Thailand Business, Investment & Corporate Legal – Thailand Employment – Chapter 1: Employing Employees in Thailand (in point form)

Thailand Business, Investment & Corporate Legal

 THAILAND EMPLOYMENT

Chapter 1: Employing Employees in Thailand

Brief Introduction:

With the effects of the AEC yet to be seen, yet with the same in foresight, it is incumbent to thoroughly appreciate Thailand’s Labor Law. Thailand’s Labor Law is observably employee friendly, and this is fundamentally important with the large labor pool and influx of investors / business owners. Thailand’s labor force is generally centralized as opposed to unionized and thus trade unions, work unions, professional bodies, collective agreements and the like are not of much weight but key determination rests upon the  main authority for the determination and enforcement of employment standards which is the Ministry of Labor and Social Welfare. It is prudent to note that Thai Employment Law does not reach to employees of Thai companies based in other jurisdictions, nor does Thailand’s Labor Law only apply to Thais where its protection extends to all employees working in Thailand irrespective of origin, law governing their employment contracts, or nationality.

Governing Laws:

  • Labor Protection Act B.E. 2541 (A.D. 1998)
  • Civil & Commercial Code
  • Labor Relations Act B.E. 2518 (A.D. 1975 )
  • Act establishing the Labor Court and Labor Court Procedure B.E. 2522 (A.D. 1979)
  • Provident Fund Act B.E. 2530 (A.D. 1987)
  • Social Security Act B.E. 2533 (A.D. 1990)
  • Employment and Job Seeker Protection Act B.E. 2528 (A.D. 1985)
  • Skill Development Promotion Act B.E 2545 (A.D. 2002)
  • State Enterprise Labor Relations Act B.E. 2543 (A.D. 2000)
  • Workmen’s Compensation Act B.E. 2537 (A.D. 1994)
  • Foreign Employment Act B.E 2551 (A.D 2008)

The Employment of Foreigners 

  • It is the obligation of the employer to ensure that its’ foreign employees are entitled to work in Thailand
  • There are different requirements applicable depending on the nationality / status of the individual
  • Specific rules and exceptions for non-nationals are provided by the Foreign Employment Act, various Regulations and Decrees. The most common requirement that is generally applicable is that foreign workers are required to possess both a valid work permit and visa in order to legally work in Thailand.

Form of the Employment Agreement / Contract

  • Employment Agreements are deemed as Contracts for Hire of Service
  • No Requirement to be in Writing
  • Where the Employment Agreements are in Writing. A signed copy should be given to the employee
  • Companies with over 10 employees are to lodge its working rules with the Labor Official

The Nature of the Employment Agreement

  • Employment relationships are contractual in nature, whether or not the terms are reduced to writing
  • Contracts of employment (irregardless of express or implied) may envisage different terms of employment:
    • Fixed-term – Permanent
    • Full-time – Part-time
  • Statutory terms are applicable in all variations, irrespectively.

 Working Hours

  • Generally, companies in Thailand determine their working hours as beginning at 8.30 a.m and ending at 5.30 p.m, with a lunch break from 12.00 p.m – 1.00 p.m.
  • In general, the maximum working hours is 8 hours, and 48 hours per week.
  • In the case where the type of work is detrimental to health / safety, the maximum working hours is 7 hours, and 42 hours per week.

Minimum Wage / Salary

  • Thailand’s minimum wage is determined by the Ministry of Labor, and is payable in THB, unless agreed otherwise
  • The Current Minimum Wage, pursuant to Thailand’s Employment Committee No. 6 and according to province and per day is (as effective on 1st April, 2012):
    • THB 300 – Bangkok, Phuket, Nakorn Pathom, Nonthaburi, Pathum Thani, Samut Prakarn and Samut Sakorn
    • THB 273 – Chonburi
    • THB 269 – Chachoengsao and Saraburi
    • THB 265 – Ayudhya
    • THB 264 – Rayong
    • THB 259 – Ranong
    • THB 258 – Phang-nga
    • THB 257 – Krabi
    • THB 255 – Nakorn Ratchasima and Prachinburi
    • THB 254 – Lopburi
    • THB 252 – Kanchanaburi
    • THB 251 – Chiangmai and Ratchburi
    • THB 250 – Chantaburi and Petchburi
    • THB 246 – Songkhla and Singhburi
    • THB 244 – Trang
    • THB 243 – Nakorn Srithammarat and Angthong
    • THB 241 – Chumporn, Pattalung, Satun, Loei and Sakaew
    • THB 240 – Prachuab Kirikhan, Yala, Surat Thani and Samut Songkram
    • THB 239 – Narathiwat, Udonthani and Ubolratchathani
    • THB 237 – Nakorn Nayok and Pattani
    • THB 236 – Trad, Lampoon, Buengkan and Nongkai
    • THB 234 – Kampaengpetch and Uthaithani
    • THB 233 – Chainat, Supanburi, Kalasin and Khonkaen
    • THB 232 – Chiangrai, Buriram, Nakorn Sawan, Petchaboon, Yasothorn, Roiet and Sakolnakorn
    • THB 230 – Chaiyapoom, Mukdahan, Lampang, Sukhothai and Nongbualampu
    • THB 229 – Nakornpanom
    • THB 227 – Pichit, Pitsanuloke, Prae, Mahasarakam, Maehongson, Utaradit and Amnatcharoen
    • THB 226 – Tak and Surin
    • THB 225 – Nan
    • THB 223 – Srisaket
    • THB 222 – Payao
  • The minimum wage for a fresh university graduate (bachelor’s degree) is THB 15,000
  • In the event of non-compliance, an official warning will be received, directing the situation to be rectified within 30 days. If this warning is non complied with, the employer will be punishable with a maximum fine of THB 100,000 and/or a maximum term of imprisonment of 6 months

Minimum Rest Periods / Paid Leave

  • 1 rest day per week
  • 1 rest hour per day
  • 13 public holidays per year incl. National Labor Day (1st May)
  • After 1 year of service, 6 days paid leave
  • Entitlement to take leave for military duties, but not for public service duties.

Working Condiitons

  • Cannot be lower than minimum standards set by law

 Age / Special Restrictions

  • Minimum age for employment in Thailand is 15
  • Nonetheless, if the prospective employee is between 15 and 18 years of age, additional restrictions apply such as the necessity of informing the Labor authority
  • No maximum age for employment in the private sector
  • In the public sector, certain Government employees may be subject to maximum age restrictions depending on their positions
  • Additional restrictions apply as to who can be employed to carry out certain hazardous activities
  • Additional restrictions also are applicable concerning the types of work that groups of employees such as children or women can be required to undertake.

 Probation Period

  • No specific provision regarding probation periods
  • Nonetheless, it has to be borne in mind that where the employee has been employed for over 120 days, termination without cause necessitates severance pay

Maternity Leave

  • Maximum of 90 days per pregnancy, including holidays
  • 45 of these 90 days are paid-leave days
  • The employee cannot be terminated due to her pregnancy

Illness / Sick Leave / Disability

  • Entitled to 30 days of  paid sick leave per year
  • This cannot include inability to work due to injury / illness arising out of working
  • Where sick leave is taken for three or more days consecutively, the employer may require a medical certificate (issued by a first class physicial or government clinic). If such medical certificate is unavailable, an explanation must be provided
  • Disability leave is generally treated in the same manner as sick leave

Working Rules

  • Employers employing ten or more employees must register their work rules reduced to a written form with the Department of Labor Protection & Welfare, a copy of which must be posted in a prominent location at the place of work
  • These work rules must have such coverage including:
    • Working days;
    • Regular working hours;
    • Rest periods;
    • Holidays and rules for taking holidays;
    • Leave and rules for taking leave;
    • Rules on overtime and holiday work;
    • Date and place / method of wage payment;
    • Overtime and holiday pay;
    • Disciplinary measures and punishment;
    • Procedures for submission of grievances;
    • Procedures for termination of employment; and
    • Severance pay and special severance pay.

 Relocation

  • Pursuant to the Labor Protection Act, where the employer is desirous of relocating its place of business if the place of business  and such relocation may be calculated to materially affect its’ employee’s or his/her family’s life – there is a required notice period of 30 days before the date of such relocation.
  • In the event of a shorter notice or absence of notice being given, employers are obligated to make a special severance payment in lieu of 30 days wages. Employers have to note that in view of such notice, should an employee wish to terminate the employment, normal severance obligations are applicable.

Pension Plans / Social Security / Welfare Funds

  • A compulsory old age pension scheme for private sector employees is administered by the Social Security Office.
  • Over and above such, the law has contemplated a scheme called the ‘Employee Welfare Fund’ (‘EWF’) designated to be established & managed by the Employee Welfare Fund Committee upon enactment of a Royal Decree (enactment of which has not yet been implemented and thus this EWF is not yet in place. Pursuant to the Labor Protection Act, employers with ten or more employees will have to participate in the EWF. The EWF will has the same objectives as a provident fund, i.e. providing financial security to employees and to employees’ beneficiaries , in case of resignation or retirement from work or in such other cases as stipulated.
  • Further, non-compulsory provident funds may be jointly set up by employer and employees. These have to managed by professional managers licensed for this purpose. Where the employer has registered a provident fund and provides welfare for the employees in case of resignation or death that is in accordance with the rules and procedures set out in the Ministerial Regulations, the employer is exempted from registering with the EWF.  Contributions thereto of both employer and employee are typically based on a specified percentage of the employee’s wages, calculation of which is based on the fund’s regulations.In view of such ‘membership”s termination or termination of the employee’s employment itself, the employee shall receive their contributions and a percentage of the employer’s contribution in accordance to the fund’s terms and conditions / regulations.

 Social Security Contributions / Compulsory Insurance

  • Enacted and codified via Social Security Act, B.E. 2533 (A.D. 1990)
  • The Social Security Fund provides for 7 types of employee benefits:
    • Sickness or Injury not suffered in the course of employment;
    • Disability not incurred in the course of employment;
    • Death not occurring in the course of employment;
    • Maternity;
    • Child Welfare;
    • Unemployment; and
    • Old Age pension
  • For Sickness / Injury / Disability / Death suffered / incurred / occurent in the course of employment, please see ‘The Workmen’s Compensation Fund” set out below.
  • Employers employing employees are required to register under the Social Security Fund and make such contributions as applicable
  • Similarly, employees are also required to make such contributions
  • Further, the Government is also so required
  • The general rate of SS contribution  is 5% of an employee’s wage with a cap of 750 THB /month
  • In 2012 nonetheless, the Government has implemented a special rate at 3% – 4% – 5% as a relief for the late 2011 flood
  • Social Security Contributions are Tax Deductible
  • Social Security Benefits that are payable are Tax Exempt
  • Failure of an employer to make its Social Security contribution within the specified time, an additional 2% penalty (per month) has to be made over and above the outstanding contribution due.
  • Persons exempted from the Social Security Fund include, inter alia:
    • Government Officials;
    • Employees of Foreign Governments;
    • Employees of International Organizations;
    • Employees of Thai firms based overseas;
    • Private school teachers;
    • Students who work for schools, universities, and hospitals; and
    • other types of employees according to Royal Decree.

The Workmen’s Compensation Fund

  • As opposed to injury / disability / death which is suffered / incurred / occurent out of the course of employment which is covered by the Social Security Fund, the Workmen’s Compensation Fund covered injury / disability / death suffered / incurred / occurent in the course of employment
  • Employers are required to register all their employees with the Workmen’s Compensation Fund – Workmen’s Compensation Fund Act
  • Employers are required to contribute between 0.2% – 1% of the total payroll as determined by the Ministry of Labor with a prescribed maximum up by 31st January, annually, rates of which vary according to the type of business and nature of work.
  • Failure of the employer to make such prompt contribution will incur a penalty of an additional 3% of outstanding contributions per month of such deficiency.
  • An employee who suffers injury, illness, disappearance, or death in the course of employment  or related to work is entitled to be reimbursed for medical treatment, funeral expenses (if applicable),  rehabilitation and compensation.
  • This obligation does not extend to intentional self-inflicted injuries, injuries allowed to be inflicted upon the employee, or injuries resulting from absence of self-control due to intoxication of self.

Employee Records

  • Employees’ records must contain the following:
    • Date of commencement of employment;
    • Job position / designation / duties;
    • Rate of wages;
    • Name and Surname;
    • Gender;
    • Date of birth / Age;
    • Current address of residence;
    • Nationality;
    • Other benefits as agreed between employee and employer; and
    • Date of termination of employment where applicable.

Wage Payment Documentation

  • Wage payment documentation  must include the following:
    • Documents concerning the payment of wages, including the payment of holiday and overtime additionals.
    • Particulars of working days
    • Particulars of working time
    • Particulars of work done by employees paid on a piece-rate basis
    • Rates of wages / Amount of compensation, including rates of additionals
    • Particulars may be consolidated in one or several volumes and payment may be evidenced by proof of direct transfer to a commercial bank account / other financial institution.
  • Wage Payment Documentation and Employees’ Records must be kept for a period of 2 years from date of payment date of termination where applicable.

 Other Non-Statutory Terms

  • The doctrine of ‘Freedom to Contract’ is applicable over and above provisions required by law and cannot be less favorable than those as codified.
  • Further, terms will only be enforceable to such extent as they are in tandem with public order and good morals.

Confidentiality

  • Doctrines of Confidentiality and Secrecy are applicable in employment relationships and are encompassed in statutory provisions like the Trade Secret Act B.E. 2545 (A.D. 2002) and in common law
  • Typically, confidentiality rules are expressly included into employment agreements specifically identifying what type of information is a Trade Secret as well as including restrictive covenants restricting disclosure for a period of time post-employment
  • Contravention of this confidentiality obligation exposes the employee to liability for compensation where the employer is indeed injured by disclosure of such confidential information

 Ownership of Intellectual Property Rights

  • Of particular importance to employment ins the research and development sector, the law especially provides that additional remuneration must be provided to employees who develops inventions to the benefit of their employers
  • As to the ownership of Intellectual Property Rights, statutory provisions are In the absence of any contractual terms, there are statutory provisions which will be read into the employment agreement in the absence of terms clarifying the same

Sub-Contracting and Outsourcing

  • Employers in engagement of a person or outsourcing company and thus in ’employment’ of an so sourced worker is obligated to ensure that such sourced ’employee’ charged with the same manner of work as its non-sourced / actual employees receive similar fair rights, benefits and welfare without discrimination over the latter.
  • Employees can seek the payment of sums due to them under the Labor Protection Act from any entity along the chain of sub-contracts.

Subsequent Amendments to the Terms of the Employment Agreement

  • Such amendments may only be made with the employee’s consent, which may be
    • express, i.e. the employee in agreement or
    • implied, i.e.the employee continuing to work for the employer ‘without protest’ for a reasonable period of time after having been made aware of such change
  • ‘Amendments’ / Changes to the Employment Agreement in the absence of consent is deemed a breach of the same

Change of the Employer Entity’s Ownership

The effects of such a change depends on the type:

  • Purchase of Assets
    • Typically, a transfer of employees from the original employer to the acquiring employer would be contemplated
    • Employees’ consent is necessary, i.e. employees may refuse such a transfer and be entitled to severance pay (such termination amounts to termination without cause)
    • New employers (as transferred) are required to accept all such obligations, duties and rights of these transferred employees, i.e. the former Employment Agreement is brought over / transferred along
  • Purchase of Shares:
    • As the original employer remains intact, its’ Employment Agreements are so intact and is maintained through

Employee Discipline And Grievance

  • As abovementioned, procedures for disciplinary actions  and employee grievances are required to be described in the work rules which have to be lodged with the Labor Office
  • If an employee disagrees with the employer decision after a submission of a grievance, recourse lies in the course of an ‘appeal’ to the Labor Official or to a Court.

Gender Equality / Harassment / Discrimination / Equal Pay

Labor Protection Act:

  • As aforementioned, termination on grounds of pregnancy is not allowed.
  • Requires equal pay for both men and women performing equal work.
  • Requires equal treatment for both men and women in their employment, save for cases where the nature or conditions of the work prevents so.
  • Sexual harassment by management, inspectors or other employees is strictly forbidden.

The Thai Constititution:

  • The lead principle against discrimination is founded in Section 30 of the Constitution which explicitly forbids unjust discrimination against a person on the basis of origin, race, language, sex, age, disability, physical or health condition, personal status, economic or social standing, religious belief, education or constitutional political view.
  • Flowing from this, persons alleging to be aggrieved by discrimination are granted direct access to the Courts.

Employers’ Compulsory Training Obligations

  • There are profession – specific educational and training requirements (discussion of which will be omitted here)
  • There are mandatory training obligations placed upon employers with 100 or more employees:
    • An annual labor skill training is compulsory for at least 50% of its employees
    • Failure of the employer to do so results in the employer required to make a contribution the following year (before February) to the Labor Skill Development Fund, with an increment of 1.5% of that outstanding per month
    • This penalty is currently determined at 1% x 3,990 THB (base salary for calculation purposes) x 12 months x  number of employees so not trained

Vicarious Liability

Employers are vicariously liable for the acts of their employees, save for such acts of the latter that are wholly outside the scope of their employment.

Restrictions against Off-setting Earnings

Employers are only permitted to cause deductions to be made from employees’ wages for the following:

  • Social Security and contributions to other provident or similar funds;
  • Payment of debts to co-operative savings or debts made for purposes of the employee’s welfare or sole benefit of employees with the latters’ consent
  • Labor Union contributions
  • Compensation or security deposits for damages incurred by the employer caused by the employees’ wilful act or act of gross negligence
  • Income tax

In some cases, the employee’s consent is required where the deductions is in excess of 10% of the employee’s wages of by aggregate exceed 1/5 of the same. For proper records, documentation of such consent should be in the form of a singed written document.

Trade Unions

  • Generally, Trade Unions are permitted for employees of a single employer or employees carrying out the same type of work
  • Registration required with the Ministry of Labor and a license therefrom required to operate legally
  • This license will only be issued after investigation for the purposes of ensuring that the union’s regulations do not constitute a threat to national security or the economy, or run contrary to law nor public order
  • There is a minimum requirement of 10 initial members.
  • A registered Trade Union may as a collective unit submit demands for better employment conditions and in general carry out such activities for the benefit of its members.
  • The aims of a Trade Union are to safeguard employment conditions, and for promotion of better relationships, both employer – employee and employee – employee.

‘Right To Strike’ of Employees

  • A demand to strike must be submitted
  • Such demand may only be submitted where negotiations and attempts to reconcile have failed
  • A written notice, of at least 24 hours  in advance must be first be furnished to the other party and the Labor Dispute Conciliator .
  • In any event, employees’ ‘right to strike’ is limited where deemed to pose a threat to the nation or the public by the Ministry of Labor.
  • Termination may not be caused merely based on employees’ union activities. Nonetheless, other ’causes’ such as dishonest performance of duties may consitute it to be termination with cause.

.. to be continued

 

Next: Chapter 2: Termination of Employment

.

.

For more information on the foregoing, please contact the author JOEL LOO SEAN EE, the Bangkok-based Senior Regional Counsel at Kelvin Chia Thailand and a member of Kelvin Chia Partnership’s Regional Practice Group at Joel.Loo@KCPartnership.com.

——————————————–

 

This article is published to provide general information only and is not offered as specific advice on any particular matter – This information is to be taken subject to proper consultation with a lawyer.

All written material on BANGKOK LEGAL BLOG (BLB) including this post are the Copyright of Joel Loo Sean Ee. Any attempt to plagiarise or reproduce these materials in whole or in part, in verbatim or in paraphrase, or in any other form that it can be conceivable that such attempt is being made is an offense in law and will be an invitation by offenders to face charges and prosecution in a Court of Law.
Advertisements

1 Comment

Filed under Thailand Business Investment & Corporate Legal, Thailand Company Incorporation, Thailand Employment

One response to “Thailand Business, Investment & Corporate Legal – Thailand Employment – Chapter 1: Employing Employees in Thailand (in point form)

  1. Pingback: Thailand Legal Due Diligence in Mergers & Acquisitions (M&A) | BANGKOK LEGAL BLOG (BLB)