EMPLOY IN THAILAND WITH EASE
- Access and hire global talent & deploy them anywhere in the world
- Remove restriction from only hiring from local markets
- Enter any international market without the requirement of opening a local entity
Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.
Expanding to countries such as Thailand – which is characterized by a highly trained and educated workforce, multifaceted employment and tax laws, a robust infrastructure network, and leading sectors in agriculture, industry, automotives, services, electronics, and tourism – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.
Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.
Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework. This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.
Thailand – The Economy
Thailand is a newly industrialized country, with the second-largest economy in Southeast Asia and the 22nd-largest in the world by PPP.
The economy of Thailand is dependent on exports, which accounted in 2019 for about sixty per cent of the country’s gross domestic product (GDP). Its currency, the Thai Baht, which was ranked as the tenth most frequently used world payment currency in 2017.
The industrial and service sectors are the main sectors in the Thai gross domestic product, with the former accounting for 39.2 percent of GDP. Thailand’s agricultural sector produces 8.4 percent of GDP—lower than the trade and logistics and communication sectors, which account for 13.4 percent and 9.8 percent of GDP, respectively. The construction and mining sector adds 4.3 percent to the country’s gross domestic product.
Other service sectors (including the financial, education, and hotel and restaurant sectors) account for 24.9 percent of the country’s GDP. Telecommunications and trade in services are emerging as centers of industrial expansion and economic competitiveness.
Thailand is the second-largest economy in Southeast Asia, after Indonesia. Thailand also ranks second in Southeast Asia in external trade volume, after Singapore. The nation is recognized by the World Bank as “one of the great development success stories” in social and development indicators.
Thailand is also one of countries with the lowest unemployment rates in the world. This is due to a large proportion of the population working in subsistence agriculture or on other vulnerable employment (own-account work and unpaid family work). Thailand is a middle power in global affairs and a founding member of ASEAN and ranks high in the Human Development Index.
Small and Medium-Sized Companies
Small and Medium Enterprises (SMEs) are defined by the Thai Government based on the number of employees and fixed capital. Enterprises with less than 200 employees and a fixed capital of less than THB 200 million (USD 6.4 million), excluding land and properties, are considered medium sized enterprises.
Small enterprises are those with no more than 50 employees and a capital of less than THB 50 million (USD 1.6 million).
According to Thailand Development Research Institute (TDRI), the country currently has about 3 million SMEs (which constituted 99.7% of all enterprises), employing up to 12 million people or around 82 percent of total employment.
SMEs make substantial contributions to the retail and wholesale, transport, hospitality, and agriculture sectors – about half of all SMEs are in tourism and related sectors.
|No. of States/Provinces||77 provinces|
|Principal Cities||Bangkok, Samut Prakan, Nonthaburi, Udon Thani, Chon Buri, Nakhon Ratchasima, Chiang Mai, Hat Yai, Pak Kret, Si Racha, Amphoe Phra Pradaeng, & Lampang|
|Local Currency||Thai baht (THB)|
|Major Religion||Theravada Buddhist|
|Time Zone||Indochina Time (GMT+7)|
|Country Dial Code||+66|
|Border Countries||Myanmar (Burma) (west), Laos (north and east), Cambodia (southeast), and the Gulf of Thailand (south)|
|Tax Year||1 January – 31 December (calendar year)|
|Minimum Wage||Ranges from 300 baht per day (depending on the cost of living in various provinces) – provincial tripartite wage committees set rates.|
|Taxpayer Identification Numbers||National ID Number (TIN, Personal)|
Social Security Number
|Leading Sectors||Automobiles and automotive parts, financial services, electric appliances and components, tourism, cement, auto manufacturing, heavy and light industries, appliances, computers and parts, furniture, plastics, textiles and garments, agricultural processing, beverages, tobacco|
|Main imports||Crude Petroleum, Integrated Circuits, Gold, Vehicle Parts, and Broadcasting Equipment|
|Main exports||Office Machine Parts, Gold, Integrated Circuits, Cars, and Vehicle Parts|
|Main trading partners||United States, China, Japan, Hong Kong, Vietnam, Malaysia, and Singapore|
|Government Type||Unitary parliamentary semi-democratic constitutional monarchy|
|Current Prime Minister||Vajiralongkorn (Rama X) (Monarch), Prayut Chan-o-cha (Prime Minister)|
The Main Sectors of the Thai Economy
Thailand focuses on the following key sectors, which all have a significant impact on the country’s economy:
- Services – A significant part of Thailand’s economy is the services sector, which contributes nearly half of the total national GDP (44.7%). The sector can be divided into a number of specialized industries, including finance, health, tourism and hospitality, retail, communications, and banking. These services provides jobs for 37% of the formal labor force and are considered the key to future economic growth in Thailand.
Tourism is one of the strongest industries within the services sector, producing approximately 17.7% of the total GDP, and has demonstrated steady growth over the last few years.
- Industry & Manufacturing – The industry sector (the majority of which is managed by the SMEs described above) is one of the largest contributors to Thailand’s total GDPO, with a value of 43.9%. Within the industrial sector, manufacturing is the most productive, contributing 34.5% of the GDP. Additionally, the industry sector is responsible for providing approximately 14% of formal jobs in Thailand.
On average, Thailand produces roughly two million vehicles every year, making it the largest automotive industry in Southeast Asia. The majority of cars and trucks manufactured in Thailand are international brands, like Ford, Volkswagen, Mercedes, and BMW. In addition to cars and trucks, Thailand also produces and exports automotive parts. The combined export value of these three types of goods was reported at $23.74 billion. Taken individually, trucks comprise 4.7% of total exports, cars make up 3.7%, and automotive parts make up 2.7% of the total exports leaving Thailand.
- Electronics – The electronics manufacturing industry in Thailand produces the largest percentage of exported goods, and accounts for 15% of total exports leaving the country. These exports are worth approximately $55 billion. Additionally, this specialized industry provides 12.2% of manufacturing jobs in Thailand. Within this category, computers and integrated circuits are the two most widely exported goods.
Computers make up 7.9% of all exports, at a value of $18.3 billion, while integrated circuits make up 4.2% of all exports, at a value of $9.8 billion. Thailand is also the world’s second largest producer of hard disk drives.
- Banking – Banking in Thailand officially started in 1906 and has expanded together with the rise of trade. The continuous growth has led to an established and modernized banking sector, with the Bank of Thailand founded as the country’s central bank.
The expansion of Thailand’s banking sector has brought about greater access to financial systems as seen from the number of automated teller machines along with being one of the leading countries in the Asia Pacific with a high banking population.
Thailand’s banking sector now provides a variety of financial services, depending on the types and demands of clientele.
One of service sector’s largest sub-sectors, The financial and insurance activities sector contributed approximately 1.3 trillion Thai baht to Thailand’s gross domestic product (GDP).
- The Revenue Department – The Revenue Department collects, administers, and develops six types of taxes: personal income tax; corporate income tax; value added tax; specific business tax; stamp duties; and petroleum income tax. These taxes combined account for more than 80 percent of total government revenue.
The department operates 12 regional revenue offices, 119 area revenue offices, and 850 area revenue branch offices throughout the country as well as 14 bureaus at its headquarters.
The department collaborates with international organizations including the International Monetary Fund, the World Bank, and the International Bureau of Fiscal Documentation [fr] to ensure international best practices for tax administration and policies
- The Department of Labor Protection and Welfare (DLPW) – monitors compliance with the law and provides support towards the improvement of working conditions and the working environment. The DLPW has several functions including:
- to establish and develop labor standards
- encourage and supervise workplace compliance with national laws and international labor standards
- to ensure worker protection, rights, and benefits in the formal and informal economy
- to promote and develop a system on occupational safety, health, and the working environment
- to promote, develop and disseminate knowledge and understanding of labor standards, labor protection, occupational safety, labor relations, state enterprise labor relations and labor welfare
- to prevent and resolve labor disputes and industrial unrest
Labor Contracts Law
Internationally minded companies hiring employees in Thailand must operate within a strict framework of legislation.
Most aspects of employment regulations in Thailand are based on the Employment Protection Act, the Employment Relations Act and the Civil and Commercial Code, with some aspects set by provinces. General requirements applying to all contracts include:
- The Employment Protection Act and the Civil and Commercial Code do not specify that a contract must be written, but it is advisable to put the key terms in writing as they form the working conditions
- If the contract is in English, for example, there should be a Thai translation if the employee is local. The Thai-language contract will be used in any legal disputes
- The Employment Protection Act says blue- and white-collar workers have the same protection under the law
- Employment contracts are generally either open-ended and indefinite, or fixed term
- Fixed-term contracts cannot include a probationary period and must specify an end date. If the end date is exceeded, it can be deemed to have become open-ended. Fixed-term contracts do not require an ‘advance notice’ of termination
- Probation periods are permitted but usually do not exceed 119 days, as employees are entitled to severance pay once they have worked for 120 days
- Employers are recommended to put contracts in writing as they include the working conditions, but this is not legally required by the Civil and Commercial Code or the Employment Protection Act.
- Employers and employees are free to agree terms for their contract, but the Civil Code does not allow contracts that are disproportionately advantageous to the employer.
It also important to bear in mind the types of contracts/agreements and how they can affect the employment relationship. The main contract types/agreements of Thailand include:
- Open-ended, Indefinite Employment Contracts: The most common type of employment agreement gives the start date and details of the agreement. These must include names and addresses of both parties; location of work; any probationary period (generally not exceeding 119 days); salary and working hours, breaks and vacations; any information regarding confidentiality and intellectual property if relevant. Open-ended contracts require ‘advance notice’ of termination, usually 30 days, unless termination is with due cause.
- Fixed-term, Definite Employment Contracts: These stipulate the start and end dates of the agreement and end on the expiry date without needing ‘advance notice’ of termination. They cannot be terminated before the end date unless there is due cause. The Thai Supreme Court ruled that if the contract includes provisions for it being terminated prematurely, it becomes an open-ended contract. The contract also automatically converts to open-ended if the employee is paid for continuing to work after the end date. Fixed-term contracts cannot include a probationary period.
- Probation Periods: These are allowed but generally do not exceed 119 days, as employers are required to make severance payments after 120 days of employment.
- Collective Bargaining Agreements (CBAs): Generally known under Thai law as ‘agreements relating to conditions of employment’ these apply at workplace level and must be implemented if the company has 20 or more employees. Once in force, the employer cannot enter any contract that does not comply with the agreement, unless it is beneficial to the employee. If employers want to change the collective agreement, they must negotiate with employees’ representatives under the terms of the Labor Relations Act.
Payroll – Tax Contributions and Benefits
Tax residents are those who spend a total of 180 days in Thailand in a calendar tax year. Thai tax laws do not define short-term residency rules. Residents and non-residents are taxed on employment and business income whether payments are made in or outside Thailand.
Residents who earn income from abroad are taxed if it is paid into Thailand in the tax year it is received.
Married couples can opt to file joint or individual returns.
Health and Social Insurance: Thailand’s government-funded health system is provided by the Ministry of Public Health through the Department of Medical Services. Treatment is generally free for Thai citizens holding a Universal Health Coverage card (UHC), which accesses the Universal Coverage Scheme (UCS). The UHC is issued by the National Health Security Office.
All employees, local or foreigners, contribute 5% of their salary to a social security fund, capped at a monthly limit of THB 750 (€20, US$23). Employers contribute the equivalent 5% of their employees’ salaries to the fund, also capped at THB 750 per month. Contributions fund the Provident Fund and the Workers’ Compensation Fund.
However, limits have been applied to expat over-50s who do not work but move to Thailand to retire, with the government requiring proof of private health insurance to go with a long-stay visa application.
Thailand is a leading destination for ‘medical tourism’ with well-equipped private hospitals and clinics staffed by specialists and well-trained staff.
Sick Leave and Benefit: Employees are entitled to 30 days sick leave a year, paid by their employer. The employer can request a medical certificate if leave lasts for more than three days. If sickness exceeds 30 days and is not due to occupational illness or workplace accident, employees can claim benefit from the authorities at 50% of the (capped) monthly wage to a maximum 90 days for each treatment or 180 days in total annually. In the case of chronic disease, this benefit can continue for one year.
The Workers’ Compensation Fund provides up to 60% of the monthly wage (capped) in the case of workplace injuries or occupational disease. Employers can recoup employees’ medical expenses from the fund.
Paid Vacations: Employees are entitled to six days’ paid vacation once they have completed one year’s service, with the allowance adjusted pro rata for working less than one year. It is up to employers whether to allow extra days of vacation in subsequent years. Employers and workers can agree for unused holiday entitlement to be built up and used the following year.
Public Holidays: Employees have a minimum of 13 paid public holidays a year, most of which are based on the lunar calendar on dates that can vary annually. Under the Employment Protection Act, employers can ask staff to work on holidays only in particular circumstances. These include emergencies, work that has to be undertaken without interruption, medical establishments, transportation, tourism, or those selling foodstuffs and drinks.
A day off in lieu applies if holidays fall on a weekend and the government can add extra public holidays. The principal holidays include:
- New Year’s Day – January 1
- Makha Puja Day – (various dates)
- Chakri Day – (various dates)
- Songkran Festival – (Thai New Year)
- Labor Day – May 1
- Coronation Day – (various dates)
- Visakha Puja – (various dates)
- Queen Suthida’s Birthday – June 3
- Asanjha Puja Day – (various dates)
- King Vajiralongkron’s Birthday – July 28
- The Queen Mother’s Birthday – August 12
- Chulalongkorn Day – October 23
- HM the late King’s Birthday – December 5
- Constitution Day – December 10
- New Year’s Eve – December 31
Maternity / Paternity Leave and Benefit: The Labor Protection Act provides maternity leave up to a maximum 98 days, including holidays, which generally begins with the birth of the child. Pre-natal leave requires a doctor’s certificate.
The employee receives full pay from their employer for the first 45 days. Employees insured under the Thai Social Security Fund may qualify for other benefits, depending on circumstances. The following options apply only to the first two births:
- When the child is born a lump sum payment of THB 13,000 (€346, US$395)
- 50% of wages for the 98 days capped at THB 15,000 (€400, US$456)
There is no provision in Thailand for paternity leave.
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