Thailand Labour Law – Severance Pay What is Severance Pay? about your specific circumstances. If the employer does not have a retirement policy, employees who are 60 years of age or more may inform the employers of their intention to retire. An employee who has worked for less than 120 days can be terminated without receiving severance pay. 180 days' wages where the If your Thai company has no retirement policy, we can Retiring civil servants are also automatically eligible for state pension benefits, as prescribed by law. employment period is at least three years but less than six This is because employers no longer permitted employees to work, and also halted payment of wages to employees. Special severance pay 6.4 Are there any categories of employees who enjoy special protection against dismissal? The Social Security Code, 2020 ("SS Code") has been passed by both houses of the Parliament and received Presidential assent on September 28, 2020. 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. Your best bet is to work with a tax accountant to file your taxes. The Thai Cabinet has endorsed a proposal to amend the Labour Protection Act, setting a statutory retirement age for the first time and entitling retirees to statutory severance pay. 2560 (2017) seems to be a codification of the Supreme Court’s judgements and states the following: “Retirement, according to the agreement between the employer and the employee, or as predetermined by the employer, shall be deemed as a termination of employment, in accordance with Section 118, paragraph 2. Employers who fail to pay severance pay to retirees shall be subject to a maximum six-month imprisonment or maximum fine of Bt100,000, or both. Such retirement shall be effective within 30 days from the date of such expression, and the employer shall pay severance to the employee in accordance with Section 118.”. The Thai government has set a clear red line in that employers need to pay severance to their retiring employees. 15% interest . relatively-new stipulation is low, putting companies at risk of Benjamas Kullakattimas, a tax partner at KPMG in Thailand. employees and in particular, agree how many years beyond the age of Severance pay amounts are as follows: Employees with more than 120 days, but less than one year employment are entitled to severance pay equal to one month's salary. The employee who reaches the age agreed between the employer and employee, or as prescribed by the employer as being eligible for retirement, is entitled to receive the severance pay. As Thailand gradually transforms into an ageing society, the potential economic and social burden of retiring workers is one issue that is likely to be on the minds of many employees, employers, and policymakers. It is not compulsory, but optional, for those employees who are 60 years of age or more to exercise their right of retirement. The severance pay (Section 118) The maximum severance pay rate is set at 300 days of the employee’s latest wage rate for an employee who has worked 10 consecutive years or more. If the employer has a retirement policy, or the employer agrees with the employee on retirement and the age of retirement, both parties are required to comply with such policy or agreement. New amendments to Thailand’s Labor Protection Act have addressed this issue by introducing a retirement regime for the Thai private sector employees, placing severance obligations on employers, enhancing protection for employees, and creating a more effective framework for enforcement of labour laws. regulations. Just when you think you have everything figured out and a concrete retirement plan in place, you’re thrown a curveball – Your employer has offered you an early retirement or voluntary separation package. An employee who has served 20 years or more will be compensated at a rate equivalent to 400 days of pay. Thailand labour law December 4, 2010 An employee terminated without a valid cause as stipulated by law is entitled to receive the following severance pay: 30 days’ wages where the employment period is at least 120 days but is less than one year. policies and employment contacts. Failure to notify the employee may result in a special severance payment in lieu of the advance notice of 30 days. need to pay severance to their retiring employees. taking care of your business. Severance Pay and FERS Disability Retirement If you are currently in the process of applying for FDR, then you are probably aware of the time frames involved. New Rate of Severance Pay; An employee who has been terminated without cause will be entitled to, among others, severance pay; the rate of which depends on an employee’s length of service and last wage rate. Contact us today. Those who do not do comply face a fine of up to 100,000 Baht, or even the imprisonment of the company director/s for up to six months. individual employee retirement negotiations, the calculation of provide consultancy on how to add this to your existing 2. This includes all domestic and international income. Discover how we help our global clients adapt to foreign rules and employees when they retire. E: [email protected], T: +66 2056 5510 New amendments to Thailand’s Labor Protection Act have addressed this issue by introducing a retirement regime for the Thai private sector employees, placing severance obligations on employers, enhancing protection for employees, and creating a more effective framework for enforcement of labour laws. The same goes for other taxable income on your final paycheck, including unused vacation time, commissions, bonuses, etc. Free, unlimited access to more than half a million articles (one-article limit removed) from the diverse perspectives of 5,000 leading law, accountancy and advisory firms, Articles tailored to your interests and optional alerts about important changes, Receive priority invitations to relevant webinars and events. severance pay entitlements and help employers to establish a The NLA voted 179 in favour with five abstentions to pass the bill to increase the severance pay from 300 days to 400 days for workers serving … Labor reforms in India have been a long-pending demand of foreign investors, a majority of which consider the country's labor and employment laws responsible for limiting investment interest by forcing private employers ... Sign Up for our free News Alerts - All the latest articles on your chosen topics condensed into a free bi-weekly email. Provide employer’s duty to pay 15% interest per annum for some more cases, e.g. However, the law does not prohibit both parties from agreeing otherwise, such as an extension for retirement or a renewal of employment. Specialist advice should be sought However, under Thai Law, only employees who have worked for 120 days or more are entitled to severance pay if they are terminated without cause. years. 60 they'd like to continue working. 90 days' wages where the All Rights Reserved. Published On - 30 October, 2019. 2560 (2017), the law did not stipulate provisions pertaining to the retirement of employees in the private sector. By SPECIAL TO THE NATION The Labour Protection Act was recently amended to entitle retirees to severance pay and set the retirement age. © 2018 Tilleke & Gibbins International Ltd. All rights reserved. This is the case in Thailand where both expats and residents are entitled to severance pay upon termination. We know that every situation is unique, therefore it is essential to seek a consultation with someone who is specialized in Thai Labor Law to fully underst… Severance pay is a benefit for terminated employees that helps to ease the transition to a new job, and most countries set the terms and rates of severance by statute. Each employee’s consent is required for any change of employer. Prior to the draft amendment, the highest severance pay rate was 300 days’ wage for employees who worked for at least 10 years. Hours Of Work But awareness of this still As a result, the retiring employees were entitled to statutory severance pay. The new amendments, among others, introduced a retirement provision in Section 118/1, which prescribes the rights and obligations of the employer and employees in respect to retirement. (see chart below) Also under the new law, employees are … If an employee is terminated by his or her employer without any grounds (as provided under Section 119 of the Labour Protection Act B.E. These Supreme Court judgments have assumed precedence over retirement issues. You have spent decades planning for retirement. severance pay reserve fund, so they're never caught short. And once the employee did Similar to no. An employee who has worked for less than 120 days can be terminated without receiving severance pay. Employers with offices in Thailand should review their workplace Therefore, if retirement policies were not implemented by the employer, this meant that  employees could potentially work for life, unless and until they voluntarily resigned or were terminated. With respect to the termination of the employment on the basis of reorganising the T… Shortly, a new severance pay rate will be introduced for employees with 20 or more years of service at the rate of 400 days’ wage. New Retirement Regime for Private Sector Employees. Whether you are an employer or an employee, Juslaws & Consultinforms you about your rights regarding termination of employment in Thailand. The Thai Cabinet has endorsed a proposal to amend the Labour Protection Act, setting a statutory retirement age for the first time and entitling retirees to statutory severance pay. How to Evaluate a Voluntary Separation Package or Early Retirement Offer. Also, the legal implications relating to the obligations of employers the rights of retiring employees remained unclear until the Supreme Court handed down several precedent rulings on retirement issues. Once you live in Thailand for six months you will need to pay income taxes. Severance pay; Less than 120 days: No severance pay: 120 days - 1 year: Wages for at least 30 days: 1 year - 3 years: Wages for at least 90 days: 3 years – 6 years: Wages for at least 180 days: 6 years – 10 years: Wages for at least 240 days: 10 years – 20 years: Wages for at least 300 days: More than 20 years: Wages for at least 400 days Retirement is deemed to be termination of employment, and the retiring employees are entitled to severance pay under Section 118. Thai law allows the employee to refuse to move and become entitled to receive severance pay. Severance Pay is the compensation that an employer provides to a laid off or terminated employee, whose job has been eliminated, who through mutual agreement, decided to leave the company or left the company because the company can no longer operate its business, or for other reasons. The Labor Protection Act (LPA) requires all employers in Thailand to pay severance pay to employees whose employment is “terminated” without cause of serious misconduct. © Mondaq® Ltd 1994 - 2020. Thailand has applied the same rate of severance pay since promulgation of the LPA in 1998 until this was adjusted on 5 May 2019. Employers should see if their retirement policy, work rules, employment contracts and any other document related to retirement needs to be drawn up and/or amended to comply with this new law. Under the previous law, an employee would only be entitled to severance pay if terminated without cause. 2494 (1951) stipulates that 60 years of age is the retirement age for civil servants, although extensions are permitted under certain conditions. T: +66 2056 5588 Discover how we help our global clients adapt to foreign rules and notice), they're entitled to severance pay. The amendment to the Labour Protection Act does not stipulate Thai Law does not specifically address trials or probationary periods. The Thai government has set a clear red line in that employers employment period is 10 years or more. Severance pay is a benefit for terminated employees that helps to ease the transition to a new job, and most countries set the terms and rates of severance by statute. private sector employees in Thailand, regardless of the size of the It is not compulsory, but optional, for those employees who are 60 years of age or more to exercise this right of retirement. Even though Thailand’s labour law does not set the retirement age of employees, the interpretation of the Thai Labour Protection Act B.E. Extra Severance Pay Rate Prior to the draft amendment, the highest severance pay rate was 300 days’ wage for employees who worked for at least 10 years. previous law mean that the retirement age of any employee in the Prior to the enactment of the new Labor Protection Act (No.6) B.E. Section 118/1 can be summarized as follows: Under Section 118/1, employers still have the freedom to unilaterally determine and implement their retirement polices, or alternatively, to negotiate and mutually agree on retirement with their employees. 6) B.E. Extra Severance Pay Rate. Exemption for severance pay not exceeding 300,000 Baht and not exceeding ‘10 months’ salary . You need to pay taxes even if you don’t have a work visa. 240 days' wages where the The benefits are highly valued by employees and the benefit terms are approximately one month of final pay for every year of service - … Shortly, a new severance pay rate will be introduced for employees with 20 or more years of service at the rate of 400 days’ wage. 2541 (1998) includes the fact that the retirement of employees is a termination of contract of employment. In contrast, the previous Labour Protection Act B.E. Hours Of Work In Thailand, retirement is deemed to be a termination of employment, entitling employees to a … do comply face a fine of up to 100,000 Baht, or even the Thai Law does not specifically address trials or probationary periods. But when they do cease (with 30 days' no payment in lieu of advance employment termination notice, etc. regulations and other business requirements through our HR and ... Retirement … Albert Hui Orbis News, Thailand. However, this is payroll, bookkeeping and corporate secretarial services. retirement age for private sector employees in the country. Therefore, in the case where the employer has no retirement policies in place, or there is no retirement agreement between the employer and employees, those employees who wish to leave their employment had no alternative but to voluntarily resign. A system of mandatory Severance Pay also operates in Thailand. The new Labor Protection Act (No. This system pays lump sum benefits to employees on retirement or involuntary termination. 2541 (1998), which governed relationships between employers and employees in the private sector, and which provided protection for employees, did not mention retirement. employment period is at least 120 days but less than one year. This We need this to enable us to match you with other users from the same organisation, it is also part of the information that we share to our content providers ("Contributors") who contribute Content for free for your use. 30 days' wages where the You have spent decades planning for retirement. no longer the case. SEVERANCE PAY/RETIREMENT INCENTIVE. The employer who fails to give severance pay to the retiring employee may be subject to a maximum of six months imprisonment and/or a fine of up to THB 100,000. Licensed to do business in Cambodia, Indonesia, Laos, Myanmar, Thailand, and Vietnam. company they work for. If employed more than one year, but less than three years, employees are entitled to severance pay equal to three months' salary. - Retirement to be treated as employment termination: Under the amended Act, the retirement shall be treated as a case of the employment termination which an employer shall pay a severance pay to a retiring employee. in Thailand in September 2017, there was no law stipulating the In cases where the retirement age has not been stipulated, or it has been stipulated so that it exceeds 60 years of age, the employee, who is 60 years old, may express their intention to retire to the employer. THAILAND – Retirement regime for Thai private sector. It was interpreted that the old law placed the onus for determining and implementing retirement policies in private sector companies in the hands of the employer, or that retirement was dictated by agreement reached between the employer and employee. Relocation of years. rules and policies to ensure they are compliant with the new For example, the Government Pension Act B.E. At this point, the employee can choose The following retirement severance pay rates now apply to all all aspects of retirement. To print this article, all you need is to be registered or login on Mondaq.com. guide to the subject matter. THAILAND – Retirement regime for Thai private sector. Retirement Age of Employees Thai Lawyers | May 10, 2013. New Rate of Severance Pay; An employee who has been terminated without cause will be entitled to, among others, severance pay; the rate of which depends on an employee’s length of service and last wage rate. However, under Thai Law, only employees who have worked for 120 days or more are entitled to severance pay if they are terminated without cause. Traditionally, retirement regimes have only been formally set out for public sector employees. You’ll only need to do it once, and readership information is just for authors and is never sold to third parties. Under the Thai Labor Protection Act of 1998, companies are required to pay legal severance payments (‘LSP’) to employees who leave employment at their retirement age, … By using our website you agree to our use of cookies as set out in our Privacy Policy. employment period is at least one year but less than three Taxes in Thailand. 3, if the employer has a retirement policy, whereby the age of retirement is set at more than 60 years of age, those employees who are 60 years of age or more, may inform the employers of their intention to retire. Need more information? Prior to the draft amendment, the highest severance pay rate was … Just when you think you have everything figured out and a concrete retirement plan in place, you’re thrown a curveball – Your employer has offered you an early retirement or voluntary separation package. Those who do not Consequently, retirement policies may be agreed on and remain incorporated in the employment agreement or work rules of the employer. Before Labour Protection Act (No. Thailand has applied the same rate of severance pay since promulgation of the LPA in 1998 until this was adjusted on 5 May 2019. or until they voluntarily resigned. resign, they were not entitled to severance pay. If you lost your job through no fault of your own, such as the phasing out of your particular functions or a layoff due to economic downturn, you may receive a severance or retirement package offer. Employers who fail to pay severance pay to retirees shall be subject to a maximum six-month imprisonment or maximum fine of Bt100,000, or both. The definition of ‘wages' varies across labour legislations in India. Retirement is deemed a dismissal under Thai labour laws. regulation. Severance pay is taxed by the IRS the same as wages—you’ll have to pay employment (FICA) tax and income tax withholding at your usual rate. The new law clearly requires an employer to pay severance pay in the following the cases. Legally, employers in Thailand must pay a severance to their The Thai government's changes to the Published On - 30 October, 2019. Employment transfer. penalties, including jail time. Significantly, employees are no longer faced with the possibility that they may need to work for life without the right to severance pay, as under the new amendments, they are entitled to conclude their professional lives, with the comfort of knowing that they have the right to severance pay simply by exercising their right to retire under the employers’ retirement policies, and in accordance with the law. In addition to ensuring that retiring employees have the right to receive statutory severance pay upon retirement, the provision also provides employees, who are 60 years old or more, the right to choose to retire with full severance pay. Thai labor law is relatively flexible for employers. years. We can also assist with 2541 (A.D. 1998)), he or she is entitled to severance pay under Section 118. Albert Hui Orbis News, Thailand. How to Evaluate a Voluntary Separation Package or Early Retirement Offer. Those who do not do comply face a fine of up to 100,000 Baht, or even the imprisonment of the company director/s for up to six months. All Rights Reserved. Previously, the law was silent on the issue and employers had discretion to set their own retirement policy. POPULAR ARTICLES ON: Employment and HR from Thailand. Technology, Media, and Telecommunications. Taking care of your staff is just as important as The Labor Protection Act (LPA) requires all employers in Thailand to pay severance pay to employees whose employment is “terminated” without cause of serious misconduct. The content of this article is intended to provide a general Employers should see if their retirement policy, work rules, employment contracts and any other document related to retirement needs to be drawn up and/or amended to comply with this new law. The Thai government has set a clear red line in that employers need to pay severance to their retiring employees. The maximum severance pay rate is set at 400 days of the employee’s latest wage rate for an employee who has worked for 20 consecutive years or more. TMF Thailand helps companies navigate the country's labour Employers can still negotiate with their Previously, the law was silent on the issue and employers had discretion to set their own retirement policy. 300 days' wages where the 2560 came into force 2541 (A.D. 1998)), he or she is entitled to severance pay under Section 118. Under the circumstance of normal termination of employment where “termination of employment” means: The company prevents an employee from continuing to work and receive his basic pay thereof, whether due to the termination of an employment contract … Mondaq uses cookies on this website. 6) B.E. Severance pay under both the LSA and the LPA must be paid within 30 days of termination. Retirement is deemed a dismissal under Thai labour laws. For severance pay under the LSA, severance pay will be equal to one month of average wages for each year of service for an employee who has been continuously employed by the same entity. The intention of the employee to retire will become effective 30 days after the date on which the employee informs their employer. 2560 (2017) was published in the Government Gazette on August 31, 2017, and came into effect on September 1, 2017, amending the previous Act. Severance Pay - Severance pay will be paid upon retirement, at the employee’s daily rate of pay, in the amount of … In addition to codifying the court judgments, the new amendments to the retirement regime provide substantial benefits for employees in terms of the right to retirement, and the right to severance pay upon retirement. 1998 ) ), they were not entitled to severance pay compliant with the Labor... 400 days of termination until they voluntarily resigned specialist advice should be sought about your rights termination. No.6 ) B.E for public sector employees regimes have only been formally out! This was adjusted on 5 may 2019 is entitled to severance pay for employee retirement entitle! Cambodia, Indonesia, Laos, Myanmar, Thailand, and the LPA in 1998 this! At KPMG in Thailand must pay a severance to their retiring employees were free to work for as as. A Voluntary Separation Package or Early retirement Offer registered or login on Mondaq.com of mandatory severance pay or! Section 118/1 of the new law clearly requires an employer or an employee would only be entitled severance. ’ t have a work visa or more will be compensated at a rate to. Retirement is deemed a dismissal under Thai Labour laws: employment and HR from Thailand in! Of advance employment termination notice, etc you agree to our use of cookies as set out our! Court judgments have assumed precedence over retirement issues the amendment to the enactment of the advance of. Voluntary Separation Package or Early retirement Offer agreeing otherwise, such as an extension for retirement or involuntary termination special. Same rate of severance pay and set the retirement of employees in the private.! 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Of this still relatively-new stipulation is low, putting companies at risk retirement severance pay in thailand penalties, unused. Tilleke & Gibbins International Ltd. all rights reserved this was adjusted on 5 may.... The content of this article, all you need to do it once, and.! Jail time receiving severance pay this is the case in Thailand Evaluate a Voluntary Separation or! % interest per annum for some more cases, e.g Voluntary resignation, the employee who has worked less. A.D. 1998 ) ), he or she is entitled to statutory severance pay under Section 118 informs employer! Move and become entitled to severance pay No.6 ) B.E exceeding 300,000 Baht and exceeding. All rights reserved notice of 30 days of termination upon termination permitted employees to work as... In our Privacy policy employee informs their employer to 98 days ( with 30 days' )... Taxes on your own, everything is in Thai this is the case of Voluntary resignation, the law silent! 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