Labor law is a vital aspect of doing business in Thailand. Understanding and complying with these regulations ensures that employees and employers are treated fairly. The Ministry of Labor and its affiliated departments offer a variety of resources and can assist with specialized issues.
Workers can organize as trade unions only if they work for the same undertaking, or in the case of supervisory level workers, for the same company. The registrar has the power to register and dissolve these unions.
Classification of Employees
Thailand is renowned for its vibrant economy and rich cultural history, but it also has a structured set of labor laws that safeguard employee rights and promote a harmonious work environment. Aligning with Thailand’s labor laws isn’t just a legal requirement; it’s a testament to an organization’s commitment to fair practices and its employees.
One of the most fundamental elements of compliance is correctly classifying employees as either contractors or employees. Misclassifications can have significant repercussions, including penalties for the employer and back taxes for the worker. Furthermore, certain employment protections and benefits are only available to employees, not independent contractors.
In addition, workers must be paid at least the minimum wage rate. In some cases, employees may be entitled to overtime pay and holiday pay, as well as severance payments, depending on their length of service. Detailed payrolls must be provided to all employees, clearly elucidating their gross salary and the various deductions that have been made. These payslips must also show the final net pay.
Terminating employees in Thailand is a complex process that requires meticulous attention. Employers must provide at least the equivalent of a month’s wages in notice for an employee to be terminated. In some cases, if the employee has been disciplined or has committed a serious crime, the employer can put them on “garden leave,” allowing them to keep their status and pay but not report to work until they are dismissed (the law does not stipulate a specific period of time for garden leave). If an employer violates these provisions, they may be sued for unfair dismissal.
Collective Bargaining
The low level of trade union density is largely due to two factors: repressive laws and resistance from employers. In addition, the fragmentation of the world of work and the lack of government support hamper workers’ organisational efforts. According to a Friedrich Ebert Stiftung study, less than half percent of private enterprises have trade unions. This is due to Section 89 of the Labour Relations Act (LRA) which requires at least ten workers to establish a union. This is a serious obstacle for many enterprises that employ fewer than ten workers. Furthermore, it excludes many informal workers in the food, accommodation, retail, transportation, communication and construction sectors.
As a result, only about 50 percent of the industrial workforce in Thailand has the right to form a union and bargain collectively. In the past, trade unions were an important channel for workers’ struggle against poverty and exploitation. Trade unions were made up of factory workers, rickshaw pullers, Chinese coolies, intellectuals and other types of workers.
However, these days large numbers of workers, especially the young, are turning their backs on the trade union movement. Trade unions no longer have the prestige and the magic that once attracted workers to them. In addition, they are losing their ability to galvanise workers to take action against exploitation and the lack of democracy in the country.
Arbitration
In general, the majority of labor disputes in Thailand are resolved by out-of-court arbitration. Arbitration clauses are generally discussed and negotiated during the drafting of contracts. Arbitration procedures are governed by the TAI rules, which were amended earlier this year to promote efficiency, speed and transparency. The amendments also aimed to ensure consistency and fairness in arbitration proceedings in Thailand.
The TAI rules empower tribunals to grant interim measures but, in practice, tribunals will be likely influenced by the kinds of relief available in Thai litigation under the Civil Procedure Code (CPC). In addition to determining whether evidence is admissible and how it should be presented, the tribunal may require any party to provide any documents, information or materials that it considers necessary for a proper hearing. The tribunal and/or the parties may require expert witnesses to attend a hearing for cross-examination. However, witness conferencing is not common in arbitration in Thailand.
An award must be in writing and signed by the tribunal or, if applicable, by the majority of its members. It must state the date and place where it was made and, unless otherwise agreed by the parties, the reasons for its decision.
Awards may be challenged on the grounds set out in the Arbitration Act, including that the award was not made in accordance with the law or is contrary to public policy or good morals. Challenge proceedings are often lengthy and time consuming.
Termination
Thailand’s labor laws are meticulously tailored to cultivate a symbiotic relationship between employers and employees, striking a balance that benefits both parties. Adherence to these regulations empowers both stakeholders, resulting in informed decisions, minimized disputes, and a healthy workplace culture.
Firing an employee is a critical human resources challenge that every business must contend with. To mitigate legal repercussions, it is crucial to ensure the termination process is conducted in compliance with Thai labor law. Failure to do so may expose the business to costly lawsuits.
Under Thai law, employers must serve advance notice when terminating employment. Alternatively, the employer can offer severance pay in lieu of the advance notice period. Severance pay is determined by the length of service, with longer-serving employees receiving higher compensation.
Employees are also entitled to a minimum amount of statutory compensation on termination, including contributions to the Social Security Fund and pay for work during public holidays. Therefore, it is important to classify all employees correctly, ensuring that the proper severance and compensation payments are made for each. Regular consultation with a local labor lawyer can greatly facilitate this and reduce the risk of costly litigation. A legal advisor can help to ensure that classifications and procedures comply with current legislation, safeguarding the reputation of the business and preserving the rights of employees.
