As evidenced by the many multinational enterprises (MNEs) and foreign firms that set up shop within its borders, Thailand embraces international businesses. However, to ensure that its economy and people profit from foreign investment, Thailand operates with strict labor laws. Here is an overview of five things you should know about employing people in Thailand:
1. Social Security taxes
All non-exempt employers and employees must register with the social security system to make contributions and receive benefits. Employees contribute 5% of their income, up to a maximum of 750 Thai baht (THB), and employers match these contributions.
2. The Provident Fund
What the country is primarily relying on to provide for retirement income and related social programs is its pension Provident Fund.
The Provident Fund used to allow voluntary contributions of 5-15% of an employee’s paycheck. Based on data that anticipates a growing gray-haired demographic, Thailand exercised its fiscal foresight by making contributions to the Fund mandatory.
Why Thailand elected to prepare for its growing elderly population primarily through the Provident Fund rather than Social Security is an open question. It could be that Bangkok hoped to capitalize on the immense popularity the Fund enjoyed in its voluntary form.
Whatever the reasons, enforcement of mandatory contributions to the Provident Fund began in 2018. Under the law, employers and employees each contribute 3% of the employee’s salary for the first three years. The percentages increase to 5% in Years 5-6, 7% in Years 7-9, and 10% after that. The cap is 60,000 THB per month.
Employees of privately-owned companies, state enterprises, and public organizations between the ages of 15-60 are required to contribute to the Provident Fund. Temporary employees are also obliged to contribute to the Fund.
When employees make below 10,000 THB per month, employers are the only ones who contribute to the Provident Fund. Otherwise, employers match employees’ contributions baht for baht. The law requires companies employing 100 or more people to match employees’ contributions to the Provident Fund within the first four years of its enforcement.
3. Employee time off
After working for a year, employees are granted at least six days of annual leave. They are also accorded 30 days of paid sick leave each year if they need it. Sick days do not include days when the employee cannot work because of injury or illness suffered in the course of employment. Each employee is also entitled to 13 paid holidays, which grant employees 15 days off.
Workers who are terminated after 4-12 months of service are entitled to 30 days of pay as severance. If they have been working for more than 12 months, these amounts increase.
4. Employee wages and working conditions
Effective January 1, 2020, the daily minimum wage for unskilled labor rose by 5-6 THB, bringing wages up to 313-336 THB per day. There are ten new minimum wage levels, which vary by province.
Workers in Chonburi and Phuket provinces earn 336 TBH per day, while those in the three southern border provinces of Narathiwat, Pattani, and Yala earn the lowest rate of 313 THB per day. According to the National Statistics Office (NSO), the average wage in Bangkok was 20,854 THB per month.
Depending on the employment sector, the maximum Thai workday is 8-9 hours. The Thai workweek caps out at 42-48 hours. Another maximum employers need to be aware of is that an employee’s maximum probationary period is 120 days.
5. Temporary and agency workers
For most intents and purposes, Thailand extends the same protections to temporary workers as permanent workers. Temporary employees are considered employees under the Labour Protection Act (LPA). As such, they are covered by minimum wage, working hours, fairness, and other laws.
The main difference between temporary and permanent workers is severance pay. Employees whose employment period is fixed to two years and are terminated based on that agreement are not entitled to severance payments.
Agency workers are also protected under Thai labor laws. According to the LPA, business operators who use an outsourcing service for their employees are considered employers of the outsourced workers. Employers must ensure that outsourced employees receive benefits similar to direct employees who work in the same capacity.
Those are some of the highlights of Thai labor law. For a list of some of the most important laws, please see Navigating Thai Labor Laws.
Although Thailand encourages foreign investment, it can still be challenging for international companies to set up and run a business there. The risk of non-compliance is high, laws change, and the information you need may only be available in the Thai language.
A stress-free solution to employment issues is to engage Aster Lion, a Thailand Employer of Record (EOR). Let us take care of your payroll, tax, immigration, adherence to labor laws, and other HR related matters.
You can also check out this article on Navigating Thai Labor Law
Would you like to receive a Thailand Market Report? Sign up for our newsletter here: http://asterlion.com/market-report/
Aster Lion is an Employer of Record (EOR) provider headquartered in Thailand that can assist with visa & work permit application, employee contractor management and payroll solutions. You can reach out to us for any inquiries on how we can assist you with your staffing & employment requirements in Thailand.