1.          Labor Regulations

Employment legislation has a direct bearing on labor practices for each type of business. Investors should seek appropriate advice to determine which legislation applies to their line of business.

1.1        Labor Protection

Workers in Thailand are protected by the Labor Protection Act B.E. 2541 (1998), the Labor Protection Act B.E. 2551 (2008), the Labor Relations Act (No. 2) B.E. 2518 (1975), and other related laws. These laws apply to all businesses with at least one employee. Employers who disregard these laws are subject to heave fines and possible imprisonment of up to one year. It should be noted that domestic workers (household staff) are not included in the definition of “employee” and are not covered by the Labor Act. All other employees, whether full or part time, seasonal, casual, occasional or contract, are covered.

Important protections contained in the law are:

Work Hours and Holidays: The maximum number of hours for non-hazardous work is 8 hours a day, but not exceeding 48 hours per week. Where the working hours of any day are less than 8 hours, the employer and employee may agree to make up the remaining working hours in other normal working days, but not exceed 9 hours per day and the total working hours per week shall not exceed 48 hours. In some types of work as stipulated by law, the employer and the employee may agree to arrange the period of working hours, but it still must not exceed 48 hours a week. Hazardous work may not exceed seven hours a day, or 42 hours per week. The employees are entitled to no fewer than 13 national holidays per year, as well as a minimum of six days of annual vacation after working consecutively for one full year. The employees have the choice of whether they wish to work overtime or on holidays. A female employee is entitled to maternity leave for a period of 90 days including holidays, but paid leave shall not exceed 45 days.

             All employees are entitled to a daily rest period of at least one hour after working five consecutive hours. The employer and the employee may arrange the daily rest period to be shorter than one hour at each time, but it must not be less than one hour a day in total. A weekly holiday of at least one day per week at intervals of a six-day period must be arranged by the employer.

             For work performed in excess of the maximum number or working hours fixed either by law or by specific agreement (if the latter is lower), the employees must be paid overtime compensation. The rates for overtime vary and range from 1-1/2 times to 3 times the normal hourly wage rate for the actual overtime worked. The maximum number of overtime working hours is limited to not more than 36 hours a week.

             The minimum age for employment is 15 years, and the workers below the age of 18 are banned from dangerous and hazardous jobs. They are also prohibited from working overtime, on holidays, or between the hours of 10 p.m. and 6 a.m. A pregnant employee is also prohibited from working overtime, on holidays, or between the hours of 10 p.m. and 6 a.m. However, if she works in an executive position, or performs academic, administrative, and/or work relating to finance or accounts, the employer may assign her to work overtime on a working day with her consent insofar as it does not affect the health of the pregnant employee.

–               Sick Leave: Employees can take as many days of sick leave as necessary, but the employer is required to pay wages in respect of a day of sick leave for not exceeding 30 working days per annum. The employer may require the employee to produce a certificate from a qualified doctor for a sick leave of three days or more.

–               Severance Pay: Employees who have worked for at least 120 days but less than one year are entitled to 30 days severance pay. For personnel employed between 1-3 years, the severance pay is not less than 90 days’ pay. The employees with 3-6 years of service will receive 180 days’ pay, those with 6-10 years’ service will receive 240 days’ pay, and employees with more than 10 years’ service will receive 300 days’ pay

–               Termination of Employment: Conditions for termination of employment are laid out in the Act, and a code governs unfair practices and unfair dismissals, which often are the result of the failure to follow correct legal procedures. Employee associations and labor unions must be registered at the Labor Department, and require a license for operation. Finally, a Labor Court specifically settles employment disputes. If an employment contract does not specify any duration, either party can terminate the contract by giving notice at or before any time of payment, to have effect in the next pay period.

–               Employee Welfare Fund: For companies with at least 10 employees that do not have a provident fund, an Employee Welfare Fund will be established to compensate the employees who resign, are laid off, or die in service. Both employers and employees will be required to contribute to this fund.

In addition to these provisions, there are restrictions on the kind of work that women and children can perform. Guidelines are set for wages and overtime, as well as resolution of labor-management disputes. The employers are required to pay workers compensation if an employee suffers injury, sickness or death in the course of work. Thai law also requires employers to provide welfare facilities, including medical and sanitary facilities.

1.1.1     Workmen’s Compensation

The Workmen’s Compensation Act of 1994 prescribes that an employer must provide the necessary compensation benefits for employees who suffer injury or illness or who die as a result or in the performance of their work at the rates prescribed by law. The compensation benefits can be grouped into 4 categories: the compensation amount, the medical expenses, the work rehabilitation expenses, and the funeral expenses.

The payment of compensation benefits is made in accordance with the criteria and rates prescribed by law depending on the seriousness of the case. In general, the compensation amount must be paid monthly at the rate of 60% of the monthly wages of the employee subject to minimum rate and maximum rate prescribed by the Announcement of the Ministry of Labor and Social Security Welfare.

Actual and necessary medical expenses must be paid but not exceeding 45,000 baht for normal cases and 65,000 baht for serious injury. The work rehabilitation expenses must be paid as necessary according to the criteria procedures and rates prescribed by law but not exceeding 20,000 baht. In the case of death, the funeral expenses will be paid at a maximum amount equal to 100 times of the minimum daily wage rate prescribed by law.

1.1.2     Social Security

The Social Security Act of 1990, amended in 1999 requires that all employers withhold social security contributions from the monthly wages of each employee. The prescribed rate is currently 5% for the first 15,000 baht of salary. The employer is required to match the contribution from the employee. Both contributions must be remitted to the Social Security Office within the 15^th day of the following month.

The employees with social security registration may file claims for compensation in case of injury, illness, disability or death that is not due to the performance of their work, and for cases of child delivery, child welfare, old age pension and unemployment.

1.1.3     Ceasing Operations Temporarily

When employers adopt this measure in Thailand, they can pay wages at a 25% reduced rate to the affected employees. Lacking understanding of the law can result in court proceedings and the risk of a court order revoking the measure of “temporary cessation of operations.”

For the conditions on adopting this measure, consult Section 75 of the Labor Protection Act. Furthermore, situations arising from events deemed to be a “force majeure”, which result in the employer not being able to operate at all, may enable the employer to withhold all wages from employees.

1.1.4     Termination of Employment

If an employment contract does not specify any duration, either party can terminate the contract by giving notice at or before any time of payment to take effect in the next pay period, but not required to issue a notice in advance for more than three months. However, there are some reasons which the employee can be dismissed without prior notice and compensation from the employer as follows:

(a)     The employee willfully disobeys or habitually neglects the lawful commands of his employer;

(b)     The employee absents himself from service;

(c)     The employee is guilty of gross misconduct;

(d)     The employee acts in a manner incompatible with the due and faithful discharge of his duty.

In addition to the above, the employer is not required to pay severance pay to the employee whose employment is terminated by the employer for any of the following reasons;

(a)     The employee has dishonestly carried out in his/her duties or committed an intentional criminal act against the employer;

(b)     The employee has intentionally caused damage to the employer;

(c)     The employee has gross negligently performed an act which results in severe loss to the employer;

(d)     The employee has violated the employer’s work regulations, rules or orders which are both lawful and equitable subsequent to a written warning (no warning is required for serious violations);

(e)     The employee has abandoned his/her duties for three consecutive days without reasonable cause;

(f)      The employee has been imprisoned by a final judgment of a court.

One of the grounds for dismissal with cause under the Labour Protection Act is repeated violation of work rules as stated in item (d) above, for which a previous letter of warning has been issued for the particular act. The letter will be effective for a period of 1 year from the date on which the employee commits the violation, not from when the letter was written. However, in case of a serious violation, a written warning notice is not required.

–               Requirements for Warning Letter: Section 119 (4) of the Labour Protection Act provides for the dismissal for serious cause of an employee who has committed a repeat violation of an offence for which a written warning has already been given, but does not give guidance for the form requirements for the warning letter itself. Based on previous decisions of the Supreme Court^[1], it is evident that:

1.   Prior to issuing the warning letter, the employer should first consider the work rules. If they contain a disciplinary procedure consisting of several stages which have to be followed step by step, the employer must follow each step.

2.   The warning letter must contain:

a.       Date of issuance of the warning letter;

b.      Name and position of the employee;

c.       A description of the behavior of the employee that constitutes a violation of the work rules;

d.      A reference to the work rules which the employee has violated;

e.       A statement that of the employee commits the same violation of the work rules again, the employer will punish the employee pursuant to the procedure in the work rules.

Further, the employer should ask the employee to sign the warning letter as an acknowledgement. The employer can read the letter to the employee, and ask two witnesses to sign the letter to confirm it has been read and that the employee refuses to sign. A letter from the employee acknowledging violations does not constitute a warning letter.

If the employee is a member of an Employee Committee formed in accordance with the Labour Relations Act, the employer may not discipline the employee, including by issuing a warning letter, even where there has been a determination of guilt. The employer must submit a petition to the Labour Court seeking an order approving the discipline of the employee. If approved, the employer may then proceed as described above.

In the event that the employer relocates its place of business in a way that essentially affects the normal living of an employee, the employer must notify the employee of the relocation at least 30 days in advance or pay an amount in lieu of the advance warning of 30 days’ wages. If the employee refuses to move and work in the new location, the employee has the right to terminate the employment contract within 30 days as from the date of being informed by the employer or the date of relocation, as the case may be. In this regard, the employee is entitled to receive a special severance pay at the rate of not less than the rate of severance pay.

In the event the employer terminates an employment as a consequence of streamlining the work units, production process and distribution service, due to an introduction or change of machinery or technology that reduces the required number of employees, the employer must notify the Labor Inspector and the employee concerned at least 60 days in advance of the date of termination or pay an amount in lieu of an advance notice, that is equal to 60 days’ wages to the employee. Moreover, the terminated employee will be entitled to the prescribed severance pay. In additional to that, if the terminated employee has worked consecutively for more than six years, the employee would be entitled to an additional special severance pay at the rate of not less than 15 days’ wages for each full year of service, calculated from the start of year seven onwards. However, the total amount of this additional special severance pay is limited to the equivalent of 360 days’ wages.

1.1.5     2015 Minimum Daily Wage

2015 Minimum Daily Wage

Effective 1 January 2013, the minimum wage in all provinces of Thailand is 300 baht per day.

Source: Ministry of Labor (www.mol.go.th)