Labor Rules and Regulations in Thailand

Employee and Employer's Agreement

The new hire process start after an offer has been accepted and a written employment agreement is highly recommended and must be carefully drafted. All employers must define the terms of employment for their staff and employers with ten or more regular employees are required to specify working rules and regulations. These rules and regulations must be display on the work premises within 15 days from the date that the number of employees reaches ten employees or more and a copy must be submitted to the Department of Labor Protection and Welfare within seven days from the date that the employer announces or displays the working regulations. An employer with ten or more employees is also required to maintain an employee register in the Thai language together with source documents pertaining to the working employee and employer’s agreements and this must be maintained for at least two years after the end of the employment. According to the employment law in Thailand, an agreement that has been established between the employee and employer should not be less than the minimum requirements or standards devised by law.

WHO IS AN EMPLOYER?
An employer means a person who agrees to employ employees to work by paying wages and includes:

• A person who is authorized to employ people on behalf of the employer.
• Where the employer is a juristic person, a person who is authorized to act on behalf of the juristic person and a person appointed by an authorized juristic person to act on his/her behalf.

NOTE: A business is also deemed to be an employer if a contractual employer has sub-contracted the provision of work and payment of wages to it. Such an employer must also provide the employees (of the contractual employer) with the same employment protection measures as the employees’ contractual employer.

WHO IS AN EMPLOYEE?
An employee means a person who agrees to do work for an employer in return for wages, regardless of the description of his status. NOTE: Employees in certain specified occupations, including those in agriculture, fisheries, the transporting or loading of goods for seagoing vessels, and other categories as prescribed by regulations, are subject to other forms of employment protection outside Labor Protection Act. The act also does not apply to central or local government entities or state enterprises but they have similar employment rights as to this Act under separate legislation.

WHAT IS AN EMPLOYMENT AGREEMENT?
An employment agreement means a written or oral agreement which is clearly stated or implicitly understood, where a person referred to as the employee agrees to do work for another person referred to as the employer, and the employer agrees to pay wages throughout the period of work.

ACTS PERTAINING TO THAILAND’S LABOR RULES AND REGULATIONS

In Thailand, all the rights and duties pertaining to employers and employees are generally governed by a series of laws and regulations. The Ministry of Labor and Social Welfare is charged with implementing Labor Laws and performing Labor inspections throughout the country to provide a reasonable work environment and protects workers against labor exploitation and preserve their rights. Among the different acts that govern labor issues in Thailand are the following:

(A) THE LABOR PROTECTION ACT B.E. 2541 (1998)

This act is the most important act in Thailand labor law and was promulgated with effect from August 19, 1998 and brought practices more in line with International Labor Organization (ILO) standards. This mainly concern about the rights and duties of employers and employees. It primarily establishes minimum standard practices in general labor force utilization, women and child labor utilization, remuneration, severance and employee welfare fund. It also prescribes the interventions by government officials in providing protection to labors so as to ensure fairness and sound occupational health for the maximum benefit of both employers and employees, which will ultimately be beneficial for the national development.

(B) WORKMEN’S COMPENSATION ACT B.E. 2537 (1994)

This act requires employers with ten or more regular employees to contribute 0.2%-1% (depending on the assessed risk of the workplace) of the employee’s annual earnings to the Workmen’s Compensation Fund. The fund provides benefits to employees who are injured, sick, disabled, or die as a result or in the performance of their work. In general, the compensation amount must be paid monthly at the rate of 60% of the monthly wages but not lower than 2,000 and not exceeding 9,000 baht per month. Actual and necessary medical expenses must be paid up to 35,000 baht for normal cases and 50,000 baht for serious injury. Employment rehabilitation expenses must be paid as necessary up to 20,000 baht and in case of death, funeral expenses will be paid at a maximum amount equal to 100 times in minimum daily wage.

(C)SOCIAL SECURITY ACT B.E. 2533 (1990)

This Act has been in effect since 1990 amended by Social Security Act B.E. 2537 (1994) and by Social Security Act B.E. 2542 (1999). This law covers enterprises with one or more employees. Contributions to the Social Security Fund from the government, the employer, and the employee are mandated. The Social Security Fund provides compensation to insured workers under six categories: injury or sickness, disability, maternity, death, child welfare, and pensions. In the first four categories, each party contributes 1.5% of the wages to the insured totaling to 4.5% of the basic salary not exceeding 15,000 baht. For child welfare and old cases, 3% is contributed. The contributions must be remitted to the Social Security Office within the 15th day of the following month.

Effective January 1, 2004, the Social Security Fund covers unemployment compensation. If an employee is laid off, he is entitled to receive 50% of his wages for 180 days. In practice, disbursal of unemployment benefits is dependent on the state of the economy and the government’s financial resources.

(D)STATE ENTERPRISE LABOR RELATIONS ACT (SELRA) B.E. 2543 (2000)

This Act was reaffirmed by the Thai parliament and became law in 2000. This act mainly concern about the benefits and labor relations standards between State Enterprises’ Management and employees. It establishes the right to collective bargaining in accordance with regulations and procedures set forth for submission of demand for changes or modifications of the conditions of employment, settlement of labor disputes, establishment of State Enterprise Labor Union for acquiring and protecting benefits for State Enterprise employment. This law also requires each State Enterprise to establish the state Enterprise Labor Relations Committee, which is a tripartite committee to set the minimum standards of the conditions for employment in State Enterprises. Additionally, the establishment of Labor Relations Affair Committee in each State Enterprises is also mandatory. This is a bipartisan committee involving both parties in the discussion and reconciliation of labor issues and disputes with an aim to create positive mutual understanding and peaceful working atmosphere and co-existence between State Enterprises’ Management and the employees.

(E) LABOR RELATIONS ACT B.E. 2518 (1975)

This act sets out a comprehensive framework of rules for employees and employers to negotiate labor disputes. The aim is to create a good understanding and successful reconciliation between employers and employees which will result in a peaceful atmosphere and co-existence in the industry. This will ultimately be beneficial to the national development. The Act also provides for the registration of trade unions, trade union federations, employers’ associates and employers’ federations. Employees who engage in trade union activities may not be disciplined or dismiss for such activities. Generally speaking, trade unions are not very active in Thailand.

(F) THE LABOR COURT AND LABOR COURT PROCEDURE B.E. 2522 (1979)

This Act is concern about labor court procedures and gives jurisdiction to the Central Labor Court, The Regional Labor Court or Provincial Labor Court over the following matter:

• Disputes concerning the right or duties under and employment agreement or under the terms concerning the state of employment.
• Disputes concerning the rights or duties under the law relating to labor protection or the law relating to labor relations.
• Cases where the rights must be exercised through the court according to the law relating to labor protection or the law relating to labor relations.
• Cases of appeal against a decision of the competent official under the law relating to labor protection or of the Labor Relations Committee or the Minister under the law relating to labor relations.
• Cases arising from the ground of wrongful acts between the employers and the employees in connection with a labor dispute or in connection with the performance of work under an employment agreement.
• Labor disputes which the Minister of Interior requests the labor court to decide in accordance with the law relating to labor relations.

(G) THAI CIVIL AND COMMERCIAL CODE (HIRE OF SERVICE)

This law pertains to the hire of services. A hire of services is a contract whereby a person, called the employee, agrees to render services to another person, called the employer, who agrees to pay remuneration for the duration of the services. This regulates employer-employee relations and protects their rights from binding themselves in the contract they agreed upon.

(H) PROVIDENT FUND ACT B.E. 2530 (1987)

This Act states that any business which employs at least ten employees and which does not yet have a registered provident fund or pension or retirement fund, must join the compulsory provident fund which will be set up by the Ministry of Labor. This fund will provide benefits to employees on their retirement at the end of employment, upon death during employment, or in other cases to be set out in regulations. Employers and employees will be obliged to make equal contributions to the Fund, in accordance with a scale of contributions to be fixed by the Ministry (not exceeding 5% of wages). An employee (or his estate upon death) will be entitled to receive the total of the employer’s contributions, the employee’s contributions, and the benefits accrued from those contributions.

(I) EMPLOYMENT AND JOB SEEKER PROTECTION ACT B.E. 2528 (1985)

This Act had been originally the Employment Act B.E. 2511 (1968) used for enforcement until there were increasing numbers of overseas employment service businesses and frequent incidents of defraud. As a result, this Act was amended to become the Employment and Job Seeker Protection Act B.E. 2528 (1985) with follow up amendments in B.E. 2537 (1994) and B.E. 2538 (1995). The essence of this Act is as follows:

• Set up government’s employment office to provide employment services to the labor force at no cost.
• Expand job seeker protection approaches and activities to ensure fairness and appropriate assistance when job seekers are in trouble.
• Actively and seriously control and oversee private employment service businesses to ensure compliance to the following regulations:
  • Local employment service provider must be a Thai national, and must deposit 100,000 Baht as a financial guarantee with the Registrar Officer as required by this Act. In case the employment service provider is a juristic person, such juristic person must be a Thai national, and its Manager must be qualified and does not possess prohibited characteristics.
  • Overseas employment service provider must be a company limited or a public company having fully paid registered capital of not less than 1 Million Baht and a financial guarantee of 5 Million Baht deposited with the Central Employment Registrar Officer as required by this Act, and its Manager must be qualified.
• Establish requirements for overseas employment service providers to arrange for skill standard testing with appropriate authority for job seekers.
• Under the Department of Skill Development’s mandate, establish skill testing control measures and mechanisms for skill standard testing activities that may be implemented by government agency or private entity.

(J) ALIEN EMPLOYMENT ACT B.E. 2521 (1978)

Alien Employment Act was enacted to control alien employment and the issuance of work permits to aliens and to reserve certain occupations for the Thai labor force. According to this Act, aliens of the following 3 categories are qualified to apply for work permits:

• Alien who resides in the Kingdom of Thailand or is allowed temporary stay in the kingdom, but not as a tourist or a transit traveler.
• Alien who is allowed to work in the Kingdom according to the investment promotion laws or other laws.
• Alien who has been deported but is allowed to work in certain location in replacement of deportation or while awaiting deportation; alien who has illegal entry into the kingdom or is awaiting a forced transfer out of the Kingdom; and alien who was born in the kingdom but not granted Thai nationality or was denaturalized, is eligible to work in 27 occupations as stipulated in the Ministerial Announcement.

Generally, when considering whether to allow foreign nationals into the country to work, the Department of Employment will look at things such as whether the work could be done by a Thai, whether the foreigner is appropriately qualified and whether the job fits the needs of Thailand. Companies that are entitled to investment promotion under the Investment Promotion Act will be able to obtain work permits for foreign nationals more easily, and there may be more flexibility on employment requirements. There is currently a general statutory requirement that a ratio of 4:1 must be met when employing a foreigner; four employees must be local nationals in order to employ one foreigner (Order of Immigration Office No. 110/2546 (2003)). All non-locals are subject to immigration controls and require employment visas before entering into employment in Thailand. The general rule is that a visa must be obtained from the Thai Embassy on the country of residence of the applicant before departure for Thailand. A local sponsor is required (normally the employing company) to support the application. In considering an application, the Immigration Department must be satisfied that there is no suitable local candidate for the position. Where the post involves a special skill or is of a senior nature, this is not normally a problem.

(K) SKILL DEVELOPMENT PROMOTION ACT B.E. 2545 (2002)
This Act is an amendment of the Occupational Training Promotion Act B.E. 2537 (1994). The objectives were to promote and support occupational skill training for economically active labor in response to the business and industrial job market, to upgrade skill standards for employed labor and to promote cooperation between private establishments and educational institutes in providing apprenticeship for high school and college students by the private establishments and occupational skill training for the apprentices by educational institutes or government’s occupational training authorities. As an incentive and to promote private sector involvement in skill development efforts, any private establishment that delivers any occupational skill training services to labor force or its own employees utilizing training curricula or activities endorsed by the Registrar, will be eligible for certain privileges as stipulated in this Act. Additionally, a Skill Development Fund had been established for use as a revolving fund for the promotion of skill development efforts.