Thai labour law for employers: what bites

Severance: the number that anchors everything

Statutory severance under the Labour Protection Act is owed on any termination that is not for serious cause, including redundancy, restructuring and simple loss of confidence. It is calculated on the final wage and scales with tenure.

On top of severance sit notice (at least one full pay period, or payment in lieu), accrued unused leave, and, where the employer relocates or the dismissal is judged unfair, further statutory or court-awarded amounts. The practical consequence: a fifteen-year manager on a senior salary represents a seven-figure baht liability that exists whether or not it appears in the accounts. Well-advised buyers price it in due diligence; well-advised employers accrue for it.

Two refinements matter in practice. Severance is calculated on wages, which includes fixed allowances paid regularly, cost of living, fixed transport, guaranteed commissions, not just base salary; employers who load packages into allowances discover the severance base is higher than assumed. And the statutory scale is a floor: contracts, work rules or consistent past practice can create better terms, which then bind.

Terminating for cause: process is everything

Severance falls away only for the serious misconduct grounds listed in the Act: dishonesty, intentional criminal acts against the employer, intentional or grossly negligent serious damage, violation of lawful work rules after written warning (or without warning in serious cases), abandonment of duty for three consecutive working days without justification, or imprisonment on a final judgment. The list is closed. Poor performance is not on it; performance dismissals are severance dismissals.

• State the ground in writing at the moment of termination. Grounds not cited in the termination letter generally cannot be raised later in court.
• Match the sanction to the offence. Dismissal for a first minor infraction reads as pretext; a graduated record of warning, final warning and then dismissal reads as management.
• Warn in writing for rule violations, keep the warning specific, and act within a year of it. A file of vague verbal warnings is a file of nothing.
• Investigate before dismissing, and let the employee respond. The court weighs fairness of process, not only the underlying facts.
• Pay what is undisputed on time. Withholding clear entitlements to create leverage attracts surcharges and hardens the court's view of the employer.

Beyond severance sits the separate concept of unfair termination, under which the Labour Court can award additional damages, or in theory order reinstatement, where a dismissal lacked reasonable cause even though severance was paid. Documented, honest reasons and a fair process are the whole defence.

Fixed-term contracts and other false economies

Employers often reach for fixed-term contracts hoping to sidestep severance. The exemption is far narrower than assumed: it covers only genuine project, seasonal or occasional work completed within two years and documented as such from the start. An ordinary role papered as a series of one-year contracts is treated as continuous employment, the periods are read together, and severance is calculated on the whole. The rolling fixed term does not reduce liability; it merely adds an annual renewal negotiation to it.

Resignation and retirement carry their own rules. A genuine resignation attracts no severance, but a resignation extracted under pressure is treated as dismissal, and courts examine the circumstances rather than the signature. Retirement is a termination in law: when an employee retires under a company scheme, or invokes the statutory default at 60 where no scheme exists, the full severance scale is payable. Companies with long-serving staff approaching that age should be accruing now, because the liability arrives on a date already known.

Wage and overtime arrears reach back years, and the burden of proving hours falls in practice on the employer whose records are absent. The claims arrive bundled: a dismissed employee's severance case routinely adds unpaid overtime, unused leave and holiday work, each modest alone, material together.

Ten or more employees: the formal layer

At ten employees, obligations formalise. The employer must maintain written work rules in Thai covering working days and hours, holidays, overtime, pay, leave, discipline and grievance procedure, keep them displayed and current, and hold employee registers and pay records for inspection. Larger thresholds bring further machinery, including welfare committees at fifty staff. The work rules matter more than they look: disciplinary dismissals lean on them, and rules that were never issued, or never translated, take the warning-based grounds off the table. Amendments that cut existing benefits generally need employee consent; a unilateral downgrade is a dispute waiting for a signature.

The Labour Court, honestly described

Any employee can file at the Labour Court without fees and without a lawyer, and many do; a claim costs them an afternoon. The court is inquisitorial and conciliation-minded: most cases are pushed hard toward settlement at the first hearing, and the going rate for settling a weak-but-annoying claim is real money that arrives regardless of the merits. Judges sit with lay associate judges from employer and employee panels, proceedings are quick by court standards, and sympathies, candidly, run with the employee where the paperwork is thin. Employers win the cases they have documented and settle the ones they have not.

Appeals go to the specialised appellate court on points of law, a narrow gate, so the first-instance findings of fact are usually the end of the story. Settlements concluded at court and recorded in a compromise agreement are final and enforceable, which is their real value: a signed release at the Labour Court closes the file in a way a private arrangement sometimes does not.

Foreign managers often import at-will instincts from home jurisdictions. Thailand is the opposite model: every dismissal has a price, the price is on a schedule, and attempts to engineer around it, resignation under pressure, contrived restructures, serial fixed-term contracts, are patterns the court has seen for decades and does not reward.

Running a clean shop

The employers who never see the Labour Court share three habits: contracts and work rules kept current in Thai, a personnel file for every employee maintained as if it will one day be evidence, and exits budgeted at the statutory scale and negotiated with courtesy, usually with a modest premium in exchange for a signed settlement and release. An annual review of contracts, work rules and accruals against headcount takes a morning and removes most of the exposure this briefing describes. Asia Global Partners keeps client companies on that footing, and when a difficult separation does arise, manages it quietly through counsel so it ends with a release rather than a docket number.

This briefing is general information, not legal, tax or investment advice. Thai rules change frequently and individual cases differ. Verify current requirements with the relevant authorities, including the Immigration Bureau, the Board of Investment, the Land Department, the Department of Business Development and the Revenue Department, and take advice on your own facts before acting.