Thailand Business, Investment & Corporate Legal
Chapter 2: Terminating Employees in Thailand
How to Terminate an Employee?
- Must be in compliance with Employment Agreement, Work Rules, and applicable Law.
Fixed-term Employment (e.g. 1 year employment Agreements with the possibility of renewal and/or possibility of becoming permanent)
- Automatic Termination (no notice requirement)
Permanent / Indefinite Employment
- Minimum notice period of 1 (one) full payment-cycle in advance (normally 1 month) or wages in lieu thereof. [see below]
- Notice in advance or on payday (effective date of termination is next payday) or payment in lieu equal to number of days of which notice is deficient
- Employees may resign at any time, subject to such Resignation Notice Period as may be contained in the Employment Agreement.
- Generally, the resignation of the employee is tantamount to a waiver of any severance pay that may be due and where the employee’s desire not to pursue its ‘retirement notice’ of which said desire is accepted by the employer (i.e. not to require the employee to serve working the notice period), the employee is not entitled thus to any payment of wages in lieu of notice of his/her own resignation.
Termination Notice Requirements
- Employment Agreements generally contain Notice clauses which be must adhered to by both employee and employer, i.e. the employee is generally required to tender an advanced notice of resignation and vice versa.
- Minimum of 1 (one) full payment cycle’s notice (normally 1 month) in advance with a maximum of 3 (three) full payment cycle’s notice.
- Nonetheless, at such point, employee – employer relationships may have already turned sour and it may not be feasible to require the employee to continue working till expiration of the notice period. Generally, where the employee wishes to resign immediately, the employer may accept such immediate resignation and the employee thus will not be entitled to any payment of wages in lieu of notice per the employment agreement.
- This however is not normally the case in respect of Termination by the employer, where the employee may desire to continue working through the termination notice period. Thenceforth, to effect immediate termination, the employer is mandated to pay the said payment of wages in lieu.
- The effective date of resignation / termination will be at the end of the payment cycle and before the commencement of the next.
- If Company O issues a Termination Notice to B in the middle of B’s payment cycle (generally meaning mid-month), and B’s employment agreement states that there is a Notice Period of 3 months – the said 3 months will begin to run after the end of the current payment cycle (generally meaning beginning next month). If Company O wishes to effect the termination immediately, payment of wages of the current month + 3 months payment of wages in lieu of notice needs to be given to B.
Termination Without Cause – Severance Pay
- Severance Pay is determined by Statute, varies according to the length of the employee’s employment and is calculated as per the employee’s last salary:
- 120 days or more but not more than 1 year = 30 days Severance Pay
- 1 year or more but not more than 3 years = 90 days Severance Pay
- 3 years or more but not more than 6 years = 180 days Severance Pay
- 6 years or more but not more than 10 years = 240 days Severance Pay
- 10 years or more = 300 days Severance Pay
- Where better terms are contained in the employment agreement or work rules & regulations – such better terms will be given effect by the law.
Tax on Severance Pay
- Severance Pay is exempt from tax up to THB 300,000 (subject to certain conditions)
Termination with Cause – Instant Dismissal – Termination without Notice or Severance Pay
Written warnings should be issued before termination, and sufficient opportunity should be given to the employee to rectify his errors, afford an explanation and/or correct his/her ways. Where Termination is with Cause, the Termination Notice should clearly state so. The following are Causes for Termination:
- Violation of the Work Rules & Regulations and/or such Orders / Instructions of the Employer which may be deemed Lawful despite having received written warning within 1 (one) year prior or, without such written warning in serious circumstances
- Absenteeism from Work without Good Reason for 3 consecutive working days (irregardless of holiday in between)
- Dishonest Performance of Duty
- Intentional Commission of a Criminal Act against the Employer
- Intentionally causing the Employer to Suffer Losses
- Performance of an Act of Gross Negligence which Causes the Employer to Suffer Severe Losses
- Imprisonment by Final Judgment (if negligence / petty offence – must cause the employer to suffer damages)
Termination by Reason Of The Employee’s Age
- There is no statutory maximum age of employment in the private sector.
- Retirement age instead is usually determined by the employer’s policy but notwithstanding such stipulated retirement age, termination by reason of an employee’s age is considered termination without cause and such notice prescriptions and severance payments are accordingly applicable.
- Available, subject to the rule that parties cannot contract out of Thai Employment Laws’ stipulated minimums such as the minimum notice period, the provided severance requirements, and so forth.
Directors or other Senior Officers
- So long as the individual Directors / other Senior Officers are employees, the LPA requirements apply mutatis mutandis, along with such specific requirements applicable to removal – appointment of Directors contained in the CCC, the employer company’s Articles of Association and other relevant laws.
Force Majeure – Frustration – Impossibility to Perform
- Automatic Termination where it is impossible for employment agreement to be performed. Circumstances are such as inter alia, destruction of employer entity or employee’s death.
- Thai law is silent on this and principles of freedom to contract are applicable.
Post-Employment Non-Competition Clauses
- These are enforceable subject to reasonableness and adherence to the Thai Unfair Contract Terms Act, Labor Protection Act, public order and good morals. More detailed illustrations on acceptable Non-Competition Clauses is provided here in BANGKOK LEGAL BLOG (BLB) Write-Up on Franchising.
- In essence, in construing reasonableness / fairness, a degree of specificity must be infused upon the period and area of restriction, the subsequent employability of the employee in his profession / industry and the parties’ respective lawful interests.
Time Limitations for Employee’s Claims following Termination
- For wages, other remuneration, disbursements, claims for reimbursements of advances, etc. – 2 (two) years from date of termination
- For Severance Pay – 10 (ten) years
- Distinct from the the Termination requirements above, employees may bring claims against their employers for Unfair Termination to the Labor Court, which may order reinstatement of the employee or where it decides that the two can no longer work together, order such damages to be paid to the employee taking into consideration:
- Employee’s Age
- Employee’s Tenure
- Employee’s Hardship
- Cause of Termination
- Compensation that Employee is entitled to
- Employee compensation flowing from Unfair Termination is not statutorily provided for but Courts generally award damages amounting to 2 (two) months’ wages for the first year or service and 1 (one) month of compensation for each subsequent year of service
Employees may challenge Terms contained in Employment Agreements contending that they are unfair, and it is the general inclination of the Courts that these Terms will be interpreted as tending toward the employee as opposed to the employer. It is the general consensus that the Thai position with regards to Employment, in the interpretation and provision of the LPA, interpretation of the terms of the employment agreement, work rules & regulations, etc. lean toward the Employee and much care is taken to determine what is fair and reasonable given the circumstances and that Employees are not oppressed by the generally stronger position Employer.
Aggrieved employees may bring their employment related complaints to:
Labor Officials (Ministry of Labor)
Thai Labor Courts – exclusive jurisdiction within territorial jurisdictions
Central Labor Court – Bangkok and surrounding provinces
Leap-Frog Appeals for Labor Courts – go directly to Supreme Court.
Where there is no corresponding Labor Court as according to territory, a Labor Claim may be brought in a Court of First Instance.
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.