Legal Differences between an Employee and a Contractor in Thailand

Many employers in Thailand engage both normal staff (ongoing and fixed term employees) as well as external contractors but when they contract with these two groups they need to be careful of several factors to ensure that their intentions are not undermined due to Thai law. This article shall explain the key differences between employees and contractors with respect to Thai law and what employers should be careful of to ensure that a contractor is not interpreted by the Thai courts to be an employee given that this can result in extra liability such as severance pay etc.

Hire of Services (i.e. normal employees)

Normal employees (both ongoing and fixed term) fall under what is called a “hire of services” legal relationship. This type of legal relationship is defined under section 575 of the Thai Civil and Commercial Code (CCC) as “a contract whereby a person, called the employee, agrees to render services to another person, called the employer, who agrees to pay remuneration for the duration of the services.”

Hire of Work (i.e. contractor/ external consultant)

A contractor falls under a ‘hire of work’ legal relationship. This is defined under section 587 of the CCC which provides that it is “a contract whereby a person, called a ‘contractor’, agrees to accomplish a definite work for another person, called the ‘employer’, who agrees to pay him remuneration of the result of the work.”

Key Differences between Hire of Services (Employees) and Hire of Work (Contractors)

There are several key differences between these two groups in relation to Thai law, these are as follows:

Management Control: An employee is under control of their employer; this basically means the employee must follow a lawful order of their employer and shall be subject to the employers work rules/ regulations (if any). However, a contractor is not subject to the same management control as an employee and they do not need to comply with an employer’s work rules/ regulations which apply to its normal employees.

Remuneration: Employees are paid wages on a regular basis such as monthly, whereas for a contractor they are only to be paid remuneration upon the accomplishment of the agreed work (or completion of a stage of work). If remuneration is paid on a regular basis, irrespective of whether the assigned work has been finished, then the Thai courts will likely interpret this as a normal employee-employer relationship (hire of services). However, if remuneration is paid to a person all at once after completion of a job or after completion of a certain stage of a job, then such relationship is more likely to be considered by the Thai courts as being a hire of work relationship.

Tools and Instruments for Work: For regular employees, the provision of tools and instruments is the responsibility of the employer. However, this does not apply to contractors, given that section 588 of the CCC provides that they are responsible for “tools or instruments which are necessary for the execution of the work”.

Work Permit and Visa (for Foreigners): If a contractor is a foreigner (non-Thai) then they are responsible for obtaining their own work permit and visa so that they can legally work in Thailand. However, in the case of an employee, the employer is responsible for getting the relevant visa and work permit for its foreign staff.

What Employers should be careful of to ensure that a Contractor is not interpreted as an Employee under Thai Law

If an employer wishes to engage a contractor to carry out a certain project and they don’t want such person to be legally considered as an employee under Thai law, then they should be mindful of the following matters:

1. Arguably, one of the best ways to clarify the legal relationship as being a hire of work (contractor) relationship rather than a hire of services (employee) is to put this detail in a written contract which is signed by the parties. If an employer uses a contract to reflect this fact then it would be advisable for the contract to also cover the key requirements of a contractor such as them being responsible for the provision of their own tools and instruments required for the completion of the assigned work.
2. Employers should be careful not to make a contractor subject to management control, hence they should not treat a contractor like they treat their staff, such as making them subject to their employee’s work rules/ regulations.
3. If a contractor is non-Thai and wishes to work in Thailand then the employer (if it is a juristic person such as a company limited) should be careful not to get them a non-B visa and work permit under their entity as this could be used to argue that such person is in fact an employee and not a contractor.
4. Remuneration for a contractor should only be paid to them upon them completing the assigned work such as payment being made upon the completion of a certain task. It would be prudent to reflect this detail in the hire of work contract too.
5. An employer should be careful not to fix a contractors’ work hours under a hire of work contract which are the same as those for its normal monthly employees.
6. Finally, an employer should not treat a contractor like an employee in practice. One practical example of this is not providing a contractor with welfare that is the same as that which is provided to its ordinary employees.

Employers should also be mindful that even if they make a written hire of work (contractor) agreement between them and a person, such relationship may still be found by the Thai Courts to be that of hire of services (employee). If the issue goes to trial, then the Thai court shall look at the substance of the working relationship between the parties to see if the contractor has in practice been treated like an employee, such as the person being paid regularly like an ordinary staff member regardless of whether the assigned work was actually completed or not, or whether the contractor was subject to a company’s work rules/ regulations etc.

Writer: Ryan Crowley – Director and Foreign Services Manager

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