Termination of Employment in Thailand

Terminating employment in Thailand is a process governed by the Labour Protection Act (LPA) and other related regulations. Both employers and employees must understand their rights and obligations to ensure compliance with Thai labor law.

Types of Employment Contracts in Thailand

Employment contracts in Thailand typically fall into two categories:

• Fixed-term employment: These contracts specify a start and end date, generally not exceeding two years. They are commonly used for special projects, seasonal work, or temporary assignments.
• Permanent employment: These contracts do not have a predefined end date. Termination of such contracts requires adherence to specific legal provisions, including notice periods and severance pay.

Termination of Fixed-Term Employment

A fixed-term contract automatically expires upon reaching the agreed end date. If an employer extends the contract beyond the original period, it is no longer considered fixed-term, and standard employment protections apply. Employees under fixed-term contracts are generally not entitled to severance pay upon termination.

Termination of Permanent Employment

The termination of permanent employees can occur in two ways:

1. With statutory cause: If an employee commits serious misconduct, such as fraud, theft, or gross negligence, the employer can dismiss them without severance pay.
2. Without statutory cause: If an employer terminates an employee without legal justification, they must provide severance pay and adhere to notice period requirements.

Notice Period Requirements

Employers must provide at least one pay period’s notice before terminating an employee, unless otherwise specified in the employment contract. The notice period cannot exceed three months. If an employer wishes to terminate an employee immediately, they must provide payment in lieu of notice.

Severance Pay Regulations

Employees who have worked for at least 120 days are entitled to severance pay if terminated without cause. The severance pay is calculated based on the length of employment:

Steps an Employer Must Take When Terminating an Employee

When terminating an employee, an employer must follow these steps to ensure compliance with Thai labor laws:

1. Provide a Written Notice of Termination
• The employer must issue a written termination letter detailing the reason for termination and the effective date.
• If termination is without cause, the notice must be given at least one pay period in advance or payment in lieu of notice must be provided.
2. Notify the Employee in Advance
• As per Section 17 of the Labour Protection Act, written notice must be provided at or before the wage payment date to take effect on the next wage payment date.
3. Pay Outstanding Wages and Benefits
• The employer must pay all outstanding wages, including unused annual leave and overtime, within three days of termination.
• If applicable, severance pay must be provided based on the employee’s length of service.
4. Issue a Tax Withholding Certificate
• Under Thai tax law, employers must provide a withholding tax certificate specifying any deductions made from the final payment.
5. Provide a Job Certificate
• According to Section 585 of the Civil and Commercial Code, employers must provide a job certificate upon request, detailing the employee’s work history and years of service.
6. Close the Provident Fund (if applicable)
• If the company has a provident fund, the employer must notify the fund manager to facilitate the disbursement of the employee’s contributions within 30 days.
7. Notify Government Agencies
• The employer must inform the Social Security Office about the termination.
• For foreign employees, additional notifications must be sent to the Immigration Bureau and the Department of Employment at the Ministry of Labour.

Wrongful and Unfair Dismissal

Wrongful dismissal occurs when an employer terminates an employee without a legitimate reason or fails to provide due compensation. In such cases, the employee can file a complaint with the Labour Court, which may order reinstatement or compensation based on factors such as the employee’s age, service duration, and financial hardship.

Constructive Dismissal

Constructive dismissal occurs when an employee resigns due to unbearable working conditions, such as:

• Significant changes to job responsibilities or pay without consent
• Workplace harassment or discrimination
• Unsafe working conditions
• Non-payment of wages

Employees who experience constructive dismissal can claim compensation if they prove that the employer’s actions forced them to resign.

Legal Recourse for Employees

Employees who believe they have been unfairly dismissed can:

1. File a complaint with the Department of Labour Protection and Welfare.
2. Pursue legal action in the Labour Court, seeking reinstatement or financial compensation.

Special Severance Pay Conditions

In addition to standard severance pay, Thai labor law provides for special severance payments in the following cases:

• Relocation: If an employer relocates operations and an employee refuses to move, they are entitled to special severance pay.
• Technological changes: If new technology reduces workforce needs, affected employees must be given 60 days’ notice or special severance pay.

Post-Termination Restrictions

Thai law allows employers to enforce post-termination restrictions, such as:

• Non-compete clauses: Courts may uphold non-compete agreements lasting up to two years within a specific geographic area.
• Non-solicitation clauses: Employers can prevent former employees from poaching clients or colleagues, provided the restrictions are reasonable.

Taxation of Severance Pay

Severance payments are considered taxable income, but employees may qualify for special tax deductions based on their service length. The first THB 300,000 of severance pay is tax-exempt, with progressive tax rates applied to amounts exceeding this threshold.

Conclusion

Employment termination in Thailand requires careful adherence to legal requirements to avoid disputes and penalties. Employers must ensure compliance with notice periods, severance pay obligations, and statutory termination conditions, while employees should be aware of their rights to seek legal recourse in cases of wrongful dismissal. Understanding Thai labor law is essential for both parties to navigate employment termination smoothly and lawfully.