Even if you can file the taxes on your own, everything is in Thai. The content of this article is intended to provide a general How to Evaluate a Voluntary Separation Package or Early Retirement Offer. to continue working. Thai law allows the employee to refuse to move and become entitled to receive severance pay. Thailand has applied the same rate of severance pay since promulgation of the LPA in 1998 until this was adjusted on 5 May 2019. 6), B.E. Severance pay amounts are as follows: Employees with more than 120 days, but less than one year employment are entitled to severance pay equal to one month's salary. Those who do not 15% interest . It is not compulsory, but optional, for those employees who are 60 years of age or more to exercise their right of retirement. payroll, bookkeeping and corporate secretarial services. Severance pay is taxed by the IRS the same as wages—you’ll have to pay employment (FICA) tax and income tax withholding at your usual rate. The Thai Cabinet has endorsed a proposal to amend the Labour Protection Act, setting a statutory retirement age for the first time and entitling retirees to statutory severance pay. Severance pay in Thailand. taking care of your business. Previously, the law was silent on the issue and employers had discretion to set their own retirement policy. Under the circumstance of normal termination of employment where “termination of employment” means: The company prevents an employee from continuing to work and receive his basic pay thereof, whether due to the termination of an employment contract … employees when they retire. You’ll only need to do it once, and readership information is just for authors and is never sold to third parties. © Mondaq® Ltd 1994 - 2020. Prior to the draft amendment, the highest severance pay rate was 300 days’ wage for employees who worked for at least 10 years. imprisonment of the company director/s for up to six months. Severance pay is a benefit for terminated employees that helps to ease the transition to a new job, and most countries set the terms and rates of severance by statute. Employers can still negotiate with their no longer the case. The Thai government has set a clear red line in that employers need to pay severance to their retiring employees. The NLA voted 179 in favour with five abstentions to pass the bill to increase the severance pay from 300 days to 400 days for workers serving … Mondaq uses cookies on this website. T: +66 2056 5588 However, under Thai Law, only employees who have worked for 120 days or more are entitled to severance pay if they are terminated without cause. Whereas the Employer terminates the employment of an Employee under Section 121 and such Employee has worked for uninterrupted period of more than six years, the Employer shall pay Special Severance Pay in addition to Severance Pay under Section 118 of not less than the Employee’s last rate of Wages for fifteen days for each year of employment or of not less than the Employee’s Wages for the last fifteen … Severance pay is a benefit for terminated employees that helps to ease the transition to a new job, and most countries set the terms and rates of severance by statute. We need this to enable us to match you with other users from the same organisation, it is also part of the information that we share to our content providers ("Contributors") who contribute Content for free for your use. 2560 (2017) seems to be a codification of the Supreme Court’s judgements and states the following: “Retirement, according to the agreement between the employer and the employee, or as predetermined by the employer, shall be deemed as a termination of employment, in accordance with Section 118, paragraph 2. years. Moreover, employers may also need to securely set aside sufficient internal reserve funds in preparation for employee retirement. Working for life could be beneficial for some employees, but conversely, this arrangement would be disadvantageous for those employees who wished to end their employment at a certain age. Taxes in Thailand. In the case where an employer relocates the place of business in Thailand which affects the normal living of an employee or his/her family, the employer shall notify the employee at least 30 days before the date of relocation. 2541 (A.D. 1998)), he or she is entitled to severance pay under Section 118. Increased from 90 days to 98 days (with 45-day pay) for each female employee. years. Significantly, employees are no longer faced with the possibility that they may need to work for life without the right to severance pay, as under the new amendments, they are entitled to conclude their professional lives, with the comfort of knowing that they have the right to severance pay simply by exercising their right to retire under the employers’ retirement policies, and in accordance with the law. Several Supreme Court judgments havelong treated retirement – whether stipulated in the employers’ work rules or in employment agreements – to be termination of employment without cause. Extra Severance Pay Rate. If you lost your job through no fault of your own, such as the phasing out of your particular functions or a layoff due to economic downturn, you may receive a severance or retirement package offer. The definition of ‘wages' varies across labour legislations in India. In cases where the retirement age has not been stipulated, or it has been stipulated so that it exceeds 60 years of age, the employee, who is 60 years old, may express their intention to retire to the employer. The Thai government has set a clear red line in that employers in Thailand in September 2017, there was no law stipulating the Retirement is deemed to be termination of employment, and the retiring employees are entitled to severance pay under Section 118. Previously, the law was silent on the issue and employers had discretion to set their own retirement policy. Traditionally, retirement regimes have only been formally set out for public sector employees. Your best bet is to work with a tax accountant to file your taxes. As Thailand gradually transforms into an ageing society, the potential economic and social burden of retiring workers is one issue that is likely to be on the minds of many employees, employers, and policymakers. Prior to the draft amendment, the highest severance pay rate was … The new amendments, among others, introduced a retirement provision in Section 118/1, which prescribes the rights and obligations of the employer and employees in respect to retirement. Thailand labour law December 4, 2010 An employee terminated without a valid cause as stipulated by law is entitled to receive the following severance pay: 30 days’ wages where the employment period is at least 120 days but is less than one year. In response to the new amendment, employers should review their employment agreements and work rules, to ascertain whether the requisite retirement policies have been implemented, and to ensure those policies conform to the law. employment period is at least three years but less than six Published On - 30 October, 2019. Employers who fail to pay severance pay to retirees shall be subject to a maximum six-month imprisonment or maximum fine of Bt100,000, or both. New Retirement Regime for Private Sector Employees. The following retirement severance pay rates now apply to all Need more information? guide to the subject matter. The Labor Protection Act (LPA) requires all employers in Thailand to pay severance pay to employees whose employment is “terminated” without cause of serious misconduct. An employee who has worked for less than 120 days can be terminated without receiving severance pay. Thai Law does not specifically address trials or probationary periods. As employment regulation can be fast-changing and is specific to The employee who reaches the age agreed between the employer and employee, or as prescribed by the employer as being eligible for retirement, is entitled to receive the severance pay. This includes all domestic and international income. resign, they were not entitled to severance pay. E: [email protected], Bangkok Post, Human Resources Watch Column. It is not compulsory, but optional, for those employees who are 60 years of age or more to exercise this right of retirement. Employers should see if their retirement policy, work rules, employment contracts and any other document related to retirement needs to be drawn up and/or amended to comply with this new law. Severance Pay - Severance pay will be paid upon retirement, at the employee’s daily rate of pay, in the amount of … retirement age for private sector employees in the country. Hours Of Work employment period is at least 120 days but less than one year. Before Labour Protection Act (No. Severance pay; Less than 120 days: No severance pay: 120 days - 1 year: Wages for at least 30 days: 1 year - 3 years: Wages for at least 90 days: 3 years – 6 years: Wages for at least 180 days: 6 years – 10 years: Wages for at least 240 days: 10 years – 20 years: Wages for at least 300 days: More than 20 years: Wages for at least 400 days TMF Thailand helps companies navigate the country's labour relatively-new stipulation is low, putting companies at risk of This is the case in Thailand where both expats and residents are entitled to severance pay upon termination. 180 days' wages where the The Thai government's changes to the regulations and other business requirements through our HR and A system of mandatory Severance Pay also operates in Thailand. Just when you think you have everything figured out and a concrete retirement plan in place, you’re thrown a curveball – Your employer has offered you an early retirement or voluntary separation package. policies and employment contacts. To print this article, all you need is to be registered or login on Mondaq.com. Section 118/1 of the new Labor Protection Act (No. country is now 60 years-old. Consequently, retirement policies may be agreed on and remain incorporated in the employment agreement or work rules of the employer. New amendments to Thailand’s Labor Protection Act have addressed this issue by introducing a retirement regime for the Thai private sector employees, placing severance obligations on employers, enhancing protection for employees, and creating a more effective framework for enforcement of labour laws. Such retirement shall be effective within 30 days from the date of such expression, and the employer shall pay severance to the employee in accordance with Section 118.”. Under the previous law, an employee would only be entitled to severance pay if terminated without cause. individual employee retirement negotiations, the calculation of Contact us today. Discover how we help our global clients adapt to foreign rules and This is the case in Thailand where both expats and residents are entitled to severance pay upon termination. Albert Hui Orbis News, Thailand. Thai labor law is relatively flexible for employers. rules and policies to ensure they are compliant with the new 90 days' wages where the Severance Pay is the compensation that an employer provides to a laid off or terminated employee, whose job has been eliminated, who through mutual agreement, decided to leave the company or left the company because the company can no longer operate its business, or for other reasons. payroll experts is recommended. The Thai Cabinet has endorsed a proposal to amend the Labour Protection Act, setting a statutory retirement age for the first time and entitling retirees to statutory severance pay. With respect to the termination of the employment on the basis of reorganising the T… notice), they're entitled to severance pay. Therefore, in the case where the employer has no retirement policies in place, or there is no retirement agreement between the employer and employees, those employees who wish to leave their employment had no alternative but to voluntarily resign. Under the Thai Labor Protection Act of 1998, companies are required to pay legal severance payments (‘LSP’) to employees who leave employment at their retirement age, … 2560 came into force This system pays lump sum benefits to employees on retirement or involuntary termination. It was interpreted that the old law placed the onus for determining and implementing retirement policies in private sector companies in the hands of the employer, or that retirement was dictated by agreement reached between the employer and employee. For severance pay under the LSA, severance pay will be equal to one month of average wages for each year of service for an employee who has been continuously employed by the same entity. Similar to no. (see chart below) Also under the new law, employees are … Albert Hui Orbis News, Thailand. Shortly, a new severance pay rate will be introduced for employees with 20 or more years of service at the rate of 400 days’ wage. Each employee’s consent is required for any change of employer. However, terminations and dismissals are subject to certain rules that are important to respect in order to avoid any subsequent dispute with the employee or for the employer. The same goes for other taxable income on your final paycheck, including unused vacation time, commissions, bonuses, etc. Licensed to do business in Cambodia, Indonesia, Laos, Myanmar, Thailand, and Vietnam. 2. Just when you think you have everything figured out and a concrete retirement plan in place, you’re thrown a curveball – Your employer has offered you an early retirement or voluntary separation package. An employee who has worked for less than 120 days can be terminated without receiving severance pay. New Rate of Severance Pay; An employee who has been terminated without cause will be entitled to, among others, severance pay; the rate of which depends on an employee’s length of service and last wage rate. 2541 (1998), which governed relationships between employers and employees in the private sector, and which provided protection for employees, did not mention retirement. Discover how we help our global clients adapt to foreign rules and Even though Thailand’s labour law does not set the retirement age of employees, the interpretation of the Thai Labour Protection Act B.E. employees and in particular, agree how many years beyond the age of Employment transfer. 2541 (A.D. 1998)), he or she is entitled to severance pay under Section 118. The Labor Protection Act of 1998, Section 118, (LPA) requires all employers in Thailand to pay severance to employees who are “terminated” by the employer without legal cause (as described in LPA Section 119). In Thailand, retirement is deemed to be a termination of employment, entitling employees to a … employment period is at least six years but less than 10 Labor reforms in India have been a long-pending demand of foreign investors, a majority of which consider the country's labor and employment laws responsible for limiting investment interest by forcing private employers ... Sign Up for our free News Alerts - All the latest articles on your chosen topics condensed into a free bi-weekly email. If your Thai company has no retirement policy, we can The new Labor Protection Act (No. 6.4 Are there any categories of employees who enjoy special protection against dismissal? employment period is at least one year but less than three about your specific circumstances. Provide employer’s duty to pay 15% interest per annum for some more cases, e.g. each country in which you operate, partnering with local HR and Retirement Age of Employees Thai Lawyers | May 10, 2013. 2541 (1998) includes the fact that the retirement of employees is a termination of contract of employment. In addition to codifying the court judgments, the new amendments to the retirement regime provide substantial benefits for employees in terms of the right to retirement, and the right to severance pay upon retirement. Retirement is deemed a dismissal under Thai labour laws. Generally, in the case of voluntary resignation, the employee who resigns would not be entitled to severance pay. If the employer has a retirement policy, or the employer agrees with the employee on retirement and the age of retirement, both parties are required to comply with such policy or agreement. The severance pay (Section 118) The maximum severance pay rate is set at 300 days of the employee’s latest wage rate for an employee who has worked 10 consecutive years or more. But when they do cease (with 30 days' 6) B.E. As mentioned above, If the company has included the retirement age in the regulation of the company, when the employees reach the retirement age, the Employer shall pay Severance Pay to them according to the rated specified in Section 118: 30 days’ wages where the employment period is at least 120 days but is less than one year. An employee who has served 20 years or more will be compensated at a rate equivalent to 400 days of pay. Employers should see if their retirement policy, work rules, employment contracts and any other document related to retirement needs to be drawn up and/or amended to comply with this new law. How to Evaluate a Voluntary Separation Package or Early Retirement Offer. The NLA voted 179 in favour with five abstentions to pass the bill to increase the severance pay from 300 days to 400 days for workers serving … Not only can it take several weeks (or months) to complete the paperwork, but once your claim has been submitted to OPM, it can take an additional 6 – 14 months to receive a decision. The employer who fails to give severance pay to the retiring employee may be subject to a maximum of six months imprisonment and/or a fine of up to THB 100,000. Exemption for severance pay not exceeding 300,000 Baht and not exceeding ‘10 months’ salary If an employee is terminated by his or her employer without any grounds (as provided under Section 119 of the Labour Protection Act B.E. THAILAND – Retirement regime for Thai private sector. The intention of the employee to retire will become effective 30 days after the date on which the employee informs their employer. Specialist advice should be sought We can also assist with The maximum severance pay rate is set at 400 days of the employee’s latest wage rate for an employee who has worked for 20 consecutive years or more. Severance pay under both the LSA and the LPA must be paid within 30 days of termination. Section 118/1 can be summarized as follows: Under Section 118/1, employers still have the freedom to unilaterally determine and implement their retirement polices, or alternatively, to negotiate and mutually agree on retirement with their employees. ... Retirement … Extra Severance Pay Rate Prior to the draft amendment, the highest severance pay rate was 300 days’ wage for employees who worked for at least 10 years. These Supreme Court judgments have assumed precedence over retirement issues. 300 days' wages where the Employers with offices in Thailand should review their workplace 60 they'd like to continue working. employment period is 10 years or more. The Labor Protection Act (LPA) requires all employers in Thailand to pay severance pay to employees whose employment is “terminated” without cause of serious misconduct. This is because employers no longer permitted employees to work, and also halted payment of wages to employees. © 2018 Tilleke & Gibbins International Ltd. All rights reserved. Also, the legal implications relating to the obligations of employers the rights of retiring employees remained unclear until the Supreme Court handed down several precedent rulings on retirement issues. The Thai government has set a clear red line in that employers need to pay severance to their retiring employees. 3, if the employer has a retirement policy, whereby the age of retirement is set at more than 60 years of age, those employees who are 60 years of age or more, may inform the employers of their intention to retire. You need to pay taxes even if you don’t have a work visa. Published On - 30 October, 2019. Therefore, if retirement policies were not implemented by the employer, this meant that  employees could potentially work for life, unless and until they voluntarily resigned or were terminated. Retirement is deemed a dismissal under Thai labour laws. 6) B.E. New Rate of Severance Pay; An employee who has been terminated without cause will be entitled to, among others, severance pay; the rate of which depends on an employee’s length of service and last wage rate. Thailand • Severance pay • Notice of at least one pay period, on or before any payday, so that the termination of the employment contract will take effect on the next payday, or a longer period if specified under the employment agreement, or payment in lieu. no payment in lieu of advance employment termination notice, etc. The benefits are highly valued by employees and the benefit terms are approximately one month of final pay for every year of service - … severance pay reserve fund, so they're never caught short. Special severance pay 30 days' wages where the All Rights Reserved. Retiring civil servants are also automatically eligible for state pension benefits, as prescribed by law. 240 days' wages where the or until they voluntarily resigned. regulations. New amendments to Thailand’s Labor Protection Act have addressed this issue by introducing a retirement regime for the Thai private sector employees, placing severance obligations on employers, enhancing protection for employees, and creating a more effective framework for enforcement of labour laws. If an employee is terminated by his or her employer without any grounds (as provided under Section 119 of the Labour Protection Act B.E. Failure to notify the employee may result in a special severance payment in lieu of the advance notice of 30 days. And once the employee did all aspects of retirement. However, the law does not prohibit both parties from agreeing otherwise, such as an extension for retirement or a renewal of employment. Those who do not do comply face a fine of up to 100,000 Baht, or even the imprisonment of the company director/s for up to six months. Once you live in Thailand for six months you will need to pay income taxes. previous law mean that the retirement age of any employee in the Severance Pay and FERS Disability Retirement If you are currently in the process of applying for FDR, then you are probably aware of the time frames involved. Those who do not do comply face a fine of up to 100,000 Baht, or even the imprisonment of the company director/s for up to six months. regulation. The new law clearly requires an employer to pay severance pay in the following the cases. As a result, the retiring employees were entitled to statutory severance pay. company they work for. The employee who reaches the age agreed between the employer and employee, or as prescribed by the employer as being eligible for retirement, is entitled to receive the severance pay. - Retirement to be treated as employment termination: Under the amended Act, the retirement shall be treated as a case of the employment termination which an employer shall pay a severance pay to a retiring employee. Employees cannot waive their rights to severance or retirement pay. Hours Of Work However, under Thai Law, only employees who have worked for 120 days or more are entitled to severance pay if they are terminated without cause. Key revisions include the following: Employees with at least 20 years of service are entitled to 400 days of statutory severance, up from 300 days for employees with at least 10 years' service. Shortly, a new severance pay rate will be introduced for employees with 20 or more years of service at the rate of 400 days’ wage. 2494 (1951) stipulates that 60 years of age is the retirement age for civil servants, although extensions are permitted under certain conditions. severance pay entitlements and help employers to establish a At this point, the employee can choose Thailand has applied the same rate of severance pay since promulgation of the LPA in 1998 until this was adjusted on 5 May 2019. For example, the Government Pension Act B.E. The Social Security Code, 2020 ("SS Code") has been passed by both houses of the Parliament and received Presidential assent on September 28, 2020. Thai Law does not specifically address trials or probationary periods. If the employer does not have a retirement policy, employees who are 60 years of age or more may inform the employers of their intention to retire. Benjamas Kullakattimas, a tax partner at KPMG in Thailand. SEVERANCE PAY/RETIREMENT INCENTIVE. Taking care of your staff is just as important as Prior to the enactment of the new Labor Protection Act (No.6) B.E. But awareness of this still THAILAND – Retirement regime for Thai private sector. With a view to reform the archaic labour laws and to facilitate the ease of doing business in India, the Government of India had decided to consolidate twenty nine (29) central labour laws ... On September 28, 2020, three new labour law codes namely, the Industrial Relations Code, 2020, the Occupational Safety, Health and Working Conditions Code, 2020 and the Code on Social Security, 2020. Termination notice, etc important as taking care of your business the law was on... Any change of employer not exceeding 300,000 Baht and not exceeding ‘ 10 ’. Were not entitled to severance retirement severance pay in thailand under Section 118 118/1 of the new Labor Protection Act recently... 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Can not waive their rights to severance pay login on Mondaq.com 118/1 of employer... About your specific circumstances Labour legislations in India ‘ wages ' varies across Labour legislations in India resigns would be! Only need to pay taxes even if you don ’ t have work... As taking care of your staff is just as important as taking care your. Payment of wages to employees on retirement or a renewal of employment to business... You will need to do business in Cambodia, Indonesia, Laos, Myanmar, Thailand, and LPA... To securely set aside sufficient internal reserve funds in preparation for employee retirement Thailand must pay a severance their. Waive their rights to severance pay since promulgation of the LPA in 1998 until was. Is deemed to be termination of contract of employment in Thailand should review their workplace and. Civil servants are also automatically eligible for state pension benefits, as prescribed by law securely set aside sufficient reserve... 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