Thailand PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Thailand to companies willing to enter the Thailand market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in Thailand.  However our solution allows you to start the operations in Thailand within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. 

Thailand fast facts

Population, million: 69 million
Land area: 513,120 km²
Capital: Bangkok
Local currency: The baht (THB)

GDP per capita:$ 6450.00
GDP in currency:$ 528 billion

Thai labour laws are applicable to foreign nationals working in Thailand. This is because the principle of territorial rule requires that the law of Thailand must be strictly enforced with respect to every person, whether a Thai national or a foreigner, who resides in Thailand.

While the parties can make an agreement on choice of governing law in their employment contract, the Conflict of Law Act B.E. 2481 (1938) provides that the foreign law can only be applied insofar as it is not contrary to the public order and good morals of Thailand.

Key legal requirements which cannot be undermined by mutual agreement of the parties include, without limitation, the following:

• Minimum wage rates.
• Working hours and overtime pay.
• Severance pay.
• Notice periods.
• Statutory holidays.

However, where a provision of a foreign law is more favourable for the employee than the provisions prescribed under Thai labour laws, the court may consider the choice of law clause as a clear intention of the parties to be bound by additional requirements apart from Thai labour laws, and will apply that foreign provision in accordance with the parties’ intention.

Hiring, Negotiating and Doing Business in Thailand

Necessity of written employment contract

Written employment contracts are commonly used in medium and large organisations, but employees of small businesses usually do not have a written employment contract.

There is no statutory requirement that an employment contract must be in writing. A contract, whether in writing or verbal, made between an employer and an employee is recognised as an “employment contract” under the Labour Protection Act if it specifies expressly or impliedly that a person (employee) agrees to work for another person (employer) who agrees to pay wages during the period of work.

Different forms of engagement: employment, contracting, work with private entrepreneur

Collective agreements exist in the form of agreements between an employer and employees or between the employer or employers’ association and a labour union in relation to employment or working conditions, working days and hours, wages, welfare, termination of employment or other benefits relating to employment or work. This is called an “Agreement relating to Conditions of Employment” under the Labour Relations Act.

An Agreement relating to Conditions of Employment will bind the signatory employer and employees as well as every employee who takes part in the negotiation.

After the Agreement relating to Conditions of Employment has come into force, the employer cannot enter into any employment contract with the employees which is contrary to or inconsistent with the Agreement relating to Conditions of Employment. Unless it is more favourable to the employee, any amendment of the Agreement relating to Conditions of Employment requires consent of the employees according to the process prescribed in the Labour Relations Act 

Thailand Employment Contract

Types of employment agreements

Thai law distinguishes between:

• Employees under an employment contract.
• Independent contractors under a service contract.

Thai Supreme Court decisions indicate that an employment contract is different from a service contract in that the employer under an employment contract has the power to supervise the employee during the processes of work and the employee is required to work according to the specified working hours to receive compensation, regardless of the completion of the work. The employer in a service contract cannot supervise the processes and methods of the work conducted by the independent contractor and the independent contractor will be entitled to receive payment only when the assigned work is completed as agreed in the contract.

Thailand working hours

In general, the working hours each day must not exceed eight hours. If the working time of any day is less than eight hours, the employer and the employee can agree to add the working time on another working day, but it must not exceed nine hours per day, and the total working hours must not exceed 48 hours per week.

Overtime

Overtime is generally voluntary. An employer may require an employee to work overtime only in an emergency or if the nature of the work requires that it be performed continuously. An employee who works overtime on a regular workday is entitled to 1.5 times regular pay. For overtime on a holiday, the rate is three times regular pay.

Vacation leave in Thailand

Employees who have worked for an uninterrupted period of one year are entitled to annual holidays of not less than six working days per year. The employer may agree with employees in advance to accumulate and postpone any outstanding annual holidays that have not yet been taken in a year to be included in the following years.

Entitlement to paid time off

Under the Labour Protection Act, employees are entitled to sick leave pay equal to regular wages for up to 30 days per year.

In the case of illness or injury as a result of work, an employee who is unable to work for more than three consecutive days is entitled to injury or sickness benefits in an amount of 60% of the monthly wages throughout the period he or she is unable to work, but not exceeding one year. In that case, the days on which the employee cannot work will not be regarded as sick leave under the Labour Protection Act (Workmen’s Compensation Act B.E. 2537 (1994)).
Benefits under the Social Security Act and the Workmen’s Compensation Act can be claimed by submitting the required forms to the Social Security Office.

Thailand Maternity Leave

A pregnant employee is entitled to maternity leave of not more than 98 days, including holidays during that period. The employer will have to pay to the employee up to 45 days of wage. This means, if the employee takes 50 or 60 or 90 days of leave, the amount that the employer will have to pay is 45 days of wage anyway. On the other hand, if the employee takes less than 45 days of leave, the amount entitled to the employee shall base on the actual number of days of leave.

The female employee can receive Child Delivery payment of THB 13,000 from the Social Security plus 50% of the 90 days’ wage, but the monthly salary cap for Social Security’s purpose is THB 15,000.

Let’s say if the monthly salary is THB 50,000, the cap allowed by the SSO is THB 15,000. The 90-day-wage shall be 15,000 x 3 = 45,000. So 50% of 45,000 is 22,500. Hence THB 22,500 shall be paid by SSO.

Paternity rights

There are no paternity rights provided under the Labour Protection Act for male employees in the private sector. Paternity rights are only provided to male employees in the government sector, with paid paternity leave of up to 15 consecutive working days, which can be taken prior to or within 90 days after the childbirth.

Companies can also elect to create their own leave policies as long as they meet the statutory minimums.  One good example of this is Microsoft Thailand, who recently increased paid maternity leave from 12 to 20 weeks and paternity leave from three days to six weeks, also fully paid.

Thailand Severance Laws

On termination, an employee is entitled to receive the following payments:
Statutory severance pay under section 118 of the Labour Protection Act, subject to certain exceptions (see below).
Payment in lieu of advance notice (where the employer did not give advance notice).
Payment in lieu of unused holidays entitled in the year of termination and accumulated unused holidays from the previous year.
Any outstanding salary or other expenses.
The amount of statutory severance pay under section 118 depends on the employee’s length of service:

• 120 days but less than one year: 30 days’ salary at the employee’s latest salary rate.
• One year but less than three years: 90 days’ salary.
• Three years but less than six years: 180 days’ salary.
• Six years but less than ten years: 240 days’ salary.
• Ten or more years: 300 days’ salary.
• 20 years + – 400 days of salary and allowances

In the event of termination for economic reasons, an employee with at least 6 years of continuous service shall receive in addition to severance pay, a special compensation equal to 15 days’ wages for every year of employment, with a maximum amount equal to 360 days’ wages. With respect to this additional payment, a period of work of more than 180 days is counted as 1 full year of service.

Thailand Tax

The Social Security Act is used to finance compensation to employees for maternity, death, unemployment, accidents, illnesses, and physical disabilities occurring outside the workplace.

Employees’ contributions are withheld from their wages by employers and are allowed as a tax deduction against employee’s assessable income. Employee and employer’s contributions are remitted monthly to the appropriate authorities and failure to remit the contributions results in penalties.

Employers (with one or more employees) and the government are each required to contribute 5 percent of the employee’s wage to the social security fund, subject in each case to a maximum contribution of THB750 (5 percent of THB15,000) per month.

Employees pay contributions at 5 percent, subject to a maximum contribution of THB750 (5 percent of THB15,000) per month.

Health Insurance Benefits in Thailand

In Thailand they have universal healthcare that is provided through three systems: the civil welfare system for civil servants, social security for private employees (expats and nationals), and a universal health scheme available to all other Thai nationals.

The social security fund assigns employees a local hospital that they can receive care at no charge. The quality of care varies between the different hospitals, and often they are crowded and do not have a customer service model.

Supplementary health insurance may be provided by an employer to an employee as a supplementary benefit. Most executives and expats request supplementary health and life insurance, or a small company may provide an allowance in lieu of arranging insurance.   When employing individuals under our global PEO and global employee leasing in Thailand, we can put the employee on our group health insurance plan.

Additional Benefits in Thailand

A 13^th month or annual bonus is not required but is market norm in Thailand. A commission plan may be seen as replacing this for a sales employee.

Thailand Holidays

Employers by law are required to provide 13 paid public holidays (15 days) per year:

• New Year’s Day
• MakhaBucha Day
• Chakri Day
• Songkran Day (3 days)
• Labor Day
• Coronation Day
• VisakhaBucha Day
• AsarnhaBucha Day
• M. Queen’s Birthday
• Chulalongkorn Day (Rama V Day)
• M. King’s Birthday
• Constitution Day
• New Year’s Eve

Why Choose WeHireGlobally

WeHG takes care of all difficulties in hiring, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your foreign teams efficiently while minimizing cost and risk.