Understanding Payroll in Thailand: What Global Companies Need to Know About Thailand Payroll System

Oct 17, 2017  | Topic: Country Payroll

Thailand is studded with natural beauty everywhere you turn. The jungles and wildlife make it a tourist haven, as do the elaborate temples and friendly people. Thailand even hosts a Buffet for Monkeys every year in Lopburi Province as a way of saying thank you to its simian native residents. The country has managed to pull itself up financially with the help of exports like electrical components, car parts, and textiles.

With a GDP of around $670 billion, Thailand is the second largest economy in Southeast Asia. The emerging economy is helping the unemployment rate plummet; however, businesses who want to come to Thailand and set up their international payroll will find a somewhat uneven landscape. The country was ranked in the top 50 of World Bank's Ease of Doing Business Survey, though certain industries may find it easier to conduct business than others. 

Business Basics

Registering a business requires establishing a legal entity in the country first, which can take up to two months. Organizations must put together a Memorandum of Association and have it approved by the Partnerships and Companies Registration Office, the Department of Business Development, and the Ministry of Commerce. If more than 49% of all shares are held by foreign interest, the company will need to follow rules set out in Thailand's Foreign Business Act.

Businesses do not need to open an in-country bank account to process  . Most companies choose to form a limited company, which is subject to Civil and Commercial Code. Once their MOA is approved, company leadership will need to fill out a Declaration of Business form and provide Articles of Association and a list of shareholders. It should be noted that large businesses with several branches are seen as one unit by Thai law. This means the head office will be liable for any litigation against the local Thai branch. 

Employment Law & Employee Rights

The Thai work week is usually Monday through Friday from 8:30 a.m. to 5:30 p.m., with a half day on Saturday. The maximum amount of working hours is 48 per week. Although working on Saturday is normal, most businesses won't call formal meetings on that day. Rest periods are normally an hour unless otherwise discussed. Overtime compensation varies based on the day and number of hours worked. Any hours beyond the standard eight on a normal workday are paid at 150% of the employee’s base hourly rate. A shift of up to eight hours worked on a holiday or day off is compensated at 200% of the base rate, and work beyond eight hours on a holiday or day off is paid at 300% of the base hourly rate.

Written contracts in Thailand are not required, but they are heavily encouraged. Even if no written documentation is provided, employer and employee are considered to have a contract between them. Collective bargaining is not usually practiced in Thailand, though it's not prohibited. While it is unusual to see labor unions, there are many social groups advocating for better treatment of all workers in the country.

Payroll Assessment

Compensation & Severance

The currency in Thailand is the Thai baht, and minimum wage is currently 305 baht per day—an all-time high that was reached in 2017. The Thai people usually get paid once a month, and this can be done either in cash or through bank transfer.  

Employees will expect approximately 30 days of notice for termination, though it is not mandated. Unless an employee committed criminal activity or gross incompetence to their organization, they can expect severance. Severance compensation depends on the time served, with employees who worked between six and 12 months receiving 30 days of severance, those who worked between one and three years receiving 90 days of compensation, and so on. 

Tax Requirements & Withholding

Tax law in Thailand is fairly straightforward. Income is taxed on a progressive scale, from 0% for those making less than 150,000 baht a year up to 35% for workers making more than 4 million baht annually. Taxes are generally withheld from salaries before payment. Social security rates are 5% for both employee and employer, due at the middle of every month. The corporate tax rate is 30%, though this may be lowered for certain industries. In addition, payroll regulations stipulate employers will need to contribute to a workmen compensation fund. 

Companies making more than 1.8 million baht a year will need to register for VAT through the Revenue Department. Additionally, if a company has a head office outside of Thailand but a branch office in Thailand, they will need to pay tax on all transactions in Thailand whether or not the Thai branch was involved. 

Time Off & Paid Leave

Thai workers are entitled to six days off after working with a company for a year. Typically Thai people will take their days off throughout the year, as opposed to going on a lengthy holiday. In addition, there are 13 national holidays in the country. New mothers are entitled to 45 days of pay but can take up to 90 days off. Up to 30 days of sick leave are allowed each year. In addition, employees may take personal leave to attend to important matters, such as an ill parent. Employers are responsible for paying employees during time off. 

Date  Thailand's Public Holiday Schedule
 January 1st  New Year's Day
 February - dates vary depending on the   lunar cycle  Makha Bucha Day
 April 6th  Chakri Day
 April 13th  Songkran/Thai New Year
 May 1st  Labor Day
 May - dates vary depending on the lunar   cycle  Visakha Bucha Day
 July - dates vary depending on the lunar   cycle  Asahka Bucha Day
 July 28th  H.M. King's Birthday
 August 12th  H.M. Queen's Birthday
 October 13th  The Passing of King Bhumibol
 October 23rd   Chulalongkorn Day
 October 26th  Public Holiday
 December 5th  King Bhumibol's Birthday
 December 11th  Constitution Day
 December 31st  New Year's Eve

An Exotic Option

Thailand has a lot to offer multinational organizations, even beyond its stunning natural beauty. It can be an excellent place for your business, but it does present a few complexities when it comes to managing financial aspects of the business, including global payroll. It can help to have a payroll solution on your side before you even get started. 

This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.