Mar 1, 2024
In terms of labor laws, Thailand is more stringent than most Southeast Asian countries, and Thai laws are more inclined to protect Thai employees. In many scenarios, foreign-funded enterprises ignore Thai labor laws and fail to pay attention to the seriousness of the laws. This results in the fact that when foreign-funded enterprises hire employees, sections such as "termination" are not described clearly and accurately enough in the employment contract. As a result, in some terminate cases, employers must compensate employees, which not only causes financial losses to the company, but also directly affects the company's reputation.
Therefore, in order to reduce unnecessary troubles, foreign companies need to have a clear understanding of Thai labor laws, especially those regarding termination and compensation.
Article 118 of Thailand’s Labor Law clearly stipulates length of service and dismissal compensation, as follows:
- If the employee has been employed for 120 days but less than 1 year, a severance pay of no less than 30 days shall be paid.
- If the employee has been employed for more than 1 year but less than 3 years, a severance pay of no less than 90 days shall be paid.
- If the employee has been employed for more than 3 years but less than 6 years, a severance pay of no less than 180 days shall be paid.
- If the employee has been employed for more than 6 years but less than 10 years, a severance pay of no less than 240 days shall be paid.
- If the employee has been employed for 10 years but less than 20 years, a severance pay of no less than 300 days shall be paid.
- If the employee has been employed for more than 20 years, a severance pay of no less than 400 days shall be paid.
At the same time, these severance pay also include the fixed monthly income that employees should receive. For example, according to employment contract, the employer provides the employee (monthly) with 700 baht for phone calls and 800 baht for transportation expenses. Then, his income and wages should also be included in the legally obtained severance pay. However, if the company stipulates that benefits such as telephone bills and transportation expenses must be reimbursed according to employee bills, these benefits cannot be used as part of the severance pay due to employees.
Article 17 of Thailand's Labor Law stipulates that the employer must notify the employee of the termination at least 30 days in advance, so that the employee can continue to work for 30 days and receive a full month's salary, or the employer chooses to "temporarily" lay off the employee, according to the law, the company must pay a full month's salary. Therefore, if the company dismissal or related company rules are not detailed in the employment contract, the company may be sued by the employee for wrongful termination. Therefore, Thai labor law is something that foreign investors should have a deep understanding of.
However, the payment of these two parts of compensation does not mean that the dispute over the company's dismissal of employees has completely ended. What if some employees are still not satisfied with the two parts of compensation, or feel that they have been unfairly treated or illegally dismissed. They can file a complaint with the Labor Bureau (available through the official website of the Labor Bureau: https://www.mol.go.th/service- complaint ). In this way, the most serious situation is unavoidable, and the company can only face the employee's illegal dismissal lawsuit and wait for review by the Labor Bureau.
All in all, before a foreign-funded enterprise hires employees, the most critical thing is to pay attention to the details of all aspects of the employment contract. It not only proves the existence of a labor relationship between the two parties but also is an important basis for regulating the rights and obligations of both parties. The execution of employment contract is ultimately conducive to avoiding and reducing labor disputes.
Special reminder: Once employees are recruited, the company must provide employment contract. If the company has more than 10 employees, according to Article 108 of Thailand’s Labor Protection Law, the employer must provide the company’s employee rules and regulations.
