Legal

Everything you need to know about terminating an employee in Thailand

11/11/2022

In Thailand, it is possible for an employer to terminate an employee’s employment at its discretion. However, should the dismissal be made without a statutory cause, as provided under the Labour Protection Act B.E. 2541, the company could be liable for statutory payments to be made to the employee.

In this article, we take a look at the process for terminating an employee in Thailand and what payments an employee could be expected to make.

terminating an employee Dismissal procedure in Thailand

Key points

In Thailand, it is possible for an employer to terminate an employee’s employment at its discretion.
Should the dismissal be made without a statutory cause, the company could be liable for a statutory payment to be made to the employee.
Should an employer terminate an employee using a statutory cause, the employer is required by the law to notify the reason for the termination through the issuing of a letter of termination of employment.
Once the employee’s employment has been terminated, either with or without statutory causes, the employee will be entitled to statutory payments.

What are the statutory causes for the dismissal of an employee in Thailand?

Thai law sets out several statutory causes that a company can rely upon when dismissing an employee.

Section 583 of the Civil and Commercial Code states that the following can be considered statutory causes for the termination of an employee who:

wilfully disobeys or habitually neglects the lawful commands of the employer,
absents himself of services,
guilty of gross misconduct,
or otherwise acts in a manner incompatible with the due and faithful discharge of the employee’s duty.

In addition, Section 119 of the Labour Protection Act also stipulates the statutory causes as follows:

performing the duty dishonestly or intentionally committing a criminal offence against the employer;
wilful acts were done to cause damages to the employer;
committing negligent acts causing serious damage to the employer;
violating work regulations, regulations or orders of the employer which is lawful and just for which the employer has already issued the employee a written warning, except in a serious instance for which the employer is not required to give a warning;
absenting from duty without justifiable reason for three (3) consecutive working days whether or not they are separated by holiday and;
being sentenced to imprisonment by a final court judgment.

Therefore, should an employee perform an action or deed which satisfies the above requirements, the employer can terminate the employee’s employment using statutory causes.

However, should the employer terminate an employee using a statutory cause, the employer is required by the law to notify the reason for the termination through the issuing of a letter of termination of employment.

Alternatively, a company may inform the reason for termination to the employee at the time of the termination of employment. Failure to do so will mean that the employer will not be able to claim such statutory cause against the employee’s termination.

Statutory Payment

Once the employee’s employment has been terminated, either with or without statutory causes, the employee will be entitled to statutory payments. The details for these payments can be seen here:

Statutory payments	With cause	Without cause
Wage until the employee’s last working day	Yes	Yes
Payment in lieu of advanced notice	No	Yes
Severance pay	No	Yes
Payment for unused annual leave	Only accumulated unused annual leave	Both accumulated and prorated annual leave
Other payments if any	If any	If any
Compensation for unfair dismissal	At the courts discretion	At the courts discretion

These statutory payments take the following details into consideration.

Wage

Wage is the compensation that the employer and the employee mutually agree to be payable in return for work done. Any fixed-monthly payment made to the employee would be considered part of the employee’s wages.

Payment in lieu of advance notice

As per Section 17 of the Labour Protection Act, an employer who wishes to terminate the employment must issue a dismissal notice to the employee in advance.

This notification must be delivered to the employee before or on the day of their wage payment. This is required in order for the termination to be effective on the day of the next and final wage payment for the employee.

Essentially, the dismissal notice from the employer must be sent to the employee in advance by at least one cycle of wage payment. E.g. if the wage payment is made on the 26th day of the month, the employer must notify the dismissal to the employee before or on 26 January 2022 and request the employee to leave his job on 26 February 2022.

Severance pay

Section 118 of the Labour Protection Act states that the employer is required to pay severance to an employee whose employment is terminated without cause at the following rates:

Required monthly tax and payments:

Years of service with employer	Rate of severance payment
120 days to 1 year	The last 30 days wage
1 -3 years	The last 90 days wage
3 – 6 years	The last 180 days wage
6 – 10 years	The last 240 days wage
10 – 20 years	The last 300 days wage
20 + years	The last 400 days wage

Payment for unused annual leave

Section 67 of the Labour Protection Act states that if the employer dismisses the employee without a statutory cause, the employer has to be compensated for the unused annual leave of the employee.

Compensation for Unfair Termination

Termination of an employee’s employment without a statutory cause may lead to an unfair dismissal claim being made against the company. Unfair dismissal cases can be brought before the Labour Court even though the employer has made all the required payments, i.e. wages until the last working day, severance payment, payment in lieu of advance notice, and wage for unused annual leave.

Should the Labour Court view that the termination of employment is unfair, the Labour Court may order the employer to re-employ the employee. However, the Labour Court may have the opinion that the employee and the employer cannot work together anymore. If this is the case, the Labour Court may order the employer to pay extra compensation i.e. compensation for unfair termination to the employee.

The Labour Court will come to a judgement on the amount of compensation owed by taking the following into consideration:

the employees’ age
Period of employment
payment for unused annual leave
compensation for Unfair Termination and hardship and
the reason for dismissal

Typically, the court normally will grant compensation for unfair termination by determining the employee’s service years at the rate of one month per one service year of the terminated employee. For example, if the employee works with the employer for three years, the Labour Court would order three months’ wages as unfair dismissal damages.

Dismissal procedure in Thailand

The following procedure sets out the preliminary duties of an employer for terminating an employee under Thai law.

Issuing a written dismissal notice

This will act as legal evidence for the dismissal. This notice should be provided in written form and contain all the termination details, the reason for termination and the date of dismissal.

Notifying the employee of the termination in advance

According to Section 17 of the Labour Protection Act, the dismissal notice must be sent to the employee in advance at least one cycle of wage payment. Failure to do so means the employee will be able to claim compensation in lieu of the advance notice.

Paying the required statutory payments

The Labour Protection Act states that the employer has to pay wage and overtime payments within three days after the dismissal date. While any other compensation that is owed such as severance pay, payment in lieu of advance notice, payment for unused annual leave and others has to be paid upon the dismissal date.

Issuing of the withholding tax certificate

As per the Revenue Code, the employer must issue a withholding tax certificate for the compensation paid to the employee upon deduction of the withholding tax from the compensation derived from the dismissal.

Issuing a job certification

Section 585 of the Civil and Commercial Code states that upon being asked by the employee, the employer has to issue the job certificate showing the length of their service years working for the employer and information relating to the nature of their work.

Closing the provident fund (if any)

The employer has to notify the fund manager of the dismissal. The fund manager will then pay out the fund to the employee according to the Articles of Association of the fund within a period of 30 days after the date of membership termination.

Returning the employer’s belongings

In relation to the employer’s belongings i.e. uniform, ID card, health insurance etc., returning such items is subject to the employment contract. Typically these items will be returned to the Company on the last working day.

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Letter to inform staff of employee termination

Notifying the employee of the termination in advance

Payment for unused annual leave

ection 67 of the Labour Protection Act states that if the employer dismisses the employee without a statutory cause, the employer has to be compensated for the unused annual leave of the employee.

How much compensation for unfair termination?

Dismissal procedure in Thailand