Termination of Employment
The Labour Protection Act B.E. 2541 (1998) (“the Act”) applies to all businesses operating in Thailand. The employer/employee relationship is regulated under Thai law, including matters relating to the termination of an employee.
The main reasons why Thailand employers may consider payroll cuts by terminating staff can be summarised briefly as economic, poor performance or misconduct.
It is common in the Thailand legal environment that the Labour Court tends to favour the employee and accordingly it is extremely important that business owners in Thailand adopt correct procedures insofar as termination of their employees.
Termination Payment Calculation Summary
The following is a summary of the quantum of severance pay which must be paid by an employer to an employee under Thai law if Section 118 of the Act is applied. This is calculated in accordance with the employee’s length of service.
120 days but less than 1 year – 30 days pay
1 year but less than 3 years – 90 days pay
3 years but less than 6 years – 180 days pay
6 years but less than 10 years – 240 days pay
more than 10 years – 300 days pay
Exclusions to Payment of Severance Pay
A. Short or Temporary Employment Periods
Labour laws in Thailand afford business owners certain exclusions from the requirement to pay severance payments if the following conditions apply:
An employee has served the company for less than 120 days.
An employee whose employment is stipulated in a contract set for a definite period and the employment is terminated at the end of that period, if this form of employment is in compliance with the Thai labour laws and regulations (Section 118 of the Act).
Employment with a definite period is allowed only for the following categories;
Employment on a specific project which is not the normal business of the employer;
Employment for occasional or temporary work; and,
A written employment contract is required for the above with clauses stipulating the commencement and completion dates. In addition, all tasks must be completed within two years.
B. Termination with Cause
Under Section 119 of the Act, there are certain exceptions which enable an employer to avoid the payment of severance to an employee and which are as follows:-
The employee performs dishonestly or intentionally commits an offence against the employer;
The employee intentionally causes the employer to suffer loss;
The employee causes serious damage to the employer as a result of negligence;
The employee violates the employer’s working rules or regulations or the employer’s orders which are legal and fair where the employer has already given the employee a written warning, except in a serious situation where the employer is not required to provide a warning;
The employee neglects to complete his or her duties by not attending work without justifiable reason for three consecutive working days; and,
The employee has spent time in prison by final judgement, with the exception of negligence or petty offences.
The exceptions to which employers are liable for severance pay are stipulated in Section 119 (1) – (6) of the Act.
If the employer terminates the employment contract of the employee for other grounds, the employee is entitled to receive severance pay.
Nevertheless, to terminate the employment of any employee on the grounds stipulated in Section 119 of the Act, the employer must provide a letter of termination to the employee with the reasons for termination. Note that in accordance with Thai law, the reasons provided must be real or relate to the actions for termination of employment.
Special Severance Pay
In the case where an employer relocates the place of business in Thailand which affects the normal living of an employee or his/her family, the employer shall notify the employee at least 30 days before the date of relocation. Thai law allows the employee to refuse to move and become entitled to receive severance pay. Failure to notify the employee may result in a special severance payment in lieu of the advance notice of 30 days.
With respect to the termination of the employment on the basis of reorganising the Thailand based business, production line, sales or services due to the adoption of machinery or technologies which result in a reduction of the number of employees, the employer has a duty in compliance with Thai law (Section 121 of the Act) to notify the employee as well as the labour inspector not less than 60 days prior to the contemplated date of termination. Failure to do so will result in a special severance payment in lieu of the advance notice of 60 days being paid in addition to the normal severance pay.