Thailand
Payroll Guide

Country Overview

With its serene beaches, picturesque landscapes and bustling cities, Thailand captivates both visitors and investors equally. Nestled in the heart of Southeast Asia, Thailand is renowned for its rich cultural heritage and vibrant economy. Officially known as the Kingdom of Thailand, it is bordered by Myanmar to the north, Laos to the north and east, Cambodia to the east, and Malaysia to the south. With the help of smart economic policies, Thailand has made significant progress and has now become an upper-middle-income economy.

As Thailand is a member of the Asia-Pacific Economic Cooperation (APEC) and the Association of Southeast Asian Nations (ASEAN), investing in Thailand facilitates trade with major markets such as China, India, and other ASEAN countries. The nation benefits from numerous Free Trade Agreements (FTAs) and Investment Promotion Acts, which enhance its appeal to foreign investors. Thailand’s infrastructure is well-developed, featuring modern transportation networks, advanced telecommunications, and efficient logistics systems.

Thai government has implemented forward-thinking policies to maintain its competitive edge in the international market. Admiral initiatives such as the Eastern Economic Corridor (EEC) and Thailand 4.0 by the Royal Thai government rolls the country towards a value-based economy. EEC is a special economic zone encompassing the provinces of Chonburi, Rayong, and Chachoengsao in Eastern Thailand and it aims to usher investments in high-growth potential sectors. While Thailand 4.0, the fourth economic development strategy focuses on innovation driven economy as part of the nation’s new economic model.

The previous phases of this plan have been focused on different sectors of the county such as, agriculture (Thailand 1.0), light industry (Thailand 2.0), and heavy industry (Thailand 3.0). the nation’s continuous strive for development makes it an attractive destination for international businesses seeking growth and expansion.

Market Glimpse

One of Thailand’s key initiatives is the AI Agenda, which focuses on enhancing the country’s AI infrastructure. Additionally, there is a strong emphasis on developing a skilled digital workforce to support this technological advancement stand as an important factor to attract potential investors. The nation’s annual GDP growth was 1.9% in 2023 and according to World Bank’s Thailand Economic Monitor July 2024, the growth is projected to reach 2.4% in 2024 and 2.8% in 2025. The Thailand Board of Investment (BOI) has announced a 35% rise in investment promotion applications during January to June 2024, totalling 458.4 billion THB. Additionally, Foreign Direct Investment (FDI) witnessed a 16% increase during this period.

BOI serves as the primary government body dedicated to encouraging foreign investment in Thailand. It offers a range of incentives, services, and essential information to support foreign enterprises looking to establish or expand their presence in the country. Some of the incentives are as follows:

• Corporate income tax exemptions for up to 13 years
• Import duty reductions on machinery and raw materials
• Land ownership privileges
• Additional tax deductions for infrastructure investments
• 100% ownership to foreign investors, bypassing restrictions of the Foreign Business Act that normally limit foreign ownership to 49.99% in certain sectors.

Despite these advantages, there are challenges to consider:

Shifting focus from the broader economic landscape, we delve into the complexities of payroll management, a vital element for any thriving business. This guide will cover the key aspects of payroll, ensuring both compliance and improved operational efficiency.

Payroll Compliance Essentials

Several registrations are required for a company to start their operations in Thailand. Registering a private company in Thailand generally takes about a week, whereas the process for a public company can extend to a month.

To start a business in Thailand, first reserve a company name online through the Department of Business Development (DBD). This involves registering an account, searching for and reserving the name, and signing the Notice of Reservation, which is valid for 30 days. Next, prepare the necessary documents, which vary by business type and may include the Memorandum of Association, application form, list of shareholders, director forms, Declaration of Business Operation form, and office details. A company stamp is also required. Finally, register the company at the local Business Registration office and obtain a taxpayer identification number.

Upon completion of the registration and all mandatory process, the company can begin its functions. The company must comply with the relevant employment, social security, and withholding tax regulations to ensure employees receive accurate compensation. Additionally, all statutory dues should be deducted and remitted to the relevant authorities to avoid non-compliance.

In this guide, the statutory details right from onboarding to offboarding of an employee will be discussed in depth and the links to relevant official sites are embedded below:

Onboarding Simplified

The onboarding process for employees in Thailand is regulated by pertinent Labour Protection Act to ensure adherence to established standards. This process requires the creation of an employment contract based on the types of employees, including all essential working conditions and payroll elements for smooth operations. The requirements for Thai payroll are outlined below:

1. Employee Classification

The employee classification is based on the type of work performed by each type of employee and withholding tax rates may differ based on the employee type. The following types of employment are recognised in Thailand:

2. Employment Contract

In Thailand, employment contracts are crucial for both employers and employees. While these agreements can be either verbal or written, having a written contract is preferable. A written contract, clearly outlining the terms and conditions of employment, provides a solid reference in the event of any disputes.

A typical employment contract in Thailand should contain the following elements:

• Date the contract was made
• Names of employer & employee
• Commencement date of employment
• Expiry date of the contract (for fixed-term contracts)
• Duration of probation period
• Position & right to change position
• Duties & responsibilities of the employee
• Working days, hours & holidays
• Wages, benefits & welfare
• Payment date and frequency
• Security deposit/guarantee (if applicable)
• Workplace address/location
• Non-competition & non-solicitation clause
• Confidentiality/non-disclosure clause
• Reference to work rules & regulations
• Termination of employment

3. Probation Period

In Thailand, there is no legal mandate regarding minimum or maximum probationary period. However, it is common practice among employers to set the probationary period within 3-4 months. This approach helps to avoid the obligation of severance pay if the employer decides to terminate the employee due to unsatisfactory performance at the end of the probationary period.

4. Minimum Wages

Thailand’s national minimum daily wage varies by region, this approach ensures that the wages commensurate the varying costs of living and economic activities in different provinces and aims to balance employee welfare with economic sustainability. The minimum wages range from 330 THB to 370 THB. It is employer obligation to adhere to minimum wage applicable for the province in which employee is working.

Province-wise minimum wage details are given below:

In case of foreign employees, their nationality will decide their minimum wages. Find the details below:

Workplace Protocols

Ensuring compliance with legal working conditions is a crucial responsibility following the onboarding of an employee. Labour Protection Act (“Labour Act”) outlines the working hours, overtime, break times, overtime wages and leaves eligibility criteria of an employee.

1) Working Hours

Section 23 of Labour Act outlines the standard working hours in Thailand.

* If daily working hours are less any day, the employer and employee can agree to make up the hours on other days, provided it does not exceed 9 hours per day and 48 hours per week.

2) Breaks

Section 27 of Labour Act outlines the laws regarding the rest period.

A rest period during work shall not be counted as working time. However, if the total time of rest period is exceeding 2 hours it shall be counted as normal working time.

3) Rest Day

Rest day is known as weekly holiday in Thailand. Section 28 of Labour Act defines that employees must have a weekly holiday of not less than 1 day and the interval between weekly holidays shall be not more than 6 days. The employer and employee may agree in advance to fix any day as a weekly holiday.

On the other hand, employees who are working in a hotel business, transport, forest or in a location lacking basic facilities, or any other work as prescribed in the Ministerial Regulations, the employer and the employee may agree in advance to accumulate and postpone weekly holidays to be taken at any time, but they must be taken within a period of 4 consecutive weeks.

4) Overtime

Section 61 of the Labour Act regularise the law related to overtime hours. If the employer requires an employee to work overtime on a regular working day, then the employer shall provide overtime pay to the employee at a rate of not less than 1½ times of the hourly wage rate of a working day for the number of overtime hours of work done. In case the employee receives wages on a piece rate basis, not less than 1½ times of the piece rate of wages of a working day must be paid.

Employer shall not require an employee to work overtime on a Working Day without employee’s prior consent is obtained on each occasion. Also, employees can be asked to work on holidays only in specific circumstances.

5) Night Shift Pay

In Thailand, there is no specific law mandating additional compensation for employees working night shifts. However, if their regular working hours exceed the standard limit, they are entitled to overtime pay.

6) Leaves Entitlement

Section 29 of Labour Act mandates the employers to announce not less than 13 traditional holidays every year in advance for their employees, including National Labour Day as specified by the Minister.

The Employer shall designate traditional holidays in alignment with annual official, religious, or local holidays. In case a traditional holiday coincides with an employee’s weekly rest day, the employee is entitled to a substitute day off on the next working day.

Whereas an employer does not provide a traditional holiday to an employee and employee performs work on that day, the employer shall make agreement with the employee to take another day off to substitute for the traditional holidays or the employer shall pay holiday pay to the employee.

The lists of the traditional holidays for 2025 are mentioned below:

For more details on the holidays follow this link.

Apart from these employees of Thailand are entitled to several other paid statutory leaves as provided below:

* For employees who have worked for 1 year uninterruptedly. For the employee who has not completed one year of service, the employer may set annual holidays for the employee on a pro rata basis.

**Only for male employees.

***Female employees are entitled to 98 days of maternity leave, 45 days of paid leave and the remaining days of 53 days as unpaid leave.

Note: Above mentioned leave entitlement is set by Thai Labour Protection Act however employers may modify as per the company policy if its more beneficial for the employees.
a) Holiday Pay
As per the Labour Act, the employer needs to provide holiday pay to the employee if they work on a holiday at least equal to the hourly wage rate of a working day for the number of hours of work done.

If the employee is not entitled to wages on holidays, the pay rate should not be less than two times of the hourly wage rate of a working day for the number of hours of work done.

In case the employer needs the employee to work overtime on a holiday, the employer is obliged to pay no less than three times of the hourly wage rate of a working day for the number of overtime hours of work done.

7) Event-based Compensation

The Workmen’s Compensation Act mandates that employers are required to offer compensation or benefits at legally specified minimum rates to employees who sustain injuries, fall ill, or die as a consequence of their work-related activities or environment. The Act outlines four distinct categories of compensation benefits:

* Depending on the severity of the cases as prescribed in the Ministerial Regulations

8) Other Benefits

Apart from the above-mentioned benefits, there are no other statutory benefits available in Thailand, however, company can pay additional benefits as per company policy.

Salary Essentials

Section 70 of the Labour Act primarily covers the salary payments, deductions, and other associated regulations regarding salary of the employees. It further outlines that the employer must pay at such time as agreed between the employer and the employee. In accordance with this Act, employer is obliged to make all the payments not less than once a month.

1. Salary Components

The table below provides an overview of the various salary components that constitute the gross salary:

2. Payslip Components

Payslips promote transparency and enables employees to confirm that the deductions comply with the Labour Act.

Employers should provide payslips that clearly mentions the gross salary, all deductions, and the resulting net pay of the employee.

Decoding Deductions

Employers are obliged to make several mandatory deductions in the below form:

1. Withholding Taxes/ Personal Income Tax (PIT)

Thailand follows January to December tax year and mandates employers to withhold income tax from employees’ salaries on a monthly payroll frequency as provided in the Income Tax Act. The Revenue Department of the Ministry of Finance is responsible for administering imposed taxes. The employers are required to make the accurate deductions and remit these amounts to the Revenue Department.

In Thailand, the taxpayers are classified into 2 groups:

Tax rate on employment income is same for Resident and Non-resident as provided below:

To find the taxable income, the below formula is followed:

Taxable Income = Assessable Income – Deductions for Expense – Deduction for Allowances – Deduction for income that is exempt from tax.

Find below the details regarding these components:

• Assessable Income: Income subject to the Personal Income Tax (PIT) is referred to as assessable income. This includes both cash and non-cash income.

Consequently, all regular income paid as well as any benefits provided by an employer such as a rent-free house or taxes paid by the employer on behalf of the employee, are considered assessable income for PIT purposes.

Income derived from employment includes:

• Salaries, wages, allowances, bonuses, gratuities, pensions, and retirement benefits.
• Rental payments received from the employer.
• Benefit calculated for the residence provided by the employer without rent payment.
• Any amount paid by the employer to settle any debts which the employee is obligated to pay.
• Money, property, or any benefits derived from employment, such as the value of provided meals.
• Deductions for Expense:Income derived from employment salary, wage, pension, incentive, overtime, etc. are subjected to expense deduction of 50% of assessable income but not more than 100,000 THB.
• Deduction for Allowances: Certain deductions for allowances and expenses are also allowed in the calculation of the taxable income. Find the types of allowances below:

Other Deductions:

Reporting

Employers are required to remit the withheld taxes on a monthly schedule. Additionally, they must provide an annual report that outlines each employee’s total earnings and tax contributions. These withholding tax returns should be completed using Form PND 1 and must be submitted to the Revenue Department within the following deadlines:

List of Statutory Reports:

Non-compliance

The company should be vigilant when it comes to maintaining of compliance with tax withholding, otherwise the consequences will be grave:

2. Social Security

Social security contributions are one of the key components of payroll in Thailand. Both employers and employees are required to contribute to the national social security system under the Social Security Office (SSO). Every employee is mandated to contribute 5% of their monthly salary to the social security fund, with the contribution capped at THB 750. Employers are also obligated to match this contribution.

The benefits under Thailand’s social security are as follows:

• Healthcare: This contribution provides healthcare coverage and medical benefits.
• Unemployment Support: Employees who lose their jobs due to economic downturns or company downsizing are entitled to receive unemployment benefits for a specific period.
• Pension: It is thefinancial security for employees upon retirement.

Statutory contributions are calculated on the employee’s salary following the table below:

Employee salary means the Gross salary paid to the employee for all the work done by the employee.

The minimum and maximum capping limit of SSO contribution is as follows:

Reporting

Non-compliance

3. Workmen’s Compensation Fund

Employers are required to make annual contributions to the Workmen’s Compensation Fund (WCF). These contributions are solely the responsibility of the employer and are calculated based on the total wages paid to employees, with a salary cap of THB 240,000 per employee per year. The contribution rates vary depending on the type of industry and the associated risk level, ranging from 0.20% to 1%.

At the beginning of the year, contributions are estimated based on projected wages. An adjustment reconciliation is conducted at the end of the year to account for any discrepancies between estimated and actual wages, resulting in either additional payments or refunds.

Reporting

Non-compliance

4. Provident Fund

Participation in the Provident Fund (PVF) is voluntary, though it is commonly chosen by employees. It is set up through co-operation between employers and employees. These funds are provided by private entities and regulated by the Office of the Securities and Exchange Commission (SEC). Employees contribute to the fund through deductions from their wages, while employers contribute at a rate between 2% and 15% of the employee’s wages.

Reporting

Non-compliance

5. Minimum Take Home Pay

The Labour Act in Thailand does not address the concept of minimum take home pay. Therefore, it is managed according to the company policy.

Seamless Offboarding

Ensuring compliance during the offboarding process is crucial and should be handled with utmost care. Typically, employment termination occurs due to retirement, resignation, or dismissal for various reasons.

In cases where the employment contract does not specify a period, either the employer or the employee may terminate the contract by providing written notice to the other party at or before any wage payment due date. The termination will take effect on the following wage payment due date. If the employer terminates an employment contract without an advance notice, employer must compensate the employees with the wages they are supposed to receive from the date of the dismissal to the termination of employment contract comes into effect and this shall be paid on the date the employee is dismissed.

For contracts, that specify a period, the employment contract will automatically expire upon the completion of that period, with no requirement for advance notice.

When employer terminate the contract specific termination payouts are required to be paid out, as outlined below:

• Employees who have completed 120 days or more of service are eligible for severance pay.
• Those who have worked for fewer than 120 days and are dismissed without cause are not eligible for severance pay.

As per the Section 118 of Labour Protection Act, the rates of severance pay are as follows:

In addition to above, if the employer relocates the place of business, they are obliged to clearly announce which employees shall be moved to where and when, not less than 30 days prior to the date of relocation.

If they fail to inform in advance, the employer shall pay a special severance pay in lieu of advance notice to the employee who refuses to relocate to the new place. This amount must be equivalent to 30 days’ pay at the latest wage rate, or equivalent to the wages of the last 30 days for the employee who is paid on a piece-rate basis.

If the employee refuses to relocate on the grounds that it significantly affects the ordinary way of living of the employee or the employee’s family, the employee shall inform the employer in writing within 30 days from the date of the announcement. It will be determined that the employment is terminated on the date of relocation by the employer.

In this case, the employee will be entitled to a special severance pay of not less than the rate of eligible severance pay of the employee, as mentioned here. The employer shall pay the special severance pay in lieu of advance notice or severance pay within 7 days from the date of termination.

1. Retirement

In Thailand, retirement is based on agreement between an employer and an employee, or as stipulated by the employer. In case there is no agreements or stipulation of retirement, an employee who is over 60 years old is entitled to notify his intention of retirement to the employer. Under Section 118, the retiring employee is entitled to:

• Severance pay
• Wages for unused annual leave (If any)
• Advance Notice pay (if no Advance notice given)

2. Resignation

If an employee voluntarily resigns, the employer shall pay pending salary along with the unused leave encashment and advance notice (if any), however not obligated to pay severance pay to employee.

Also, some employers may provide a special benefit, such as a lump-sum payment, to employees who have worked for a certain number of years (e.g., 10 years) upon their resignation.

3. Dismissal

In accordance with Section 119 of the Labour Act, the company is not obligated to provide severance pay to employees whose employment is terminated for any of the following reasons:

• Dishonest performance or the intentional commission of a criminal act against the company
• Wilfully causing damage to the employer
• Violation of the company’s work rules and regulations
• Neglect duties for a period of 3 consecutive workdays without a reasonable cause

However, the employer is obliged to pay wages, overtime pay, holiday pay, holiday overtime pay and other payment within 3 days from the date of the employee’s termination.

Conclusion

Thailand’s location, skilled workforce surely enhances the operational potential of the country. These factors, coupled with a growing consumer market, make Thailand an attractive destination for international businesses. Navigating payroll compliance in Thailand necessitates a comprehensive understanding of local labour laws and proficient HR and payroll management practices. The complexities involved require a meticulous approach to ensure adherence to statutory requirements. By leveraging advanced payroll systems and staying informed about regulatory updates, businesses can maintain accuracy and efficiency in their payroll processes.