Legally, employers in Thailand must pay a severance to their employees when they retire. But awareness of this still relatively-new stipulation is low, putting companies at risk of penalties, including jail time.
Before Labour Protection Act (No. 6) B.E. 2560 came into force in Thailand in September 2017, there was no law stipulating the retirement age for private sector employees in the country. This meant that employees were free to work for as long as they could, or until they voluntarily resigned. And once the employee did resign, they were not entitled to severance pay. However, this is no longer the case. The Thai government's changes to the previous law mean that the retirement age of any employee in the country is now 60 years-old. At this point, the employee can choose to continue working. But when they do cease (with 30 days' notice), they're entitled to severance pay.
Retirement severance pay rates
The following retirement severance pay rates now apply to all private sector employees in Thailand, regardless of the size of the company they work for.
- 30 days' wages where the employment period is at least 120 days but less than one year.
- 90 days' wages where the employment period is at least one year but less than three years.
- 180 days' wages where the employment period is at least three years but less than six years.
- 240 days' wages where the employment period is at least six years but less than 10 years.
- 300 days' wages where the employment period is 10 years or more.
The amendment to the Labour Protection Act does not stipulate all aspects of retirement. Employers can still negotiate with their employees and in particular, agree how many years beyond the age of 60 they'd like to continue working.
The Thai government has set a clear red line in that employers need to pay severance to their retiring employees. Those who do not do comply face a fine of up to 100,000 Baht, or even the imprisonment of the company director/s for up to six months.
Employers with offices in Thailand should review their workplace rules and policies to ensure they are compliant with the new regulation. Taking care of your staff is just as important as taking care of your business.
As employment regulation can be fast-changing and is specific to each country in which you operate, partnering with local HR and payroll experts is recommended.
Talk to us
TMF Thailand helps companies navigate the country's labour regulations and other business requirements through our HR and payroll, bookkeeping and corporate secretarial services.
If your Thai company has no retirement policy, we can provide consultancy on how to add this to your existing policies and employment contacts. We can also assist with individual employee retirement negotiations, the calculation of severance pay entitlements and help employers to establish a severance pay reserve fund, so they're never caught short.
Need more information? Contact us today.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.