Doing Business in Thailand

Are employees in Thailand well protected by the law and is it easy to terminate an employee with or without cause?

Termination of an Employee without Cause:

By comparison to western countries such as France, it is actually easy to terminate an employee in Thailand without a cause providing however that the employer:

- pay to the employee full compensation as provided by Thai labor law, and

- that the process of termination is fair and clear.

Termination with cause:

In some cases the employer may be entitled to terminate an employee for cause such as for example:

- dishonest performance of professional duties,

-  intentional act(s) against the employer,

-  gross negligence,

- violation of the company’s rules,

-  absence for 3 consecutive days without sufficient reason,

- imprisonment

Other causes of terminations may be found in the employment agreement executed between the employer and the employee such as for example poor performance or bad attitude.

On the employer point of view, termination for cause is more beneficial as the employer does not have to pay to the employee terminated for because neither advances notice nor severance pay.

All the employer will have to do is to pay the balance of compensation within 3 days after the effective termination date.

Labor Court and Wrongful Termination

An employer who wants to terminate an employee for cause should be particularly careful because an employee that feels that he/she has been unfairly terminated by his/her employer may file a complaint with the Labor Office which complain if not resolve may result with the employer being sued in labor court.

By experience I would say that the Labor Court is the most efficient branch of Thai justice in terms of speediness.

As to employer wishing to terminate an employee for cause I would recommend them to document the cause of termination as much as possible.

While some causes of termination may justify an immediate termination (such as dishonesty) other will require that the employee has been given successive warning before termination of employment (bad attitude or poor performance). At least 3 warning letters sent by post with acknowledgement of receipt are required to terminate an employee for poor performance. Being specified that all 3 letters should be warning about the same subject.

Be aware that employees may not only contest the cause of termination but also the unfairness or the absence of clarity of the termination process.

Over the past ten years I have seen more than one employer losing in Labor Court following a wrongful termination. Note that the labor court can also sentence the employer to pay complementary indemnifications in addition to severance payment in the event were it deem the termination wrongful or unfair

What are Employees Rights in case of termination without cause?

Firstly the employer will have to provide to the employee an advance notice. The duration of the advance notice depends of the cycle of the payments of the salary.

If employees wage are paid on a weekly, bi monthly or monthly basis the duration of the advance notice will be 7, 15 or 30 days.

Notice has to be given before the day where salaries are paid. For example if the salaries are paid every 30 of the month advance notice should be given on the 29^th to the latest.

The amount of the severance pay will depend of the duration of how long did the employee work for the employer. Note that duration of the employment period include the advance notice period so to fire an employee without having to pay severance pay because he/she has been working for the company for less than 120 days advance notice would have to be given on the 89 days of employment (in the case of a 30 days payment cycle)

Duration of the advance notice period may be increased in certain situation such as in cases of business restructuring, where the employer must provide 60 days advance notice.

Note that the severance payment must be paid within 7 days after the effective termination date.

In case of failure from the employer to pay the severance pay on time interest will be assessed as follows:

The rate of 15% shall be applicable if the severance payment is not paid within 7 days

The rate of 7% shall be applicable for the supplementary month to be paid if the employer has failed to give proper advance notice.

Note that employers are often sued by former employees for failing to correctly calculate the amount of severance pay. Another common cause is the issue of fringe benefits (bonus, allowance, thirteenth month, etc.). Were such items classified as wage (include in the calculation of the severance paid) or benefits (not included).

Remark

While termination of employees in Thailand is a process that is less regulated than in other countries it does not mean that employer may terminate their employees without respecting a minimal formalist or without paying them their due.

When calculating the cost of terminating an employee for or without cause an employer should always takes into account the fact that the labor court will as much as legally possible rules in favor of the employee.

Note: This post is an excerpt of Rene Philippe Dubout next book: “How to Invest Safely Into Thailand” to be published in January 2010

About the Author:

The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.

http//:www.renephilippe.com

© Copyrights 2009 – Rene Philippe Dubout – This article may be reprinted if information about the author, the websites, and the URLs remain intact

Originally posted 2009-11-21 07:04:25.

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