This post is intended to provide you with a comprehensive overview of Thai severance pay. The rate at which severance pay is paid depends on the employment period. In unique cases, employees are entitled to special severance pay rates.
What is Severance Pay?
An employer provides a terminated employee with severance pay at the time of their dismissal, whether with or without a distinct cause. Both foreign and domestic employees in Thailand are entitled to severance pay.
Thai Severance Pay Rates
On the 5th of May 2019, the new Labour Protection Act came into effect, increasing the duration of severance pay for employees that have worked for the organization for 20 years or longer.
The following describes the severance pay rates in Thailand:
Severance Pay Exceptions
A company is not obligated to pay an employee severance pay if their employment was terminated due to any of the following reasons:
- Intentionally causing the employer damage.
- Dishonest duties performance or wilfully commissioning a criminal act against the organization.
- Causing damage to the employer by committing acts of negligence.
- Violating the work rules, regulations, or orders of the company, which is equitable and lawful, when the employee has already received a written notice from the company.
- Negligence of performing duties for three following workdays in the absence of a reasonable explanation, whether a holiday intervenes or not.
- Imprisonment sentenced by a final court judgment.
Employment of a Fixed Period
Employees working under a fixed-period employment contract are not entitled to severance pay once the contract ends. The employer will only be obligated to pay severance pay if the Labour Court concludes that the contract does not meet the requirements of a fixed-period contract.
Special Severance Pay
Special severance pay is the compensation an employee is entitled to receive if they are terminated due to special circumstances, as outlined by the Labour Protection Act.
Special severance pay applies in the following circumstances:
If the location of a company’s operations changes, which affects an employee’s regular course of living, the employee must be notified about the relocation a minimum of 30 days in advance.
If an employee does not wish to work at the location the organization is moving to, they may terminate their contract within the first 30 days of receiving the relocation notice. The employee can then receive special severance pay equal to or more than the rate to which they are legally entitled.
If an employee is not informed of the relocation 30 days in advance, they are also entitled to special severance pay instead of the advance relocation notice equal to the amount of the 30-day wage rate most recently received. This amount must be paid within seven days after the termination of the contract.
Improvements to Production, Distribution, Work Unit, or Service Processes
An employee’s contract may be terminated due to improvements to production, distribution, the work unit, or service processes by means of machinery or technology that leads to a reduced workforce. In that case, the employer is required to inform the Labour Inspector about the following at least 60 days before the contract is terminated:
- The employees expected to be terminated
- The date the termination will take effect
- Reasons for the termination
- A list of employee names
If an employer doesn’t provide the employee with a notice within 60 days, the employer is required to pay both severance pay and special severance pay of the same amount as the 60-day wage most recently received.
If an employee has completed an employment period of six or more years, they are eligible to receive special severance pay alongside the severance pay of an equal or greater amount than the most recent severance pay rate for 15 days for every completed work year. However, the total severance pay may not be greater than the wage amount received during the most recent wage rate for 360 days.
If the employment period of an employee is less than a year but more than 160 days, the special severance pay rate is calculated based on a full employment year.
To ensure compliance with Thai severance pay regulations and minimize potential disputes, companies can consider partnering with an experienced recruitment agency.