begins. This requirement does not apply to work that cannot be interrupted and to which the employee has consented, or to emergencies. If the cumulative rest periods in a day exceed two hours, any time spent in excess of two hours will be considered normal working hours.

The Labor Protection Act provides for three types of vacations:

Weekly vacations: Employees are entitled to a minimum of one holiday per week, and the period between these weekly holidays must not exceed six days. Generally, this holiday is Sunday. In the case of work in a hotel, in the transport sector or in the timber industry, and when work takes place in isolated areas or in other cases stipulated by government rules, employers and their employees may arrange the accumulation of these weekdays at the convenience of the employees. However, the duration of continuous work may not exceed four weeks.

Public Holidays: An employer must provide its employees with at least 13 paid public holidays per year. When a holiday falls on a weekly day off, the employer must give its employees the next day (working day) as a paid holiday. The designated holidays must also include May 1, which is Labor Day, each year. The employer may choose the other 12 holidays from a list of official holidays published by the Thai government. Officially, there are 16 to 17 days per year. The employer may also choose these holidays from other local religious or traditional holidays that are not statutory. For example, a labor ruling states that Chinese New Year may be a holiday. The company must prove that most employers and employees are of Chinese origin or that it is a traditional holiday in the area. It should be noted that this decision can also apply to Christmas Day. Before the beginning of the calendar year, the employer must notify its employees of the days that will be public holidays.

Annual Holidays: When an employee has worked for at least one year, he or she is entitled to six days of vacation per year, and this vacation is paid. An agreement may stipulate the number of vacation days and, in practice, the employee will receive vacation for the first year on a pro rata basis. According to section 30 of the Labour Protection Act, the precise timing of this vacation may be determined in advance by the employer or agreed upon with the employee.

According to the Labor Law of the Kingdom of Thailand, there are different categories of leaves. The Labor Protection Act stipulates six types of leaves as follows:

Sick leave: In case of illness, the employee is not required to fulfill his/her work obligation during the period of illness. An employee must have a minimum of 30 days of paid sick leave per year. In practice, these 30 days of sick leave are calculated in working days (excluding weeks and holidays). If the employee is absent from work for at least three days, the employer may request a medical certificate attesting to the illness. Absences due to an accident at work or maternity leave are not considered as sick leave.

Maternity: In the event of illness, the employee is not required to fulfill his/her work obligation during the period of illness. The employee must receive a minimum of 30 days of paid sick leave per year. In practice, these 30 days of sick leave are calculated in working days (excluding weeks and holidays). If the employee is absent from work for at least three days, the employer may request a medical certificate attesting to the illness. Absences due to an accident at work or maternity leave are not considered as sick leave.

Employers must pay their employees a wage that is not less than the advertised minimum wage. There are two types of minimum wages: the basic minimum wage and the minimum wage for skilled workers. These levels, and their terms, are designed by the wage committee. However, there are exceptions for household work, seasonal agricultural work, workers loading materials onto ocean freight vessels, and other types of work. In 2020, the Wage Committee reported the new minimum wage rates (effective April 1, 2018). The rates range from 330 Thai baht to 308 Thai baht (total of 7 speeds) and differ by province. The provinces with the highest minimum wage rate (330 Thai baht) are Phuket, Chonburi, and Rayong, and the lowest minimum wage rate is in Narathiwas, Yala, and Pattani (3 southern border provinces). In Bangkok, the minimum wage is 325 Thai baht.

With respect to overtime, the employer must allow employees to work overtime or additional hours. However, this requirement does not apply to work that must be performed continuously, that could be affected in the event of a disruption, in urgent cases or in cases specified by ministerial regulations. There are comparable rules for work on public holidays. In a number of areas, particularly in the hotel and service industries, the employer may make an employee work on public holidays. With the employee’s prior consent, holiday work is also possible for production, sales and service purposes. Minors may not work overtime, nor may they work in certain hazardous occupations. Pregnant women may work overtime in certain occupations and only if their health is not at risk. Total overtime and holidays cannot exceed 36 hours per week.

With respect to holiday regulations, employees are quite willing to work overtime because of the increased rate of pay. Working on vacations can be considered as working on designated holidays or on weekly days off. A distinction must be made between overtime worked on regular days and overtime worked on holidays, with overtime over 8 hours per day being considered regular overtime and overtime over 8 hours during vacations being considered vacation overtime. We can categorize overtime and holiday pay levels as follows, based on the employee’s salary:

The explanation for the variation in the rate of pay for work performed on holidays (weekly days off) is that the law considers that an employee who receives a monthly salary is already receiving weekly compensation pay. Therefore, that employee receives only one additional rate of pay for work performed on holidays.

A foreigner who intends to undertake activities under the provisions of the FBA has to do so through:

The Labor Protection Act stipulates two types of contracts regarding employment in the Kingdom of Thailand: open-ended contracts and fixed-term contracts. In the case of fixed-term contracts, these contracts are terminated without the need for a notice period. On the other hand, a Thai labour court has ruled that an agreement containing a clause stipulating that a fixed-term contract may be extended under certain circumstances may be considered an agreement providing for an indefinite period of employment. The stipulation of a trial period in a fixed-term contract also transforms the contract or agreement into a contract of indefinite duration.

In contrast, open-ended contracts or agreements require prior formal notification to terminate such a contract or agreement. Thai law provides that the employer must give notice of termination no later than the time of payment of wages to take effect at the time of the next payment, if there is no agreement on any notice period.

The notice requirement takes effect from the start of employment. This means that termination is only valid during the trial period if the notice period is observed. Therefore, a clause in an employment contract providing that the employment contract may be terminated during the trial period without notice is null and void. The purpose of this rule is to give employees time to look for a new job in order to ensure a stable income.

However, the employer may also choose to pay the employee the full remaining salary and terminate the employee immediately. This is called “payment in lieu of notice”. However, in the event of a serious breach of the employment contract or gross misconduct by the employee, no notice of termination is required. The employer may terminate the contract immediately.

If an employer terminates an employee’s contract, the employee is generally entitled to receive severance pay. The employee may receive severance pay at a rate that depends on the period of employment. The following are the different rates set out in section 118 of the Labour Protection Act.

According to the provisions of Section 119 of the Labor Protection Act, when the termination is due to the employee’s fault or wrongdoing, the employee cannot receive this severance pay. The following are the various reasons:

If the employer has to terminate the employment contract due to a serious breach of the contract or agreement by the employee or other serious reasons mentioned in the Labor Protection Act, the employer must state the reasons in detail in the termination notice. Otherwise, the employer will not be able to invoke these grounds in a lawsuit. In addition, it is wise to secure the termination by sending warning letters first. If the employee repeats the same misconduct within one year, the employer may terminate the employee’s employment. The warning letter must state the circumstances of the misconduct and indicate that a repetition of such behavior will result in further sanctions or termination.

At the end of an agreement or a fixed-term contract, the employer must pay severance pay according to the above scheme. There is an exception to this rule if the fixed-term employment concerns specifically defined project work, temporary (seasonal) work or comparable activity for a maximum of two years.

In the case of a termination of employment that is not due to the employee’s fault or wrongdoing, the employer is obligated to pay the remaining annual leave on a pro rata basis.

In case of an employment contract termination, the employee may challenge the termination before the labor court. The labor court has the right to rule that the termination is unfair and to order the employer to reinstate the employee under the same conditions. If reinstatement is not possible, the court may require the employer to pay compensation for unfair dismissal, as provided under Thai law.