Why employment and substance are the same subject
Shares can be transferred with a signature. Minutes can be printed. Employment leaves a trail through systems the company does not control: social security registrations, monthly contribution filings, withholding tax returns, payroll transfers landing in individual bank accounts month after month, and people who exist and can be asked what they do. That is why the employment position is one of the most informative parts of any structural review, and why it is worth an owner examining honestly before anyone else does.
The relationship runs in both directions. Substance supports the work permit position, because a company with a real operation can justify employing foreign staff. Equally, the work permit regime creates obligations that only a real operation can meet.
There is a further reason employment matters more than owners expect. Of all the elements of a company that can be tested, it is the one with living witnesses. Registers can be read and accounts can be reconciled, but employees can simply be asked what they do and who instructs them, and their answers will be whatever the truth happens to be. No document controls that. An owner who wants to understand how their company would look under examination will learn more from the payroll than from the corporate file.
The capital and ratio requirements
Two requirements sit at the centre of the ordinary work permit position for a Thai company employing foreign nationals. The first is registered capital, commonly applied in the order of two million baht fully paid for each foreign work permit, with a reduced figure where the foreign employee is married to a Thai national. The second is the employment ratio, commonly applied at four Thai employees for each foreign employee. Both are administrative requirements that are applied with some variation, and the current position for a particular company should be confirmed with the Department of Employment and with counsel rather than assumed from general commentary.
Companies promoted by the Board of Investment are treated differently, with relief from the ratio and with streamlined processing through one stop service arrangements. That is one of the practical reasons promotion is worth examining for eligible activities: it resolves the visa and work permit question at the same time as the ownership question.
What a real employee is
The test is not documentary. A genuine employee performs actual work for the company, under its direction, at a place of work, for pay that reflects the work, and their engagement produces the ordinary consequences: a contract, registration with the Social Security Office, monthly contributions, tax withheld and remitted, leave and holiday treated properly, and severance rights that accrue with service.
- Is there work for this person to do, and do they do it?
- Is the pay commercially plausible for the role, and does it actually reach the employee's own account?
- Are social security contributions registered and paid, and is withholding filed monthly?
- Would the employee describe their job in the same terms the company would?
- Does the headcount make sense against the revenue, the premises and the activity?
Employment that exists only on paper
Some companies carry staff who were added to satisfy a ratio: names on a payroll for people who perform no work, or who work for someone else entirely, sometimes with the wages returned in cash. This is worth naming plainly. It is not a technicality and it is not made safer by being common. It creates exposure across several regimes at once, including labour, social security and tax, it involves the individuals concerned in something they may not understand, and it is comparatively easy to identify because the people can be asked.
The lawful responses are limited and clear. Either the company employs genuinely, because the business needs and can support the staff, or it accepts that the activity does not justify a Thai operating company with foreign employees and restructures accordingly, whether through promotion, a licence, genuine Thai investment, or an orderly wind down. What is not available is a better way of documenting an arrangement that does not exist. Where employment records do not reflect reality, that is a matter for counsel and for correction going forward, never for retrospective adjustment of the records.
The owner who works without a permit
A separate and very common exposure is the foreign owner who directs a Thai company, signs for it, negotiates for it and manages its staff, without holding a work permit, on the basis that they are an owner rather than an employee. Thai law takes a broad view of what constitutes work, and the distinction owners draw between owning and working is not one the regime recognises in the way they hope.
Where the company can support a permit, this is among the more straightforward things to put right, and it is worth doing early because it also improves the substance position. Where the company cannot support a permit, that fact is itself information about the structure, and it belongs in the brief to counsel rather than being worked around.
The employer obligations that follow
Real employment brings real obligations, and owners who move from a paper position to a genuine one should budget for them properly rather than being surprised. Social security contributions are payable monthly by both employer and employee. Personal income tax must be withheld and remitted. The Labour Protection Act governs working hours, holidays, leave and termination, and severance entitlements increase with length of service, reaching substantial multiples of monthly pay for long serving staff.
Work permits are tied to a specific employer, position and workplace, so changes of role, address or employing entity require the permit to be amended rather than merely noted. Since restructuring frequently involves exactly those changes, the work permit consequences should be mapped into the plan from the beginning rather than discovered halfway through.
Owners moving from a nominal position to a genuine one should plan the cash consequence honestly as well. Real staff mean real monthly cost, and severance entitlements accrue from the beginning of service, so a company that employs properly is taking on a liability that grows quietly whether or not it is provided for in the accounts. That is not an argument against employing. It is an argument for building the numbers into the restructuring plan at the outset, so that a compliant structure is also a viable one and does not fail in its second year for reasons that were entirely foreseeable in its first.
Where to take this
An owner reviewing their own position should look at the payroll, the social security registrations and the work permits together, and should be honest about which of the people listed genuinely work for the company. Where the answer is uncomfortable, the next step is qualified Thai counsel, instructed independently, given the complete picture including anything informal, and asked to advise on lawful correction. Thai employees, directors or shareholders who may themselves be exposed should be told to take their own separate advice, because their interests are not identical to the company's.
Asia Global Partners is a private office rather than a law firm and gives no legal or tax advice. Its role is to convene qualified Thai counsel and accountants, coordinate the labour, tax and corporate strands so that they do not contradict each other, and stay accountable for the process. A confidential structure review is the usual starting point where an owner is not sure how much of their position is real.
This article is general information as at August 2026 and is not legal, tax or employment advice. Capital and ratio requirements are applied administratively and change; confirm the current position before relying on it. Asia Global Partners is a private office, not a law firm. Instruct qualified Thai counsel independently, verify company and filing requirements with the Department of Business Development, verify promotion and ratio relief with the Board of Investment, and verify withholding and payroll tax obligations with the Revenue Department.
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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.
Where you stand is a question worth answering.
A briefing can describe the landscape; it cannot tell you about your own title, your own shareholder register or your own filings. A confidential review does, formed by independently instructed Thai counsel and coordinated by this office. Owners who look while nothing is happening keep the widest set of lawful options.