Every country has a set of regulations governing and protecting worker’s rights. These labor laws apply both to domestic companies, as well as international companies hiring workers from the country.
Compliance and keeping track of the labor laws in Thailand can be challenging. This is where EOR services for Thailand come in. An EOR in Thailand can help companies hiring in Thailand with compliance and save the time and costs of keeping track. An EOR in Thailand will also take the legal responsibility of hiring workers in Thailand, so companies don’t have to face costly penalties in case of non-compliance.
Thailand's labor laws, founded on the Labor Protection Act, safeguard workers' rights, encompassing aspects like working hours, wages, and termination procedures. Let’s understand the various aspects of labor laws in Thailand in greater detail.
Understanding Thai Labor Laws
Broadly speaking, Thailand's labor laws cover the following:
- Work hours: The regular work day is typically 8 hours per day and 48 hours per week (six days a week). This is reduced to a mandatory 7 hours per day only for hazardous work with the regular workweek strictly not exceeding 42 hours.
- Overtime: Overtime constitutes a 50% wage supplement over an employee’s normal hourly wages on a normal working day. If they are called to work on public holidays and days off, overtime pay rates are even higher and go up to 300% of the employee's usual hourly earnings.
- Social Security: In Thailand, employers and employees must contribute to the Social Security Fund, which acts as a financial safety net for employees, offering benefits in cases of sickness, injury, disability, death, childbirth, and unemployment.
- Wages: The monetary remuneration that the employer and the employee mutually agree to be payable in return for work done.
- Termination of employment: Employers can terminate the employment of their employees by dismissing them on various grounds (covered in more detail further in this article).
- Compliance: Compliance is a legal obligation on the part of every employer and a necessity if they want to avoid considerable financial and legal repercussions.
- Tax system: Thailand’s tax system is a progressive one, with tax rates ranging from 0% to 35% based on income levels. Those whose income ranges between 150,001–300,000 THB are taxed at 5%, while income between 300,001–500,000 THB is taxed at 10%.
- Work From Home: The Work from Home (WFH) Bill is an amendment to the Labor Protection Act B.E. 2541, one of Thailand's central labor laws. The amendment lays down a regulatory framework that states the rights and obligations of both employers and employees engaged in remote work relationships.
- Work permit: Working without a work permit in Thailand is illegal due to Thailand's Working of Aliens Act and can lead to deportation.
Employment Contracts and Conditions
Thailand's Civil Commercial Code and Labor Protection Act states that the following statutory qualifications have to be included in the employment contract: Rest, illness, annual leave, and holiday rights.
n Thailand, employment contracts are primarily categorized into Fixed-term and Permanent (or Indefinite) contracts, both written and verbal.
1. Fixed-term contracts
Fixed-term contracts are typically used for specific projects for a predetermined period.
The Labor Protection Act (LPA) is the primary statute governing fixed-term contracts in Thailand. This Act dictates that fixed-term contracts have to be drafted in written form by the time the employment period commences. Such a written contract must clearly state that the employment is “fixed” by designating a predetermined employment period, that is when the employment period starts and ends.
Termination of employment is another significant feature of a fixed-term employment contract and it must state clearly that the employment contract will be terminated when the employment period comes to an end.
An employer cannot include a clause stipulating that the employment period may be extended by either the employer or the employee as it is strictly prohibited under Thai law. If such a clause is included, the employment contract is no longer considered “fixed,” as per the Thai Supreme Court.
A fixed-term employment contract may be applicable only in certain lines of work, such as:
- Work of a temporary nature that has a strictly defined start and end date.
- Special projects that go beyond the normal scope of trade or business of the employer.
- Work of a seasonal nature where employment is only needed for a certain period of time.
The duration of work under a fixed-term employment contract should not exceed two years.
2. Permanent or Indefinite Employment Contract
This is a contract that is concluded without a fixed end date, allowing the employee to remain in the position as long as their work meets the employer’s requirements. In other words, permanent contracts are for ongoing employment without a set end date.
Wage Regulations and Benefits in Thailand
Thailand has a variety of wage regulations and benefits for employees. Here are the major ones:
1. Minimum wage
Wages vary by region and as of 2022, the minimum wage in Thailand is between 328–354 THB per day, or about $10.20 USD.
2. Overtime pay
Employees are entitled to overtime pay if they work beyond their stipulated work hours. Overtime pay is at least 1.5 times the employee's hourly wage for regular work days and at least three times the hourly wage for work on holidays and special days.
3. Payroll
The payroll cycle is usually a monthly one, and the salary disbursement date is determined by the contract between the employer and employee.
4. Benefits
Benefits include paid time off, sick leave, maternity leave, and retirement plans. Employees are entitled to 30 days of paid sick leave each year. Employees with more than 120 days of service but less than one year are entitled to 30 days of severance pay.
5. Social Security
Thailand’s social security system provides coverage for employees in the areas of health, disability, maternity, unemployment, and death. Employers and employees both contribute 5% of the employee's income, up to a maximum of THB750 per month, to register their employees with the Workmen Compensation and Social Security Fund (SSF).
6. Workers' Compensation Fund
In Thailand, the employer is responsible for paying annual premiums to the Workers' Compensation Fund (WCF). Employees are entitled to compensation benefits like medical benefits, rehabilitation, monthly compensation, and funeral benefits in case of work-related injuries
Working Hours and Leave Entitlements
In accordance with Thai labor laws, the regular workweek consists of 48 hours or 8 hours per day. After five consecutive hours of work, employees are entitled to a minimum one-hour break. Overtime pay is applicable for those working beyond 8 hours a day or 48 hours per week, with an increased hourly wage compared to the standard rate.
Leave entitlements
Thai employees are entitled to at least 15 paid holiday days per year. They are also entitled to six days of additional annual leave on completion of one year of service. The employee must be afforded one day off per week, and each day off cannot be more than six days apart.
Other leave entitlements in Thailand
- Use-it-or-lose-it policy: If a public holiday falls on a Saturday, one day of annual leave is credited to the employee immediately after the holiday. This substitute leave must be taken within the same year and cannot be carried over to the following year.
- Haj leave: Only Muslim employees can avail this leave and should not be more than 120 days.
- Compassionate leave: This varies from organization to organization and is based on a company's leave policy.
- Marriage leave: As with the above, this leave type is also based on an individual company's policy.
- Maternity leave: Female employees can enjoy 98 days of maternity leave in Thailand, including prenatal and postnatal leave. While 45 days of maternity leave are paid, the remaining days can be paid depending on the employer's agreement.
- Paternity leave: While male government employees in Thailand are entitled to 15 days of paid paternity leave after the birth of a child, private male employees do not receive any mandatory paternity leave if their partner gives birth. Government male employees also receive 50% of their wages for the 98 days of leave.
Termination of an Employment Contract in Thailand
In Thailand, an employment contract can be terminated in two ways: either the employee resigns or an employer terminates an employee by dismissal.
If an employer wishes to terminate an employee without legal cause, they are required to provide notice at least one full payment cycle in advance, but not exceeding three months. The notice should be given on or before the wage payment day and becomes effective on the subsequent wage payment day. In cases where immediate departure is necessary, the employer must provide monetary compensation instead of advance notice.
If the employee's tenure in the company exceeds 120 days, the employer is obligated to provide a written notice containing termination details and the final date of employment. The notice period should not surpass three months unless a longer duration is specified in the employment contract. If a lengthier notice period is stipulated in the contract, the employer must adhere to the contractual terms.
Income tax applies to severance pay, yet employees terminated without cause can receive severance pay up to THB 300,000 or 10 months without being taxed.
Penalties
If your application passes the screening and gets verified, the Immigration Department will issue an employment visa that gives you legal permission to work and stay in the country. The entry and work permit label you receive must be affixed to your travel documents before you arrive in Hong Kong. Upon your arrival in the region, your work visa gets activated as you start your employment journey.
- 30 days' wages for employment of at least 120 days but less than one year
- 90 days' wages for employment of at least one year but less than three years
- 180 days' salary for 3-6 years of employment
- 240 days' salary for 6-10 years of employment
- 300 days' salary for 10-20 years of employment
Compliance Strategies for Employers
Here are some compliance strategies for employers in Thailand:
- Understand labor laws: Employers should be familiar with the Labor Protection Act and other statutes that apply to their business type or sector. Compliance with local regulations is essential for any business in Thailand.
- Understand Thai workplace culture: An understanding of Thai workplace culture is crucial to ensure smooth working relationships and business partnerships.
- Provide mandatory leave periods: Abide by the Thai Labor laws that outline mandatory leave periods to ensure employee welfare.
- Pay the minimum wage: Employers must pay at least the minimum wage and ensure compliance with other wage-related regulations.
- Pay into a workplace pension fund: Employers are required to pay into a workplace pension fund for their employees.
- Keep records of wages and working hours: Employers must keep records of wages and working hours, including pay slips, in compliance with local regulations.
Expand Your Business with a Reliable EOR in Thailand
Hiring overseas employees in their country of residence has its pros and cons. While you get to sample diverse skills and talents, as an employer, you also need to be careful with that country’s laws and employment regulations. Having experts by your side considerably simplifies things while also safeguarding your business and keeping you on the right side of the authorities. So, if you are looking to hire employees to work remotely in Thailand, then look no further than a reliable and proven EOR partner like BGC, which has been helping businesses from hiring to onboarding to payroll, exit formalities, and more for employees in countries outside their area of residence. Call us today!
