Hire Staff in Thailand without Establishing a Local Entity.
As a relatively new industrialized nation, Thailand currently represents the fourth wealthiest nation in Southeast Asia, according to its GDP per capita. This impressive economy is largely driven by electrical goods, jewelry, textiles and apparel. The nation has established a 20-year national strategy to enhance the economy, sustain the environment and make the market more competitive.
Many companies have latched onto these changes and have chosen to expand their reach into Thailand. However, the regulatory requirements to incorporate a foreign business in Thailand may seem foreign to these businesses. Using an expert PEO service like New Horizons is an efficient alternative to deploy employees fast and professionally in your field. This cost-effective and flexible option allows your business to grow.
Your PEO provider can explain the following requirements and best practices to you.
Employment Contracts in Thailand
Unlike many other countries in Asia, Thailand does not require employment contracts to be written. Nonetheless, it is still a best practice to enter into written contracts to avoid misunderstandings and to clearly establish the rights and responsibilities of employers and employees.
Thailand’s labor laws do not require that specific provisions or language be included in these agreements. However, a copy of the agreement in Thai must be given to the Department of Employment in order to issue work permits. Additionally, employers must be prepared for courts in Thailand to uphold the provisions in these agreements.
Work Hours in Thailand
The typical work week in Thailand is 48 hours while the regular work day is eight hours unless the employer and employee agree to different hours, so long as this does not exceed 48 hours per week. Hazardous work cannot encompass more than seven hours per day or 42 hours per week. Employees are entitled to rest periods of at least one hour after they have continuously worked for five hours.
Employees are also entitled to at least one day off a week and time between days off cannot exceed six days.
Employers may request overtime work from employees only in certain situations, such as an emergency or if the type of project requires continuous work. Overtime is equal to 1.5 times the regular rate of pay if it is performed on a regular day of work. If the overtime work is performed on a holiday, the pay is 2 times the regular pay. Overtime is limited to 36 hours in a week.
If an employer requests overtime work of two or more hours, employees are entitled to a rest period of 20 minutes before they start the overtime hours.
Holidays in Thailand
These national holidays are observed in Thailand:
- New Year’s Day
- Makha Bucha Day
- Chakri Day
- Thai New Year
- Labor Day
- Coronation Day
- Visakha Bucha Day
- Asanha Bucha Day
- Her Majesty the Queen’s Birthday
- Chulalongkorn Day
- His Majesty the King’s Birthday
- Constitution Day
- New Year’s Ave
If a holiday in Thailand falls on a weekend, it is observed on the next working day.
Annual Leave in Thailand
After employees have worked for one year of employment, they are entitled to at least six days of paid leave each year. Unused leave time can be accumulated. Employers can provide additional annual leave in subsequent years. Employers may offer employees with less than one year of service on a prorated basis.
To be more competitive, some employers offer 10 to 15 days of paid vacation each year.
Sick Leave in Thailand
Sick leave is provided as a separate benefit than annual vacation leave. After employees have worked for one year for an employer, they are entitled to one month’s paid sick leave per year. However, an employer can require the employee to submit a medical certificate if they are sick for three consecutive days. Additionally, if the employee was injured or became ill at work, the days that he or she missed work cannot be used as sick leave.
Maternity and Paternity Leave in Thailand
Expectant mothers are entitled to three months of paid leave. 45 days of this leave is paid by the employer and the remaining 45 days are paid by the social security system. Maternity leave is paid at full pay.
Fathers are entitled to 52 weeks of paternity leave and most of the time they are able to be reinstated to their former positions after their parental leave.
Personal leave can be taken by employees for tasks considered essential in the employer’s work policies and agreement.
National Service Leave/Military Leave
Employees in Thailand are also entitled to National Service Leave or Military Leave. This type of leave is available for a male employee who is required for military practice, needs to check military status or is joining the military. National Service Leave provides the same rate of pay to the employee. This type of leave cannot exceed two months.
Employees can take unpaid leave for training purposes or to attend a course or program with a definite duration. However, employers can refuse to provide training leave if it would negatively affect the business or if the employee has previously taken leave on three or more occasions in the past or for a month or longer.
Sterilization leave is provided to employees for family planning purposes. It is available for men and women employees who go through a sterilization procedure. The applicable leave period is stated in the employee’s medical certificate.
Other Types of Leave
Employees in Thailand may use other types of leave, but these other forms of leave are at the discretion of the employer. Some examples of other types of employment leave in Thailand include:
- Marriage leave – This type of leave allows a person to miss work in order to participate in their marriage ceremony. It is based on the company’s policy.
- Huji leave – This type of leave is only eligible for Islam employees and cannot exceed four months.
- Monkhood leave – This type of leave is only eligible for Buddhist men and cannot exceed four months.
- Hospitalization leave – This type of leave lets a worker miss work to help a hospitalized relative.
- Compassionate leave – This is bereavement leave that is provided to workers who have recently lost a loved one.
Although a 13th month annual bonus is not mandatory, it is the market norm in Thailand. Commissions are also customary for sales employees.
Thailand’s Social Security system is available to employees and reduces the costs of medical care, child allowance and lost wages caused by illness, maternity, incapacitation, death, old age or unemployment. Employers register new employees with eh social Security office and making submissions of payment of taxes for Social Security. The government funds the Social Security system with contributions of 32.75% of wages. 5,184 baht are provided by employers and employees. Employee contributions of 3% of their pay also fund this system.
More information about each type of benefit provided under this system is provided below:
Old Age Benefits
Individuals who have contributed to the Social Security Fund and have stopped working can receive old-age benefits once they reach 55 years of age. Eligible individuals receive a lump-sum payment or monthly pension. The amount of this payment or pension is calculated based on the contributions they made over the years.
To receive pension benefits under the Thailand Social Security system, the employee must meet one of the following conditions:
- Be aged between 15 and 60
- Work for their employer after the age of 60
- Not be employees but make voluntary contributions
Workers who have contributed to the Thailand Social Security Fund for a minimum of 12 out of the last 36 months before having a child are eligible for a child benefit of 350 baht per month per each child.
If the employee ensured under the Thailand Social Security system dies, his or her designated beneficiaries receive death benefits if the death was caused by factors unrelated to the work and the insured employee made contributions to the Social Security Fund for at least one of the six months prior to his or her death. The survivor benefits are 60% of the decedent’s last monthly salary, up to a maximum of 15,000 baht.
Employees who have made contributions for at least three out of the last 15 months before becoming disabled can receive disability benefits.
Injury or Sickness Benefits
Employees who have made contributions for at least three out of the last 15 months before becoming disabled can receive injury or sickness benefits.
New mothers can receive a lump-sum payment equal to 50% of their wages and a grant of 12,000 baht for their first two children.
Employers make contributions to the workers’ compensation system. These contributions re equal to 0.2% to 1% of annual payroll amounts, depending on the type of business. Employees who are injured while working may be entitled to the following benefits under the workers’ compensation system:
- Medical expenses – Injured employees can receive payment for medical treatment up to 45,000 baht per illness or injury.
- Permanent partial disability benefits – Injured employees who are considered permanently and partially disabled receive economic benefits equal to 60% of their monthly salaries, subject to a maximum of 12,000 baht each month, up to ten years, which is dependent on the degree of disability.
- Permanent total disability benefits – Employees who suffer a work-related injury or illness who suffer a total work-related disability receive 60% of their monthly salaries, subject to a maximum of 12,000 baht each month, up to 15 years, which is dependent on the type and degree of disability.
- Survivors’ benefits – If an employee dies because of a work-related injury or illness, his or her survivors are entitled to a pension of 60% of his or her last monthly salary. This pension is paid for eight years and is divided between the employee’s surviving spouse, minor children and parents.
Health Insurance in Thailand
Thailand has universal healthcare provided through the civil welfare system for public workers, Social Security for private employees (including nationals and expats) and universal coverage for all other Thai nationals. The Social Security fund assigns employees a local hospital where they can receive care at no cost.
Employers may provide supplementary health insurance as an additional benefit to employees. Some provide an allowance instead.
Other Employment Benefits in Thailand
Thailand employers may offer other benefits to employees to make them a more competitive option. For example, many Thai employers provide a provident fund to promote retirement savings. Under this scheme, employer contributions must be equal to or greater than the contributions the employee makes. Employees’ contributions are pre-tax. Contributions range from 2% to 15% of the employee’s wages, based on the employment agreement. These funds are paid in a lump-sum to the employee upon retirement or termination.
Thailand employers may employ employees during a probationary period not to exceed four months. The probationary period is not mandatory and can be a provision included in the employment agreement.
Employment Termination and Severance in Thailand
Employers must provide written notice of at least one month before terminating an employee without cause. Alternatively, the employer can pay the employee for the notice period. The employer will also be responsible for providing a severance payment to the employee in the following amounts, based on the length of service:
- 20 days but less than one year of service – One month of salary and allowances
- One to three years of service – Three months of salary and allowances
- Three to six years of service – Six months of salary and allowances
- Six to ten years of service – 240 days of salary and allowances
- Ten or more years of service – 300 days of salary and allowances
If the employee is terminated for economic reasons, employees with six or more years of continuous service are entitled to receive additional compensation that is equivalent to 15 days of wages for every year of employment, up to a maximum of payment for 360 days of wages. Work for more than 180 days is counted as one full year of service. This payment is made in addition to the severance pay described above.
What Is a PEO?
A PEO is a Professional Employer Organization that provides HR and payroll outsourcing to other businesses. It provides a variety of administrative services, including:
- Employee onboarding
- HR functions
- Employee benefits
- Regulatory compliance
The PEO is the official employer for insurance and tax issues, but the foreign company manages the day-to-day activities of staff.
Benefits of Using a PEO in Thailand
Having a co-employment agreement with an established PEO in Thailand like New Horizons Global Partners provides many benefits to foreign countries that are expanding to the Thai market. Some of the most strategic advantages you can enjoy by using a PEO in Thailand include:
- Your company can expand into Thailand more quickly
- You can hire employees without having to endure the expense or logistical concerns of establishing a branch office or subsidiary in Thailand
- You can gain access to a global network of talent through our recruiting services
- We handle employment contracts and benefits in accordance with Thai law and best practices
- We run payroll in full compliance with Thai laws
- You transfer the compliance burden to us and insulate yourself from employer liability
- We handle all severance and termination procedures, if necessary
- We offer experts who are familiar with Thai laws and various industries
- You can seamlessly transition from a PEO framework to your own legal entity when you are ready while we assist with human resources, staffing support and compliance matters
- You can concentrate on the core functions of your business while we assist with administrative functions
- You can scale your workforce up or down as the needs of your business demand
- You can reduce costs by not having to have your own HR and payroll department
- You gain access to more affordable benefits through our global network
New Horizons PEO and Payroll Services
When you work with our talented experts, you can rest assured that you have chosen experts in all PEO and payroll matters. We provide comprehensive business services, including:
- Calculating income for employees
- Providing necessary forms for income tax
- Managing employee traveling expenses
- Making monthly social insurance contributions
- Adding new employees to the Thai social insurance system
- Notifying social insurance regarding employee termination or the completion of employment contracts
- Preparing reports for your business
- Advising you on Thai employment matters
We work closely with your team to provide seamless services so that you can expand your business into Thailand quickly and effortlessly. We can assist you with recruiting key talent to your business and ensure that your business in compliance with local laws without having to go through the hassle or expense of setting up a foreign entity.
Contact us today to learn more about our PEO and other business services in Thailand.