Labor Issues

 

  

Thailand’s employment laws are administered by the Department of Labor, Protection and Welfare. They stipulate working conditions including maximum work hours, holidays, sick leave, minimum wage and severance pay.

 

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

In August 1998, the Labor Protection Act (1998) went into effect. It applies to all businesses with at least one employee. Under the law, employers who disregard the law are subject to fines ranging from 5,000 baht to 200,000 baht and 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:

 

1.       Work Hours and Holidays: The maximum number of hours for non-hazardous work is eight hours a day or 48 hours a week in total.  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. Employees are entitled to no fewer than 13 national holidays a year, and a minimum of six days of annual vacation after working consecutively for one full year. 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 a 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), employees must be paid overtime compensation. The rates for overtime vary and range from 1-1/2 times to three 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.

2.       The minimum age for employment is 15 years, and 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 six a.m. Pregnant employees are also prohibited from working overtime, on holidays, or between the hours of 10 p.m. and 6 a.m.

3.       Sick Leave: Employees can take as many days of sick leave as necessary, but if an employee takes three months of sick leave, the employer is required to pay only one month’s wages. The employer may require the employee to produce a certificate from a qualified doctor for a sick leave of three days or more.

4.       Severance Pay: Employees who have worked more than 120 days, but less than one year, are entitled to 30 days severance pay. For personnel employed between one and three years, the severance pay is not less than 90 days pay. Employees with three to six years of service will receive six months salary, those with more than six to 10 years service will receive eight months salary, and employees with more than 10 years service will receive 10 months salary

5.       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.

6.       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 employees who resign, are laid off, or die in service. Employers and employees will be required to contribute to this fund.

In addition to these provisions, there are restrictions on the kind of work women and children can perform. Guidelines are set for wages and overtime, as well as resolution of labor-management disputes. 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 Compensation Act 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 four categories: The compensation amount, the medical expenses, work rehabilitation expenses, and 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 percent of the monthly wages of the employee but not lower than 2,000 baht and not exceeding 9,000 baht a month.

Actual and necessary medical expenses must be paid but not exceeding 35,000 baht for normal cases and 50,000 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, 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 requires that all employers withhold social security contributions from the monthly wages of each employee. The prescribed rate is currently 5 percent 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 15th day of the following month.

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 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. An employee may be dismissed without due notice and severance pay if the employee:

1.       Intentionally commits a crime or act of dishonesty against the employer

2.       Intentionally or negligently causes the employer to suffer damage

3.       Violates the employer’s work rules, regulations or lawful orders and a written warning has been given (except that such warning is not required for serious offences)

4.       Has been absent for three consecutive working days without a reasonable excuse

5.       Is adjudged to serve a prison sentence (except where such sentence arose due to negligence or petty offense)

An employee terminated without a valid cause as stipulated by law is entitled to receive severance pay as specified 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 and is entitled to receive a special severance pay of not less than 50 percent of the prescribed severance pay.

In the event the employer terminates the employment of an employee as a consequence of streamlining the work units, production process and distribution service, due to the introduction or change of machinery or technology that reduces the 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 of the employee or pay, in lieu of the advance notice, an amount equal to 60 days’ wages. The terminated employee will be entitled to the prescribed severance pay. Moreover, 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 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.

 

1.2 Legal Implications of Labor Management

In general, Thai labor laws provide for considerable freedom in managing labor. In many countries, it is not legal to discriminate on the basis of age or sex. Perusal of personnel ads in Thai newspapers finds employers narrowly defining their needs: “The successful candidate will be male, under 35 years of age, not a member of a labor union, and at least 150 cm in height, etc.”

Further, the government does not interfere with a company’s retrenchment policies when economic conditions necessitate cutbacks. There is no “first in, last out” requirement in Thailand. Similarly, Thai employers have the right to transfer employees to other work locations, provided the transfer is not ordered with the exclusive intent to create hardship on them. Refusal to transfer is legal cause for dismissal.

 

1.2.1 Employee records

An employer with 10 or more regular employees is required to establish written rules and regulations in Thai language governing work performance. The regulations must be displayed on the work premises within 15 days of the date from which the number of employees reached 10 or more. A copy of these rules and regulations must be submitted to the Department of Labor within seven days of the date that the employer announces or displays the working regulations. An employer with 10 or more regular employees is also required to maintain an employee register in Thai language with documents pertaining to the payment of wages, overtime, holiday work, etc. The employee register must be maintained for at least two years after the date of termination of employment of each employee, together with the supporting source documents.

 

1.3 Tips on Recruiting and Developing Staff

The ability of a company to attract and retain staff is considerably enhanced by tailoring compensation packages to meet individual employee needs. Increasingly, factors such as work environment, organizational policies, relationships with superiors, and career path influence decisions whether to join, or remain with, a company. In a challenging living environment such as Bangkok, these “quality of life” issues take on even more importance.

Organizing training programs to upgrade skills helps to motivate staff and demonstrates a company’s commitment to its employees. Admission to such programs can be seen both as a reward for good performance and as part of the total compensation package.

 

1.4 Recruiting Technically-skilled Manpower

There are two main English language daily newspapers that contain significant numbers of advertisements, both in English and in Thai. Both the Bangkok Post and The Nation boast circulation figures of close to 60,000 copies per day, and advertising rates of the two newspapers are similar. In addition to reaching prospective employees through the print editions of these newspapers, it should be noted that the newspapers have classified advertisements on-line through their Home Pages.

In addition, the Department of Employment, Ministry of Labor and Social Welfare, has a web site listing both job fairs and employment opportunities. It can be found at: www.doe.go.th.

Several domestic and international personnel recruitment services operate in Bangkok. In addition to securing personnel, these companies offer services such as advice on issues of organizational structure, labor relations, and the cultural implications of managing labor in Thailand.

Developing contacts with educational institutes to identify and court potential candidates as early as possible is also recommended. For firms with ongoing manpower needs, establishing a network of contacts can be especially valuable. 

In addition to tailoring compensation packages to individual need and emphasizing long-term and organizational benefits, high-end technical employees, such as scientists and engineers, need to be given work commensurate with their skills. By allowing them greater challenges, and less narrowly defining their role so that it may include responsibilities in systems design and possibly management, technical personnel become more productive and are more likely to view themselves as integral to the company as a whole. 

Concrete, long-term benefits are an effective retention tool. Long-term benefits motivate personnel to work through problems and to identify self-interest with company interest. Committing resources to long-term benefits also insures that companies realize increased production levels from staff as they gain experience.

 

 

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