How to Hire in Thailand

If Thailand is part of your international growth plan, it’s crucial to understand the requirements for hiring local workers.

To hire in workers directly, you’ll need legal entity in Thailand. This involves using a local office and having a registered address as a subsidiary. It also includes having an account with a local bank. Setting up a business can take months, especially when dealing with regional benefits, payroll, tax, and HR laws.

Thailand also has different requirements for contractors vs. employees. Misclassifying these workers can result in legal penalties and fines. A Global PEO provider lets you hire employees in Thailand faster, easier, and with all the regulatory compliance.

This guide will help you navigate the regulatory complexities and requirements of hiring in Thailand.

Employment Contracts

Written or verbal contracts are permissible within Thailand’s employment law, which includes fixed-term and permanent contracts. Although not required, it is always recommended to create a strong employment contract for any new hires in Thailand.

Contracts protect both the employer and employee from any potential disputes. Thailand’s judicial system often rules in favor of the employee if there isn’t a clearly defined contract in place. Don’t use online templates for hiring internationally as they don’t include specific country requirements, to avoid risks.

Employment contracts should include basic parameters, such as:

· The employee’s role and responsibilities

· Compensation expectations

· Benefits packages

· Termination requirements

Probationary Period

The Thai labor law does not have a regulation on the trial period or probation. However, the maximum period of a probation period is up to 119 days. This provides enough time for both parties to determine how they feel about the employment relationship.

Terminations

Terminations can sometimes create challenges when dealing with foreign workers. For terminating an employee without cause, you must give a written notice period of at least one pay cycle.

According to Thai labor law, the employer must severance based on the employee’s time spent with the company. Here is a severance breakdown:

· 120 days of continuous service to one year: 30 days’ wages

· one to three years: 90 days’ wages

· three to six years: 180 days’ wages

· six to 10 years: 240 days’ wages

· 10 years or more: 300 days’ wages

· 20 years or more: 400 days’ wages

Terminations for financial reasons, instead of performance issues, may result in additional severance pay. Employees who work at a company for six years receive 15 days’ salary for each year worked. The maximum amount they can receive is 360 days’ salary.

Payroll and Taxes

Employers are required to pay into Thailand’s national social security fund. These taxes support employees with medical care, childcare, unemployment benefits, disability, or childbirth. This fund provides retirement pensions and aid with funeral costs.

These social benefits comprise 5% of the employee’s salary from both parties. Another tax to know about is Thailand’s corporate tax, which is usually around 20% of the employee’s salary.

Income tax rates in Thailand range from 0% for the lowest-earning employees to 35% for those earning over 4,000,001 Baht. All taxes must be reported to the Thailand Revenue Department. Businesses must also provide payslips for each pay period, with payroll records kept for at least 7 years.

Wages and Working Hours

Work-life balance is an important part of recruitment when you hire in Thailand. Thai law establishes regular working hours of eight per day and 48 hours per week. A standard working week must not exceed six days.

The total amount of overtime must not exceed 36 hours per week. An employee who works overtime on a regular workday is entitled to one and a half times regular pay. Work on a holiday is paid at twice the normal rate, and overtime work on a holiday at three times the normal rate.

Effective October 1, 2022, the daily minimum wage varies by province from 328 baht to 354 baht.

Time Off Requirements

After one year of employment, an employee is entitled to take at least six days per year of paid annual leave. Employers may grant additional vacation time in subsequent years. Without offering that, you may miss recruiting top-tier talent for your business. The leave typically carries into the following year if it is unused.

In addition to vacation time, Thailand workers may also the following types of leave:

· National service leave

· Training or exam leave

· Family planning leave

· Compassionate leave

· Hospitalization leave

· Marriage leave

· Hajj pilgrimage leave

· Monkhood leave

Employers will also need to provide their Thai employees with 30 days of paid sick leave, which is separate from vacation leave. If an employee gets sick or injured at work, they can take time off without using their sick leave.

Maternity leave is another area to be aware of. Pregnant employees can take 98 days of paid leave, with the company funding 45 days and the social security fund paying 45 days. The remaining eight days are unpaid unless the employer chooses voluntarily to pay for it. Paternity leave is up to the discretion of the employer.

Furthermore, Thailand also has 13 paid public holidays, and Songkran lasts for three days, making it 15.

The costs of international hiring include much more than a worker’s salary. Companies will need to anticipate the compliance factors, legal requirements, benefits packages, and more. We have listed just a few of the direct and indirect hiring costs you should plan for:

· Recruitment efforts

· Vetting qualified candidates

· Payroll and taxes

· Competitive salary compensation

· Benefit packages

· Bonuses and incentives

· Insurance

· Legal entity establishment

· Outsourced vendors

Thailand’s unemployment rate for 2022 was 0.86%, a 0.13% decline from 2021. This will increase the cost for companies to hire in Thailand. They will have to offer higher salaries to attract workers away from their current jobs.

To improve your chances of hiring top talent, you must offer employment packages that stand out from the competition. For instance, 13-month bonuses are optional, but companies provide this as a customary benefit to show appreciation. For sales employees, it is common to offer generous commission structures instead of these bonuses.

Consider also offering additional health insurance coverage for the Thai market. Private employees, civil servants, and other Thai nationals are covered by a three-tiered universal healthcare system. This provides free medical care. However, by offering additional health insurance, workers can gain access to higher-quality care and facilities.

Many employers also offer a type of retirement savings plan called provident funds. Employees can deposit pre-tax earnings into a fund they can access at retirement or termination. They can save a portion of their salary, usually between 2%-15%, with the employer matching that amount.

Hiring employees in Thailand can be a time-consuming and challenging process, especially for companies setting up their own entities. Businesses need to decide their company structure, develop a budget, and adhere to all the legal requirements. Incorporation in Thailand has become tough because of the Foreign Business Act, which restricts international operations. With that said, here are some tips on how to hire in Thailand.

1. Use the local language and currency

Even if your employees know English, communicate in Thai with them. This is particularly important when drafting employment contracts or offer letters. All monetary figures for these documents should be in Thai baht. This will help your new hires feel welcome and comfortable as they begin their job tasks.

2. Use popular employment websites

Your business can leverage popular job boards like LinkedIn, JobThai.com, JobsDB.com, and JotTopGun.com if you do not have a huge recruitment budget. However, it is important to note that because of the low unemployment rate, this strategy may take more time to find the right hire.

Additionally, the descriptions on your listing should clearly outline the benefits, salary, and advantages of working for your company.

3. Create structured and established processes

Making a positive and professional impression is critical for the recruitment process. From recruitment to onboarding, your business should have a noticeably clear structure and processes for new hires. An onboarding plan will help new global employees integrate with the team and learn the ropes.

An effective plan will start before the employee ever starts their first day of work. Use technology to your advantage so you can schedule your interviews quickly and save time for other important initiatives.

4. Use a Global PEO Provider

Global PEO Services, a Safeguard Global company, is constantly monitoring international HR trends for businesses. We help companies expand globally without setting up legal entities or dealing with related talent acquisition, HR, benefits, payroll, tax, and compliance issues.

Hire employees fast, test new markets, and respond to growing business needs quickly while leaving the compliance and operational burden to us. With our Professional Employer Organization (PEO) or Employer of Record (EOR) services, you get full control. All without taking on legal entity liabilities, contractor risks, or sacrificing talent and speed to market.