Summary of Thai Labour Law – Labour Protection Act (1998)

When managing a business in Thailand with employees, senior management should pay attention to the Labour Protection Act (1998) (“LPA”) and its related Ministerial Regulations given the broad impact it has coupled with the legal penalties which can be imposed on them should they breach this law. This article addresses several of the most important aspects of this Act and its Regulations.

Work Rules

When Required: Employers with ten or more staff must have the work rules prepared in Thai language with a copy to be held at the place of business operations or the employer’s office.

If the Employer has announced the application of Work Rules in accordance with the LPA, even if later the number of employees reduces to be less than ten persons, the Employer must still continue to comply.

Amending the Work Rules: If there is an amendment to the work rules, the Employer must announce such amended work rules within fifteen (15) days from the date of the application of the amended work rules.

Notification/Publicizing of Work Rules: Relevant employers must ensure that they disseminate and openly post the work rules at the place of work.

Minimum Requirements of Work Rules: Work rules must at a minimum must address the following issues:

1. Working days, working hours and rest periods;
2. Holidays and rules related to taking holidays;
3. Rules related to overtime and work on holidays;
4. Date and place of payment of wages, overtime, holiday pay and holiday overtime pay;
5. Leave and rules for taking leave;
6. Discipline and disciplinary actions
7. How to submit a grievance – this must include several things including scope & meaning of the term ‘grievances’, procedure for submission of grievance; investigation and consideration, procedures for settlement of grievance and protection of person submitting the grievance and other persons involved (see section 109 of the LPA).
8. Employee termination, severance pay and special severance pay.

The work rules may go beyond the abovementioned topics but the above is the minimum which they must cover.

Work Rules & the Department of Labour Protection and Welfare:

Previously the LPA required employers who employ ten or more employees to submit work regulations to the Department of Labour Protection and Welfare for their review. To lessen the administrative burden on employers, an amendment to the LPA has passed in 2017 which provides that employers who have hired 10 or more employees are now only required to prepare, announce and keep at their workplaces a copy of their work regulations which can be made readily available for inspection by labour officials upon request. It is no longer necessary to submit a copy of the work rules (Thai version) to a local labour office for the government’s review and approval.

Employee/ Staff Register

Key Requirements: Employers must prepare a register of their employees in Thai language that will need to be held at their place of business operations or their office such that it is ready for inspection by Labour Department officials during business hours.

The staff register must provide the following details for each staff member:

• Name and family name;
• Gender
• Nationality;
• Age or Date of Birth;
• Residential Address;
• Date of Commencing Employment;
• Position/ Job Responsibility;
• Wage or other remuneration;
• Date of termination (if applicable).

Updating Staff Register: Employers must update their staff register within fifteen days of an employee starting employment. If an employees’ details change during their employment, then the employer must update the register within fifteen (15) days from the actual date of such change or within fifteen (15) days from the date the employee informed them of such change.

Time Limits for Retention of Staff Register Information: Following termination of an employee, their employer must retain the employee’s details on the register for at least two (2) years from the date of termination. If there is a lawsuit, labor dispute concerning labour relations with respect to an employee, then the register on the concerned employee must be retained by the employer until the issuance of a final order or judgment concerning the matter.

Work Breaks

Note: Rest periods for young workers (see also Ministerial Regulation No. 7 and 12 for certain types of employees)

Minimum Work Breaks: On workdays employers must arrange for their employees to have a rest period of not less than one (1) hour per day after the employee has been working for not more than 5 consecutive hours. However, employers and employees[1] are able to agree in advance that a rest period shall be less than one hour but when combined together with other breaks/ rest periods taken during the day, the staff must have at least one hour of rest during each working day.

Work Break before Overtime: When overtime is to be performed continuously for at least two hours in excess of normal working hours, an employer must arrange for their employee(s) to have a rest period of at least 20 minutes prior to the employee(s) commencing such overtime work. However, this rule doesn’t always apply; for instance, it will not be applied if the employee agrees otherwise and the employee is performing work which because of its characteristics or nature must be performed continuously or the work is emergency work.

Working Hours

Requirement for Notifying Work Hours: Employers need to inform their employees of the normal hours of work i.e. the start and finish times (this is normally done in the employment contract or the work rules). However, if this isn’t possible due to the nature of the work then the employer and employee are able to make an agreement to fix the working hours for each day.

Working Hours & Pregnant Women: Pregnant women are not allowed to work between the hours of 10 pm and 6 am, except where the employee works in a position of an executive, professional or their work relate to administration, finance or accounting. In such cases, the employer is able, from time to time, to request the pregnant employee to work overtime on a working day to the extent that it doesn’t affect the health of the pregnant staff member and as long as the employee agrees in advance.

Limits on Working Hours: Ordinarily an employee is not permitted to work more than 8 hours per day whilst the total hours of work in one week must not exceed 48 hours. However, if the working time on any day is less than 8 hours then the employer and employee may agree to add the balance of working time to the working time on another working day subject to the condition that it shall not exceed 9 hours a day, nor can the total hours of work in one week exceed 48 hours.

Workers engaged in professional or technical work, administrative or management work, clerical work, trade or service occupation: Employers of workers engaged in professional or technical work, administrative or management work, clerical work, trade or service occupation should be aware of Ministerial Regulation No. 7 (1998) as it enables employees and their employer to agree on the normal working hours which can be set at any number i.e. ten hours a day, subject to the requirement that the total working hours in one week don’t exceed 48 hours.

Working Hour Limits for Certain ‘Hazardous’ Jobs: However, for those jobs defined as being hazardous to the health and safety of the employee under Ministerial Regulation No. 2 (1998) including:

(1) work that must be conducted underground, underwater or in an unventilated place;

(2) work involving radioactivity;

(3) metal welding;

(4) hazardous substance transportation work;

(5) hazardous chemical production;

(6) work involving the use of equipment or machinery which exposes the worker to vibrations which may be harmful; and

(7) work involving extreme heat or cold that may be harmful;

these employees must not work in excess of 7 hours per day whilst their total hours of work in one week must not exceed 42 hours.

Overtime

Employee Consent & Overtime: The LPA provides that employers are not permitted to tell an employee to work overtime on a working day unless the consent of the employee has first been obtained. However, in cases where the characteristics or nature of the work requires the work to be performed continuously, such that if there is a stoppage it will cause damage to the company, or where the work is considered emergency work, an employer can order their employees to work overtime to the extent necessary.

Staff Under 18 Cannot Perform Overtime: Employees under 18 years of age are not permitted to work overtime.

Persons not entitled to overtime: Those categories of staff not entitled to overtime are as follows:

An employee who is authorized or assigned by an Employer to perform any of the following work shall not be entitled to overtime pay under Section 61 and holiday overtime pay under Section 63, but the employee required by the Employer to perform work as provided in item (3), (4), (5), (6), (7), (8) or (9) below shall be entitled to receiving remuneration in money equivalent to the hourly wage rate of a working day for the number of hours of work done:

(1)       an employee who is authorized to act on behalf of the Employer in

regard to the employment, granting of pension or termination of employment;

(2)       an itinerant vendor or person inducing the purchase of goods who

the Employer pays a commission to from the sale of goods.

(3)       railway service operation including work on a railway carriage and work

for facilitating a railway transportation;

(4)       work of opening or closing of a watergate or sluice gate;

(5)       work of indicating of water levels and measuring of water volume;

(6)       work on firefighting or prevention of disaster;

(7)       work of which nature or condition must be performed outside of

the premise and the definite working time may not be fixed;

(8)       work on watch keeping of premise or property which is not a regular

duty of the employee;

(9)       any other work as prescribed in the Ministerial Regulations.

Note: The exception for the above is where any Employer agrees to pay overtime or holiday overtime payment to the employee.

Overtime & Pregnant Employees: In the case of pregnant staff an employer is able to have a pregnant staff member who is an executive or who performs technical, administrative, financial or accounting work to work overtime on a working day as long as the employee gives their consent.

Maximum Limits on Overtime: The overtime hours worked by an employee under the LPA, in aggregate are not permitted to exceed 36 hours in a week.

Overtime Rates: For monthly staff overtime on a normal working day is 1.5 times the normal hourly rate. However, on a weekly holiday (such as Sat or Sun depending on what is declared as the weekly holiday) or a public holiday, the overtime rate is 3 times the normal hourly rate of the employee. The overtime rate of (3 x) will only start after the normal working hours, during normal working hours on Holiday the rate is 2 x.

Overtime Rates for Normal Monthly Salary Staff

Pay Rates for Overtime on Holiday: If an employer requires an employee to work overtime on a Holiday, the employer must pay the employee holiday overtime pay calculated at the rate of three times (3 x) the normal hourly wage rate for the overtime hours worked on such Holiday.

Breaks Before Overtime: When overtime is to be performed continuously for at least two (2) hours in excess of normal working hours, an employer must arrange for their employee(s) to have a rest period of at least 20 minutes prior to the employee(s) commencing such overtime work. However, this rule doesn’t always apply; for instance, it will not be applied if the employee agrees otherwise and the employee is performing work which because of its characteristics or nature must be performed continuously or the work is emergency work.

Hourly Wage Rate & How to Calculate: The hourly wage rate for monthly employees is calculated as follows: (monthly salary/30 days) divided by 8 hours. Hence if an employee had a monthly salary of 100,000 baht, his hourly rate would be calculated as follows: (100,000/30) divided by 8= 416.66 baht per hour.

Working on Holidays

Definition of “Holiday”: The LPA defines this to mean a day scheduled for an Employee to take a weekly holiday, traditional holiday or annual holiday.

When Employer Can Order Employee to Work on Holiday: The LPA provides that an employer is not allowed to order an employee to work on a Holiday, except in the following cases:

• when the characteristics or nature of the work requires the work to be performed continuously, such that if there is a stoppage it will cause damage; or
• where the work is urgent work.

In such cases an employer may order their employees to work on a Holiday to the extent necessary (question of fact & evidence).

Staff Under 18 Cannot be Ordered to Work on Holiday: Employees under 18 years of age are not permitted to work on holidays.

Who Can Order Employees to Work on a Holiday: Employers in certain sectors of the economy are permitted to instruct their employees to work on a holiday. Such types of business include hotels, places of amusement such as a theatre, transport, restaurants, shops that sell drinks, clubs or medical facilities such as hospitals.

Maximum Overtime Limits: The overtime hours worked by an employee under sections 24 and 25 of the LPA in aggregate are not permitted to exceed 36 hours in a week.

Pay Rates for Overtime on Holiday: If an employer requires an employee to work overtime on a Holiday, the employer must pay the employee holiday overtime pay calculated at the rate of three times (3 x) the normal hourly wage rate for the overtime hours worked on such Holiday.

If the Company requires the Employee to work on a Weekly Holiday (Saturday, Sunday) or a Public Holiday then the Employee will be eligible for Holiday Pay which is calculated at the hourly wage rate of the Employee on a normal working day for the number of hours worked.

Weekly Holiday i.e. Weekend

Weekly Holiday Minimum Requirements: In many cases workers in Thailand take their weekly holiday on the weekend (Saturday and Sunday), however the law gives employers considerable scope as to when such holidays can be set. According to the LPA an employer must arrange for their employee to have a weekly holiday of not less than one (1) day per week, with the interval between such weekly holidays not being more than six (6) days. Moreover, the employer and the employee can agree in advance to fix any day in the week as the weekly holiday.

Fixing Holidays for Certain Types of Employees: Employee’s that perform certain types of work such as:

• hotel work (i.e. concierge or maids),
• work in the field of transportation (i.e. coach driver)
• work in the forest (i.e. lumberer),
• or such other work as prescribed in ministerial regulations,

within any period of four consecutive weeks, can make a prior agreement with their employer to accumulate weekly holidays such that they are used at one time. However, employers must note that such holidays must be taken within those four consecutive weeks.

It is possible to have the staff work on a weekly holiday (i.e. weekend) without the need to pay them holiday pay if the employer and the employee agree to move the weekly holiday to a normal workday. Such arrangement should be made in an MOU (with details of the changed dates of the weekly holiday) and signed by both parties in advance.

As mentioned above if the Company requires the Employee to work on a Weekly Holiday (Saturday, Sunday) then the Employee will be eligible for Holiday Pay which is calculated at the hourly wage rate of the Employee on a normal working day for the number of hours worked.

National/Traditional Holidays

Minimum Number of Traditional Holidays: Employers are required to announce to their staff in advance the prescribed traditional/ national holidays for that year, which shall not be less than thirteen (13) days, inclusive of National Labour Day as prescribed by the Minister.

What Happens if Traditional Holiday Falls on Normal Weekly Holiday: If a national/traditional holiday falls on the weekly Holiday of an employee, then the employee is entitled to a substitute holiday to be taken on the following workday.

Employers should however be mindful of the exceptions detailed in Ministerial Regulation No. 4 (1998) which details a list of different types of work where the employer can prevent employees taking traditional holidays on those days, these jobs include:

• Works in the businesses of a hotel, entertainment establishment, restaurant, club, medical establishment and tourist service establishment; and
• Forestry work, work performed in remote areas, transportation work and work of a nature/ conditions which requires continuous performance otherwise damage would be caused to the work itself.

Note: The LPA provides that if an employer prevents an employee taking leave on a traditional holiday by virtue of Ministerial Regulation No. 4 (1998) then the employer and employee may agree to another day being taken in substitution for such holiday or otherwise that the employer pay the employee holiday pay for the traditional holiday that was worked.

Business Travel on Holidays

If monthly paid staff are required to do business travel on their weekly holiday (i.e. Saturday or Sunday) to a locality/area other than the locality of their regular work, then the following shall apply:

Entitlements If Doing Business Travel on Weekly Holiday: If the employee is not entitled to receive wages on their weekly holidays (i.e. their weekend) then their employer must pay them wages equivalent to wages on a working day for such business travel undertaken on their weekly holiday.

However, if the employee is paid on a monthly basis (monthly salary basis) and they are required to travel on their weekly holiday (Saturday or Sunday) then the Company does not have to pay them extra for such business travel, nor does it need to pay them holiday overtime pay.

Annual Leave

Minimum Amount of Annual Leave: Where an employee has worked consecutively for a full year they are entitled to take annual leave of not less than six (6) working days in the following year.

The employer has the power to determine in advance when the employees’ annual leave can be taken, or they may set such dates by making an agreement with the employee. In following years, an employer can determine annual leave for the employee, but such leave must be at least six (6) working days per year.

Accumulation & Postponement of Annual Leave: Employers and their employees may agree in advance to accumulate and postpone annual leave which has not been taken in a particular year to be combined with the annual leave of following years. Moreover, for an employee who has worked for less than one year, an employer is permitted to determine their annual leave on a proportional basis.

Sick Leave

Sick Leave Entitlement: Employees are entitled to take sick leave for as many days as the employee is sick.

Paid Sick Leave: However, employees are only entitled to receive paid sick leave up to a maximum of thirty (30) working days per year unless the employment contract or the work rules of the employer grants more paid sick leave.

Requirement for Medical Certificate: When staff take sick leave for three (3) or more working days, their employer is entitled to require the staff member to produce a medical certificate from a doctor or from a government medical facility (i.e. hospital). If the employee is unable to produce a medical certificate from a doctor or from a government medical facility, they must give a suitable explanation to their employer, if they fail to provide a suitable explanation the employer may commence disciplinary proceedings against them according to the work regulations.

What Days Don’t Fall Under Sick Leave: Days on which an employee is unable to work due to an injury or illness arising from their work or maternity leave taken under section 41 of the LPA shall not be considered to be sick leave.

Sterilization Leave

Employees are entitled to take leave to be sterilized. The amount of time able to be taken under this type of leave is be prescribed by the doctor on the medical certificate issued to the employee. This type of leave is paid leave and is able to be utilized by both male and female employees.

Maternity Leave

Pregnant female employee have the right to take maternity leave of not more than ninety eight (98) days per pregnancy (including leave taken for pre-natal exams before the delivery date and holidays that fall during the maternity leave period). The employer must pay the pregnant staff member their basic pay which shall not exceed forty-five days per pregnancy.

Business Leave

New Amendments to the LPA which became effective in 2019 provide that Employers must grant employees three (3) days of “necessary business leave” with wages paid.

Military Service Leave

Given national security considerations, employees are entitled to take military service leave for the purpose of mobilization for inspection, military training/ exercises or testing for combat readiness in accordance with the law on military service. This leave can be of any duration but is only paid up to a maximum of sixty (60) days per year.

Training & Skills Development Leave

An employee is entitled to take leave for training or development of knowledge and competency in accordance with the criteria and procedures prescribed in Ministerial Regulation No. 5 (1998) which provides guidance on this type of leave by stating that this type of leave can be taken in the following cases:

• where the training improves the social welfare of the employee or improves the skills and expertise of the employee such that it improves their working efficiency;
• Where the leave relates to an educational examination organized by the Government.

In order to take this type of leave the employee must notify their employer and provide evidence of the course/ examination not less than seven days before the date of taking this leave. Employers should be aware that they are able to deny this type of leave applications if:

• In the year it is requested, the employee has already been permitted to take this type of leave for more than thirty days or on three occasions already; or
• They can show that the proposed leave would cause damage or negatively affect their business operations.

Payment Issues

When paying monies to employees in Thailand whether it be wages, overtime pay or other benefits, senior management and HR Departments should bear in mind the following key points:

What are Wages defined as? the LPA defines “Wages” to mean “money agreed between an Employer and an Employee to be paid in return for work done under a Contract of Employment for regular working periods on an hourly, daily, weekly, monthly, or other period of time basis, or on the basis of piecework done during the normal working time of a Working Day and includes money to be paid by an Employer to an Employee on Holiday and on Leave during which the Employee does not work but is entitled to the money under this Act”.

Payments to Employees Under Eighteen: In the case of staff who are under the age of 18, an employer must pay the salary to the employee rather than anyone else such as their parents/ guardians.

Payment Currency (Thai baht): Such monies should be paid in Thai Baht except where the employee agrees to payment in a note or in another currency.

Place of Payment: Payment shall be made at the employees’ workplace or if it is to be made elsewhere then the employee must first give their consent.

Payment for Weekly holidays, national/traditional holidays (i.e. New Year’s Day) and annual leave: These are to be paid by the employer according to the employees’ ordinary daily wage rate.

Payment Interval: If wages are calculated on a monthly, daily or hourly basis or at other time intervals which do not exceed one month or on the basis of work units performed, then payment must be made at least once per month unless otherwise agreed between the staff member and the employer where such change is to the benefit of the staff member.

Payment of Overtime pay, Holiday Pay and Holiday Overtime Pay: These monies shall be paid by the employer to the employees at least once a month.

Payment Records: Payment records relating to the payment of wages, overtime pay, holiday pay and overtime holiday pay (i.e. bank transfer/ deposit slips) must be retained by the employer in their records for at least two years from when payment is made. If however there is a lawsuit or labor dispute concerning labour relations with respect to an employee, then the payment records for the concerned employee must be retained by the employer until the issuance of a final order or judgment concerning the matter.

Deductions of Offset from Employee Wages/ Overtime Pay: If the Company wishes to offset or deduct debts or liabilities of the employee against their wages or overtime pay then it must obtain the written consent of the employee beforehand. It is often a good idea for employers to grant this right to the company in the employment contract.

According to the LPA, an employer is prohibited from making any deduction from

wage, overtime pay, holiday pay, holiday overtime pay, except for the following cases:

(1)       Payment of income tax in an amount which the employee is obliged to pay, or other payments as specified by law;

(2)       Payment of dues to a labour union in accordance with the regulations of the labour union;

(3)       Payment of debts to a savings co-operative or other co-operative of the same nature as a savings co-operative, or debts which have been incurred for the welfare solely for the benefit of the employee, with prior consent of the employee;

(4)       Guarantee money as referred to in Section 10 of the LPA or compensation paid to an employer due to a willful act or gross negligence of the employee, provided that the employee has granted his/her consent;

(5)       An employee contribution under an agreement in connection with employee fund.

Deductions made under (2), (3), (4) and (5) must not in each case exceed 10 percent (10%) and, in total, shall not exceed one-fifth (20%) of the money which the employee is entitled to receive at the time of payment specified in Section 70 of the LPA, unless the employee otherwise consents.

Evidence of Payment: If the Employer pays Wages, Overtime Pay, Holiday Pay or Holiday Overtime Pay to Employees by direct transfer to deposit accounts with commercial banks or other financial institutions, the document of the Employee’s deposit account transferring shall be deemed to be the evidence of payment.

Payment Timeframe Upon Employer Terminating Employee: Where the employer terminates the employment of an employee, the employer must pay wage, overtime pay, holiday pay, holiday overtime pay, and monies which the Employer has duty to pay in accordance with the LPA to an employee entitled to receive such pay, within three (3) days from the date of termination of the employment.

Temporary Suspension of the Business By the Employer

Temporary Suspension of Business by the Employer: If it is necessary for an employer to temporarily suspend their business (in whole or part) for whatever cause (other than due to force majeure) for a legitimate reason which affects their business and causes the employer to be incapable to operate their business as normal, the Employer must do the following:

1. Pay Wages (75%): Pay wages to the employee(s) who are sent home in an amount not less than seventy-five per cent (75%) of wages for working days that were received by the employee before the suspension took effect. This money must be paid to the affected employee(s) for the entire period which the Employer does not require the affected employee(s) to work (this can be for as long as necessary);
2. Give Written Notice: The Employer must give advance written notice of the suspension to the affected employee(s) and the Labour Inspector of not less than 3 working days.

Key Requirements of Warning Letters to Employees

1. The warning letter must contain a date of issuance;
2. The name and position of the Employee;
3. A description of the behavior of the Employee which has breached the work rules (including dates when the misconduct/ breach occurred);
4. A reference to the exact work rules which the Employee has breached (i.e. mention the section of the work rules breached by the employee);
5. A statement which provides that if the Employee commits the same violation of the work rules again in 12 months of when the initial offence mentioned in the warning letter occurred, the Employer will punish the Employee pursuant to the work rules & Thai law;
6. The employee should also (if possible) sign to acknowledge the warning letter. If they won’t sign, then the Employer can read the letter to the Employee in the presence of 2 witnesses who can sign the letter and confirm that the Employee was read the warning letter but refused to sign it. Keep a copy of the letter too in your files as this is critical if it is later used to justify the employee’s termination; and
7. Letter should be signed by someone with the necessary authority such as an authorized director with unlimited signing power.

Employee Suspension from Work for Inquiry

When Can A Suspension from Work Be Issued: When an employer conducts an inquiry regarding an employee who has been accused of committing an offence, the employer is not allowed to order the employee to be suspended from work during the said inquiry unless the work rules and regulations or terms of employment agreement empower the employer to do so.

How Can A Suspension Be Issued & Maximum Suspension Period: In this regard, the employer must issue a written suspension order stating the offence and period of suspension of not more than seven days, such that the employee must be informed in advance before being suspended from work.

Payment to Suspended Employee:

1. During a suspension (for an investigation) the employee must be paid not less than 50% of their wages (based on their salary level for the working day before their suspension).
2. If it emerges that the employee is not guilty of the alleged misconduct, the employee must be paid equal to the working day wages from the date of suspension plus interest at a rate of 15% per annum.

Termination of Employees

Prohibition of Terminating Employees due to Pregnancy: It is prohibited to terminate a female employee because of her pregnancy.

Terminating Employees Who Are a Member of Employee Committee: Section 52 of the Labour Relations Act prohibits an employer from terminating/dismissing a member of an Employee Committee unless the employer firstly obtains permission from the Labour Court.

Severance Pay: Terminating an employee without cause will result in the employer having to pay severance pay to the staff if they work for 120 days or more. See more details below.

Termination for Cause: An employer is able to terminate an employee immediately and without notice or severance pay if the employee’s actions fall within those mentioned in section 119 of the LPA (this is discussed further below).

Process for Termination & Impact of Contract & Work Rules/Regulations: Employers should carefully review the employee’s labour contract (if any) and the internal work rules to see exactly what provisions deal with termination and what (if any) conditions apply to the termination of the employee with or without cause. Termination of employees should be conducted in compliance with these documents (provided that they comply with the law) as otherwise the termination may be considered as being an ‘unfair termination’.

Advance Notice Requirements: When terminating a staff member, the employer must ordinarily give them advance notice of at least one full payment cycle. For instance if the staff member is paid on the 25^th of each calendar month then they must be given notice on or before the pay day such that the notice will take effect on the following payday (unless the contract/ work rules provide for a longer period but if nothing is specified or agreed in work rules or employment contract regarding required advance notice period then no more than 3 months is required).

Recent amendments to the LPA which became effective in early 2019 provide that where an employer terminates an indefinite term employment contract (i.e. ongoing employee) without notifying the employee at least one payment cycle in advance, the employer must pay wages in lieu of advance notice to the employee on the termination date.

Pay in Lieu of Advance Notice: However, if the employer wishes, they can instead simply pay the employee the wages for the advance notice period instead and terminate them immediately.

Unfair Termination: Following termination an employee can sue them in the Labour Court for unfair dismissal i.e. where the employer terminates a staff members’ employment for no reason or for an insufficient reason. The Labour Court in determining this matter will examine the circumstances of the case and will carefully consider any reasons for termination which are given by the employer (in the termination notice). In terms of relief to employees, the Court can order the employer to reinstate the employee but if this is deemed impossible/unsuitable then the court can award damages based on several factors including length of service, age of employee, circumstances of the employee etc. Normally, in practice if an employee is awarded compensation for unfair termination, it is often set at one months’ salary per year of service, but this is only an approximate guide to what the Court may award.

Termination Upon Expiry of Fixed Term Contracts: Employees engaged under a fixed term employment agreement (i.e. two years) are automatically terminated at the end of the term of the agreement and the employer is not required to give them prior notice (according to section 17 of the LPA) unless their contracts or the work rules/regulations provide otherwise.

Retirement & Termination: If an employee reaches the stipulated retirement age as detailed in their work rules, this is considered as termination without cause and thus entitles the retiring staff member to severance pay, advance notice as well as their unused annual leave entitlements to be paid out as well in addition to other benefits due to them as provided in the work rules & their employment contract.

Note that the amended LPA, issued in 2017 sets the statutory retirement age at 60 in the case that the employer has not prescribed a retirement age in their internal work rules and policies or employment contract. Section 144 of the LPA has also been amended to include liabilities of employers who fail to pay a severance pay to retirees – a maximum of 6-month imprisonment and/or a maximum fine of Baht 100,000.

Thai law also provides that if the work rules specify a retirement age of 60 or more than an employee whose age is 60 or more is still entitled to submit their retirement notice to the employer, 30 days in advance and it will be effective after the completion of such 30 days period in accordance with section 118/1 of the amended LPA (2017) which provides as follows:

Section 118/1 – Retirement as agreed by the employer and employee or as specified by the employer shall be considered as a termination of employment under Section 118 paragraph two.

In the event that there is no agreement or retirement plan or it has an agreement or retirement plan at the age of more than sixty years, then Employees who are sixty years old or more have the right to express their intention and the employer must pay compensation to the retired employee in accordance with Section 118 paragraph one.

Timeframe for Payment of Termination Benefits (3 days) and late interest: Where the employer terminates the employment of an employee, the employer must pay wage, overtime pay, holiday pay, and holiday overtime pay, and monies which the Employer has a duty to pay in accordance with the LPA to an employee entitled to receive such pay, within three (3) days from the date of termination of the employment. If they pay late then according to the LPA the employer is required to pay interest calculated at the rate of 15% p.a.

Termination & Provident Fund: If the employer operates a Provident Fund, then the terminated employee who has participated in it may also be entitled to monies they contributed to the fund. It is necessary to refer to the rules laid down in the Provident Fund Rules to determine the terminated staff’s entitlements (if any).

Unused Annual Leave & Accumulated Annual Leave from Earlier Years: Unused annual leave will need to be paid out to terminated staff. However, please note that according to the LPA, annual leave from the year that an employee is terminated under s.119 is not to be paid out to the employee but in any case accumulated annual leave from earlier years which has been carried over to the year of termination (which is unused) must be paid out to the employee even if employee is terminated under s.119.

Certificate of Employment Issued by Employer (section 585 of Civil & Commercial Code): Upon the end of a hire of services contract (i.e. normal employees) the employee is entitled to a certificate from their employer which sets out the length of their employment and the nature of the services that they provided to their employer. This certificate can include positive statements from the employer but cannot include negative statements concerning the employee’s performance at work.

Termination Letter (for cause):

When preparing a termination letter (for cause), an employer should be mindful of complying with the following key points:

1. Make sure that the letter is signed by someone with suitable authority such as an Authorized Director (in compliance with the affidavit of company registration);
2. Make sure that the letter refers to the employee’s misconduct as stated in the work rules (identify the rule(s) which has been broken);
3. Be clear about the employee misconduct (state it) and when it occurred;
4. Be sure to follow the disciplinary action process as stated in the work rules, you can only terminate in compliance with the work rules;
5. Be clear about the date the letter is issued and when the termination shall be effective (i.e. same day);
6. Make sure that letter states that employee will be paid with all termination benefits in compliance with the law; and
7. Mention name and position of the employee.

Unfair Termination (section 49 of the Labor Court and Labor Procedure Law Act)

Many employers misunderstand the law relating to terminating staff and as such are of the opinion that if they pay severance pay to a terminated employee according to the Labor Protection Act, they can terminate an employment contract for any reason whatsoever. Such a misunderstanding of the law can lead to an employer being subject to considerable legal liability as an effected employee may be able claim compensation from the employer on the grounds of unfair termination or in some cases an employer may be forced to recall a terminated employee back to work again.

There are many issues which need to be examined when determining what constitutes an unfair termination, to begin with we shall examine section 49 of the Labor Court and Labor Procedure Law Act B.E. 2522 which provides that:

“With regard to the trial regarding the situation where the employer has terminated the employment contract. If the Labor Court considers that the employee has been unfairly terminated, the Labor Court may order the employer to call the employee back to work according to the same wage rate as the employee received before they were terminated. However, if the Labor Court considers that the employer and the employee may not work together anymore, the Labor Court may specify the compensation which the employer will have to pay to the employee instead. With regard to the compensation, the Labor Court will consider the age of the employee, the period of work of the employee, the hardship of the employee if he/she is terminated, the employment contract, the cause of termination and the severance pay which the employee is entitled to receive”.

In determining whether an employee has been unfairly terminated, the Supreme Court considers the cause of termination and whether the employee was reasonably terminated or whether the employer had a sufficient and justifiable reason to terminate the employment contract. If an employee is terminated due to no fault of their own, then such termination will be considered as an unfair termination.

Severance Pay

When Severance Pay Does Not Need to be Paid to Terminated Employee: Section 119 of the LPA sets down the situations when an employer is not required to pay an employee severance pay following termination, these circumstances are where an employee:

1. Performs their duties dishonestly or where the employee intentionally commits a criminal act against the employer;
2. Intentionally causes their employer to suffer losses;
3. Performs an act of negligence which causes the employer to suffer severe losses;
4. Violates the employer’s work rules regulations or orders which are legal and fair with the employer having already given the staff member a written warning except in serious situations where an employer is not required to give a warning. The written warning shall be effective for a period of one year from the date of the commission of the violation by the employee;
5. Neglects their duties for a period of three consecutive working days without a reasonable cause, regardless of whether there is a holiday intervening in such period; or
6. Having been imprisoned by a final judgment.

Amount of Severance Pay to be Paid to Terminated Employee: In other cases, the employer shall be required to pay severance pay to employees who are ‘terminated’ (see feedback below re termination meaning), which shall be calculated as follows (see section 118 of the LPA):

• For an employee who has worked less than one hundred and twenty days they shall not be entitled to severance pay.
• For an employee who has worked for at least one hundred and twenty days consecutively but less than one year, they shall be paid wages of not less than thirty days (at their last wage rate).
• For an employee who has worked for at least one year consecutively but less than three years, they shall be paid wages of not less than ninety days (at their last wage rate).
• For an employee who has worked for at least three years consecutively but less than six years, they shall be paid wages of not less than one hundred and eighty days (at their last wage rate).
• For an employee who has worked for at least six years consecutively but less than ten years, they shall be paid wages of not less than two hundred and forty days (at their last wage rate).
• For an employee who has worked for at least ten years consecutively but less than twenty years they shall be paid wages of not less than three hundred days (at their last wage rate).
• For an employee who has worked for twenty years or more they shall be paid wages of not less than four hundred days (at their last wage rate).

What does termination mean?: The LPA clarifies termination to mean “any act of an employer which prevents an employee from continuing to work and receiving his/her wage therefor, whether due to the termination of the employment contract or for any other reason, and shall include the situation where the employee cannot work and be paid because the employer can no longer operate its business”.

Calculating Employee Term of Service: The LPA provides that when assessing the period of employment, the following days shall also be included in the employees’ term of service:

1. Holidays;
2. days of leave;
3. days on which an employer released the employee from work for the benefit of the employee; and
4. days on which the employer ordered the employee not to work for the benefit of the employer.

If an employee has not worked for a consecutive period because the employer has intentionally adjusted their work in order to deprive the employee of his rights under the LPA then the LPA provides that all periods of employment shall be added together so that the employee shall be entitled to obtain his/her legal rights.

Calculating the Daily Wage Rate of an Employee subject to Severance Pay: The LPA does not contain a specific section which explicitly states how to calculate the daily wage rate of an employee, however guidance can be obtained from section 68 of the LPA which provides as follows:

Section 68. For the purpose of calculating Overtime Pay, Holiday Pay and Holiday

Overtime Pay for an Employee who receives Wages on a monthly basis, an hourly wage rate on Working Day means the monthly Wages divided by the product of thirty and the average number of working hours on a working day.

If staff are paid salary on a monthly basis then to calculate the daily wage rate we advise that their monthly salary should be divided by thirty (30). However, if staff are paid on a different frequency such as every 2 weeks etc then to obtain the daily rate we would advise that the total annual salary should be divided by 12 to bring it to a monthly basis and then divide it by 30 (days).

Claim Period for Severance Pay & Unfair Termination

An employee can lodge a claim for unpaid severance pay or for unfair dismissal within up to 10 years from when they are terminated.

Severance Pay & Fixed Term Contracts (see s. 118 final paragraph)

In most cases, when a fixed term contract expires, the employer needs to pay severance pay to the employee according to the employee’s length of service. Moreover, if an employer engages staff under a fixed term contract but terminates them before the expiry date without cause then the employee shall be entitled to severance pay from their employer.

However, for certain fixed term contracts, no severance pay is required upon the expiry of the agreement. These ‘special fixed term contracts’ require the following:

1. There must be a written employment contract between the employer and the employee;
2. The contract must have a definite date for commencing and ending the work;
3. Such work must be completed within a period not exceeding two (2) years. Although the work has not finished within two years, the contract cannot be renewed.
4. The work must, at least conform to any one of the following three types:
   1. work must be for a specific project which is not related to the normal business or trade of the employer;
   2. the work is occasional with a definite end or completion date;
   3. work which is seasonal and the employment is made during the season (such as fruit picking);
5. The Employer terminates the employment contract on the expiry date as specified in the contract.

If all of the above five criteria are satisfied then no severance pay has to be paid to the employee upon the expiry of the ‘special fixed term contract’. However, if just one of the above criteria are not met then the employer must pay severance pay to the employee upon expiry of the contract.

Fixed Term Employment Agreements & what to be careful of to ensure that they are not interpreted as Ongoing Employment Agreements

1. A fixed-term contract should not contain a clause allowing the employer to terminate the contract prior to the designated termination date if the employer has no work to assign to the employee.
2. A fixed-term contract should not contain a clause entitling either party to terminate the employment contract at will prior to its termination date.
3. If a fixed term employment agreement contains a probation period clause stating that the employer is only obliged to hire the employee permanently if the worker passes probation and granting the employer the right to terminate or extend the probation period at will then such contract will be considered as an ongoing agreement.
4. Fixed Term Employment Agreements should not contain a renewal or extension clause as this would make the term indefinite and likely result in it being interpreted as an ongoing contract.
5. Upon expiry of a fixed term agreement, the employee should leave work and not continue because if they stay on working past the expiry date (without a new contract in place) then it would likely be interpreted by the Thai Courts that such employee is under an ongoing employment relationship.
6. For employees engaged under a fixed term contract, in order to avoid them being interpreted as ongoing employees, ideally they should not be employed for more than 2 fixed terms (can be one after the other provided that a contract is signed for each fixed term) as otherwise it could be interpreted as being ongoing. Each term should in the writer’s view should not exceed 2 years, but this is subjective.

Severance Pay & Employee Service under Several Fixed Term Contracts

When the employer enters into several fixed short-term employment contracts consecutively with the same employee, on account of the employer trying to deprive the employee from their benefits (i.e. severance pay) under the Labour Protection Act, each period of employments shall be counted together for the purpose of the acquisition of any right by such employee, irrespective of what duty was assigned by the employer to the employee and how lengthy the lapse was between each period of employment (section 20 of LPA).

Special Severance Pay

special severance pay is different from ordinary severance pay in that it applies to the following two situations

Staff Termination Due to improvements to working unit, production, distribution or service processes, arising as a result of the utilization of machinery or change of machinery or technology

Notice Requirement: Employer must notify the Labour Inspector and the employees to be terminated, of the date of employment termination, reasons for employment termination, and list of names of the employees at least sixty (60) days in advance of the employment termination date. The normal notice period as required under section 17 paragraph two does NOT apply to this type of termination.

Pay in Lieu of Notice (depends if correct advance notice given or not): If an employer fails to give advance notice to an employee of his/her termination, or gives advance notice but shorter than the period of time specified in paragraph one under s.121 (i.e. 60 days), in addition to the severance pay payable to the employee pursuant to Section 118, the employer shall in lieu of the advance notice, also pay special severance pay in an amount equal to sixty-day wage at the most recent wage rate received by the employee or equal to the wage for work performed in the last sixty days as an employee who is paid on the basis of his/her work output units.

Special Severance for Staff Who Have Worked Uninterrupted for 6 years or more: Where an employer terminates an employee under Section 121 of the LPA and that employee has worked consecutively for six (6) years or more, the employer must pay special severance pay in addition to the severance pay under Section 118, in an amount not less than the wage received at the most recent rate for fifteen (15) days, for each complete year of work which exceeds 6 years; or not less than the wage received at the most recent rate for fifteen (15) days for each complete year of work in as an employee who is paid on the basis of his/her work output units, BUT the total severance pay under this Section, in total, shall not exceed the amount of the wage at the most recent wage rate for three hundred and sixty (360) days or not exceed the wage for the last three hundred and sixty (360) days as an employee who is paid on the basis of his/her work output units. For the purpose of special severance pay computation, where an employment period is less than one year but the fraction thereof is greater than one hundred and sixty days, it shall be deemed to be one year of employment.

Relocation of Place of Business

Where an employer relocates its place of business and the relocation materially affects the ordinary course of living of the employee or his/her family and the employee chooses not to stay with the employer they can terminate the employment contract and be eligible for special severance pay which shall be not less than the rate of severance pay he/she would be entitled to under Section 118 of the LPA, there are also advance notice requirements which must be met by the employer (must notify staff at least 30 days prior to relocation) and if this advance notice requirement is not met then an additional 30 days of salary (additional special severance pay) must be paid in lieu of the required advance notice

If the Employee doesn’t want to move to the new office they should submit a letter informing their employer of their decision and the reasons why the move would materially affect them and their family (i.e. travel time to new location would take too much time away from family etc). The notice should be submitted by the employee before the office moves to the new location.

According to the LPA, the employer must pay special severance pay or special severance pay in lieu of advance notice to the employee within seven days from the date the employee terminates the contract (i.e. 7 days from when they issue the notice to employer informing them of their decision not to move to the new office).

and.

Legal Support in Thailand with Labour Law

Dharmniti Law Office Co., Ltd.
2/2 Bhakdi Building 2nd Floor, Witthayu Road, Lumphini, Pathumwan, Bangkok 10330
Tel: (66) 2680 9777 Fax: (66) 2680 9711
Email: ryan@dlo.co.th or info@dlo.co.th
Website: https://www.thailandlawoffice.com/

[1] Such agreement shall only be effective if it is beneficial to the employees.