Employer of record in Thailand

Thailand has emerged as a pivotal hub for tech innovation and talent. With a skilled workforce, robust infrastructure, and an increasingly digitized population, the kingdom presents lucrative opportunities for international businesses looking to expand operations.

However, navigating the complexities of Thailand's labor regulations and cultural nuances can pose significant challenges for foreign entities.

Enter employer of record (EOR) services, a strategic solution that enables businesses to recruit and onboard Thai talent while minimizing risks and administrative burdens associated with direct employment.

» Hire top talent in Thailand through an employer of record

Thailand at a glance

Key considerations for hiring in Thailand

Tapping into Thailand's talent pool

• Recruiting in Thailand offers significant opportunities due to its strong economy and skilled workforce, especially in the tech and innovation sectors.
• Offering competitive compensation packages and emphasizing career growth in digital fields is crucial to attract top talent.
• Leveraging online job platforms and prioritizing language and cultural competency are key strategies for successful recruitment.
• Despite challenges posed by complex labor laws and cultural practices, understanding local regulations and adapting to Thai norms will enable employers to effectively navigate these challenges and build a successful workforce in Thailand.

Thailand's allure for foreign investment

• Thailand features favorable business regulations and open trade policies, making it an attractive destination for foreign investment.
• Thailand has one of the world's most competitive employer tax rates at 5.20% – 6%.

Digitization driving talent demand

The digital sector is growing rapidly in Thailand, making it essential for international businesses to focus on recruiting digital talent in fields like full-stack/mobile development, data science, UI/UX engineering, and sales.

Language and cultural competency

• While English is widely spoken in major economic hubs and tourist areas, language proficiency in Thai is considered a requirement or advantage in the recruitment process.
• Navigating cultural nuances and adapting to local norms are critical for successful talent acquisition and retention.

Thai employer of record (EOR) vs. entity

Employer of record in Thailand

An employer of record (EOR) is a third-party organization that serves as the legal employer for a company's workforce in Thailand. By using an EOR, you can:

• Delegate hiring, onboarding, and termination processes
• Outsource payroll, tax withholding, and benefits administration
• Ensure compliance with Thai labor laws and regulations
• Mitigate employment-related liabilities and risks

The client company retains operational control over the employees' day-to-day work, while the EOR handles employment-related administrative and legal responsibilities.

Pros

• Fast and easy setup
• Reduced administrative burden
• Automatically handles payroll and taxes

Cons

• Less control over the employment relationship
• Additional fees 

An EOR can be an attractive option for companies testing the Thai market, having short-term projects, or lacking the resources to set up a legal entity. It provides a fast and compliant way to hire local talent and navigate the complex Thai regulatory environment.

Legal entity in Thailand

A legal entity refers to a business structure recognized by Thai law as having its own legal rights and obligations separate from those of its owners or members. Common legal entities in Thailand include:

• Private Limited Companies (PLC): The most common type of legal entity for foreign businesses in Thailand, PLCs have shareholders whose liability is limited to their share capital.
• Public Limited Companies (PCL): Similar to PLCs, but can offer shares to the public and be listed on the Stock Exchange of Thailand (SET).
• Partnerships: Ordinary Partnerships (all partners have joint and unlimited liability) or Limited Partnerships (some partners have limited liability).
• Branch Offices: Extensions of a foreign company that can conduct business activities in Thailand but is limited to the types of business it can engage in.
• Representative Offices: These are limited to engaging in non-revenue generating activities, such as market research, quality control, and business coordination.

Establishing a legal entity in Thailand involves registering the business with the appropriate Thai authorities, such as the Department of Business Development (DBD) under the Ministry of Commerce, and complying with relevant regulations.

Pros

• More control over employee management and company culture
• Potential cost savings in the long run
• Ability to build a direct presence in the Thai market

Cons

• Time-consuming and complex incorporation process, requiring navigation of bureaucratic procedures and legal requirements
• Increased responsibility for administrative tasks, such as accounting, tax filing, and statutory compliance
• Difficulty in securing work permits and visas for foreign employees

Setting up a legal entity in Thailand can provide greater control and potential long-term benefits, but it also comes with significant challenges and responsibilities.

The complex regulatory environment, cultural differences, and administrative burdens may make it a less attractive option for some businesses, particularly those with limited resources or short-term objectives in the Thai market.

» Simplify global hiring in Thailand with Papaya's all-in-one global payroll & payments platform.

Work permits

In Thailand, there are several types of work permits available for foreigners, depending on the nature of work, duration of stay, and qualifications:

• Non-Immigrant B Visa with Work Permit (Business Visa): For foreigners employed by Thai or foreign companies registered in Thailand.
• One-Year Non-Immigrant B Visa with Work Permit: Similar to the standard Non-Immigrant B Visa, valid for one year. All foreign nationals, including visa-exempt individuals, must secure a Non-Immigrant B visa before entry to obtain a work permit.
• Urgent Work Permit (UWP): For short-term, urgent work, usually not exceeding 15 days. Non-visa-exempt foreign nationals seeking a UWP must obtain a Non-Immigrant B visa before entry.
• BOI Work Permit: Streamlined process for companies promoted by the Thailand Board of Investment (BOI).
• Smart Visa: For highly-skilled professionals, investors, and entrepreneurs in targeted industries, valid for up to 4 years.
• Work Permit for Teaching and Education: For foreign teachers and educational professionals.
• Work Permit for Volunteer Work: For foreigners engaging in volunteer work for non-profit or charitable organizations.

An EOR can help companies navigate the complex global immigration landscape and ensure they obtain the correct work permit for their employees in Thailand. The EOR's expertise in Thai immigration laws and regulations can streamline the process and minimize non-compliance risks.

Using an EOR for payroll and taxes in Thailand

Here's a breakdown of Thailand's progressive tax system based on income brackets:

• Up to 150,000 THB: 0% tax rate
• 150,001 – 300,000 THB: 5% of income above 150,000 THB
• 300,001 – 500,000 THB: 7,500 THB + 10% of income above 300,000 THB
• 500,001 – 750,000 THB: 27,500 THB + 15% of income above 500,000 THB
• 750,001 – 1,000,000 THB: 65,000 THB + 20% of income above 750,000 THB
• 1,000,001 – 2,000,000 THB: 115,000 THB + 25% of income above 1,000,000 THB
• 2,000,001 – 5,000,000 THB: 365,000 THB + 30% of income above 2,000,000 THB
• Above 5,000,000 THB: 1,265,000 THB + 35% of income above 5,000,000 THB

Minimum wage

As of April 2024, the minimum wage in Thailand varies by province. The minimum wage rates for some key regions are as follows:

• Bangkok, Nonthaburi, Pathum Thani, Samut Prakan, and Samut Sakhon: 336 Thai Baht per day (approximately $10.06 USD)
• Chonburi, Phuket, Rayong: 335 Thai Baht per day (approximately $10.03 USD)
• Chachoengsao, Ayutthaya, Saraburi, Nakhon Pathom: 334 Thai Baht per day (approximately $10.00 USD)
• Other provinces: 328-333 Thai Baht per day (approximately $9.82 – $9.97 USD)

EOR employment contract/agreement

An employer of record in Thailand will typically include the following key elements in employment contracts/agreements:

• Contract type (fixed-term or indefinite employment contract)
• Parties and signing date
• Start date
• Probation period
• Position & location
• Working hours
• Rest days
• Wages
• Overtime
• Holidays
• Paid leave
• Annual leave
• Personal business leave
• Sick leave
• Maternity benefits
• Paternity benefits (not legally required but sometimes offered by employers)
• Sickness allowance
• 13th month salary/bonus (customary but not legally required)
• Social Security Fund contributions
• Provident Fund contributions (if applicable)
• Termination (notice period, severance pay, unfair dismissal protections)

Mandatory employee benefits

• Social Security Fund (SSF): This fund provides benefits related to sickness, maternity, disability, death, child allowance, old age pension, and unemployment. Both employers and employees contribute to the fund.
• Workmen's Compensation Fund (WCF): This insurance covers work-related injuries, illnesses, disabilities, or death. Employers are required to contribute to this fund.
• Provident fund: Although not mandatory, many employers offer this retirement savings plan. If provided, employees must contribute a minimum of 2% of their salary, and employers must match the contribution.
• Annual leave: After working for one year, employees are entitled to a minimum of 6 days of paid annual leave.
• Traditional holidays: Employees are entitled to at least 13 paid holidays annually.
• Sick leave: Employees are entitled to paid sick leave of at least 30 days per year.
• Maternity leave: Female employees are entitled to 98 days of paid maternity leave.
• Minimum wage: Employers must pay at least the minimum wage, which varies by province and is set by the Thai government.
• Overtime pay: Employees who work overtime are entitled to additional pay of at least 1.5 times their regular hourly rate.
• Severance pay: Employees terminated without cause are entitled to severance pay based on their duration of employment.

Non-disclosure agreements

Non-disclosure agreements (NDAs) are legally binding contracts in Thailand. If a party violates the terms of an NDA, the other party may pursue legal action to seek compensation for damages. There are two common types of NDAs in Thailand:

• Unilateral NDAs: One party discloses confidential information to another party, who agrees to maintain its confidentiality.
• Mutual NDAs: Both parties exchange confidential information and agree to keep it confidential.

In Thailand, NDAs typically outline:

• The scope of confidential information protected by the agreement.
• The duration of the agreement, which can be for a specific term or indefinite.
• Permitted uses of the confidential information, such as for business purposes only.
• The receiving party's obligations to maintain confidentiality and prevent unauthorized disclosure.
• Consequences of breaching the agreement, such as damages or injunctive relief.
• Exceptions to confidentiality obligations, such as information already in the public domain or required to be disclosed by law.

Paid & sick leave

Paid leave/vacation

After completing one year of service, employees are entitled to a minimum of six days of paid annual leave per year. Leave is provided pro-rated for those with less than one year of employment.

Sick leave

Sick leave is granted to employees who have worked for at least 30 days, with the amount of leave increasing based on length of service, up to 30 days per year.

If an employee is sick for three or more consecutive days, the employer can request a medical certificate. However, if the employee was injured or became ill at work, the days out cannot be deemed sick leave.

Maternity and parental leave

Female employees in Thailand are entitled to 98 days of paid maternity leave, which includes weekends and public holidays. The employer is responsible for paying the employee's normal wages for 45 days, while the Social Security Fund covers the remaining 53 days.

Fathers are eligible for 15 days of paid paternity leave, which must be taken within 30 days of the child's birth. The employer pays this leave at the employee's normal wage rate.

Adoptive parents are also entitled to paid leave, with the primary caregiver receiving 98 days and the other parent receiving 15 days, mirroring the provisions for biological parents.

Public holidays

Employers must provide at least 13 paid public holidays per year, but the number can vary yearly. Companies usually follow the national holidays announced publicly by the Bank of Thailand.

Using an EOR to onboard new employees in Thailand

Before the first day

• The EOR collects personal, employment, and tax-related information from the new employee through a human resource information system (HRIS)
• Based on the job details and data collected, the EOR generates a Thailand-compliant employment contract that is reviewed and signed electronically.
• The EOR assists with visa/work permit requirements for foreign workers, such as obtaining a Non-Immigrant "B" visa and a work permit from the Ministry of Labor.

The first day

• The EOR sets up the new employee's payroll information in the HR system, including salary details, allowances, tax calculations, and payment schedules, in compliance with Thailand's labor laws and regulations.
• The HR system provides access to company policies, procedures, and training materials, ensuring the new hire is aware of organizational guidelines and can complete necessary onboarding training modules.

The first week and beyond

• The HRIS system manages employee performance reviews, goal-setting, and leave requests once fully onboarded.
• The EOR handles any changes or updates to the employee's benefits, such as the addition of dependents, claims processing, or plan renewals, in accordance with Thailand's social security and healthcare systems.
• The EOR ensures ongoing compliance with Thailand's labor laws, guiding issues like working hours, termination procedures, and workplace safety regulations.

How EORs protect your company’s IP in Thailand

Here are some key factors to consider concerning IP security when hiring people in Thailand:

• Use non-disclosure agreements (NDAs): Have all employees sign an NDA that clearly outlines their obligations to maintain confidentiality and protect the company's IP.
• Include IP clauses in employment contracts: Ensure that employment contracts contain clauses assigning IP ownership to the company and prohibiting employees from disclosing or using company IP without authorization.
• Implement access controls: Restrict access to sensitive information and IP to only those employees who require it for their job responsibilities.
• Educate employees: Provide training on the importance of IP protection and their obligations under the company's policies and Thai law.
• Monitor and enforce compliance: Regularly monitor employee activities and enforce compliance with IP policies and agreements.
• Use legal protections like trademarks, copyrights, and patents: Register your company's IP with the relevant authorities in Thailand, such as the Department of Intellectual Property (DIP) under the Ministry of Commerce.
• Implement data protection measures: Use secure servers, encryption, and other technical measures to protect your company's digital assets and prevent unauthorized access.
• Secure remote access: If employees access company systems and data remotely, ensure that secure protocols like virtual private networks (VPNs) are used.

How EORs ensure compliance with labor laws in Thailand

Foreign companies operating in Thailand through an EOR comply with labor laws by following these country-specific considerations:

• Labor Protection Act (LPA): The Labor Protection Act (LPA) is the primary legislation governing employment practices in Thailand. It covers wages, working hours, leave entitlements, termination, and severance pay. Foreign companies must familiarize themselves with the LPA to ensure compliance.
• Civil and Commercial Code: This law regulates contracts, including employment contracts, and outlines the rights and obligations of employers and employees.
• Labor Relations Act: This law governs labor unions, collective bargaining agreements, and labor disputes.
• Social Security Act: This law requires employers to contribute to the Social Security Fund, which provides benefits to employees in case of illness, injury, disability, or death.
• Workmen's Compensation Act: This law requires employers to contribute to the Workmen's Compensation Fund, which provides compensation to employees who suffer work-related injuries or illnesses.
• Occupational Safety, Health, and Environment Act: This law sets workplace safety and health standards to protect employees from hazards.
• Alien Working Act: This law regulates the employment of foreign workers in Thailand, requiring them to obtain work permits and visas.
• Skill Development Promotion Act: This law encourages employers to provide employee training and skill development opportunities.
• Minimum Wage Act: This law sets the minimum wage rates for different regions in Thailand.
• Trade Secrets Act: This law protects confidential business information and trade secrets from unauthorized disclosure by employees.

Offboarding/Terminating employees in Thailand

Foreign companies with an EOR in Thailand must comply with legal conditions for terminating employees by considering these key points:

1. Review employment contract: Carefully review the contract to understand the terms and conditions related to termination, such as notice periods and severance pay entitlements.
2. Provide notice or payment in lieu: Employees must be given advance notice of termination per their employment contract or the Labor Protection Act (LPA).
3. Severance payment: Under the LPA, employees who have worked for at least 120 days are entitled to severance pay when terminated without cause. The amount of severance pay depends on the duration of employment.
4. Consultation and communication: Employers should consult with employees and clearly communicate the reasons for termination, ensuring they are fair and justifiable under Thai law.
5. Consideration of alternatives: To avoid unnecessary terminations, employers should consider alternative options, such as redeployment or re-training.
6. Avoid unfair dismissal: Employers must ensure that terminations are not based on discriminatory grounds or in retaliation for exercising legal rights.
7. Compliance with immigration laws: When terminating foreign employees, employers must ensure compliance with immigration laws and promptly cancel work permits and visas to avoid penalties.
8. Ensure proper documentation: Employers should maintain accurate records of the termination process, including notices and severance payments.
9. Statutory vs. performance-based termination: There is a distinction between statutory termination (without cause) and performance-based termination (with cause) in Thailand.
10. Mutual separation agreements: Employers and employees may enter into mutual separation agreements to end the employment relationship amicably.

Use an EOR to start hiring in Thailand today

Thailand's skilled workforce and strategic location make it an attractive destination for international businesses. But navigating the complexities of hiring in a foreign country is always challenging.

Partnering with a reputable EOR service provider like Papaya Global can help streamline the hiring process and ensure compliance with Thai laws and regulations. Companies can focus on attracting top talent and driving business growth in Thailand and Southeast Asia.

» Consult a country expert for a comprehensive overview of Thailand

SUBSCRIBE TO OUR BLOG

Your personal data will be processed in accordance with our privacy policy. You may unsubscribe at any point.