Severance Claim

Background - Severance Claim

Generally, employees in Thailand have the right to claim severance pay from their employer if they are terminated.

“Termination” means under the Thailand Labor Protection Act means any action by which the employer does not allow the employee to continue to work and does not pay the salary to the employee.

Persuading an employee to sign a resignation letter is a common trick used by Thailand employers to avoid having to make severance payments to employees.

Employees should be aware that they will not be entitled to severance pay if they sign a resignation even if they were in fact terminated prior to signing the resignation letter.

The following is a schedule of the amount of severance payment an employee is entitled to is based on the amount of time they have worked for the employer: 

  • 120 days or more but less than 1 year         30 days salary
  • 1 year or more but less than 3 years            90 days salary
  • 3 years or more but less than 6 years        180 days salary
  • 6 years or more but less than 10 years      240 days salary
  • 10 years but less than 20 years                   300 days salary
  • 20 years or more                                            400 days salary

Employees and employers alike are not often aware that the Thailand Revenue Code provides for a special rates of withholding tax and a 300,000 allowance on certain types of severance and wrongful termination payments.

Often employers will calculate the withholding tax on severance and wrongful termination payments incorrectly by applying the general personal income tax rate of 0 – 35% to such payments.

Application of the general personal income tax rate of 0 – 35% and failure to apply the 300,000 Baht allowance almost always leads to the employee being significantly overtaxed.

We highly recommend employees consult an accountant experienced in structuring and calculating termination payments especially in cases of large payments that include other income items such as stock options or pension payments.

Wrongful termination claims can also be made by employees in Thailand if you are terminated without a lawful reason.

Examples of lawful reasons for termination include the following:

  • Crime committed against employer;
  • Intentional act causing employer to suffer damage;
  • Negligent act causing the employer to suffer damage;
  • Violation of work rules after a written warning has been issued;
  • Absence for 3 consecutive working days without a legitimate excuse;
  • Employee has been sentenced to imprisonment.

Your employer will need to cite one of the above lawful reasons in the termination letter provided to you if they want to argue such defense at the Thailand Labor Court.

The general legal standard is that an employee that is wrongfully terminated in Thailand is eligible to receive approximately 1 month of salary for each 1 year worked at their employer.

Wrongful termination claims in Thailand are paid “in addition” to the severance pay required to be paid by the employer under the Thailand Labor Protection Act.

In practice, wrongful termination is often claimed as part of a a complaint with the labor court but rarely does the Labor Court aware wrong termination.

Wrongful termination would usually only be awarded by the Labor Court where there is strong evidence of very egregious misbehavior or crimes by the employer.  

NNP Group - Scope of Service

Our severance claim service includes the following:

  • Meeting with client to discuss case.
  • Review documents and advise for chances of success.
  • Provide list of supporting documents required.
  • Summarize background facts and translate from English to Thai.
  • Prepare power of attorney to represent client at the Labor Court.
  • Accompany client to Labor Court to file complaint.
  • Attending Labor Court hearings.
  • Negotiating with employer’s counsel.
  • Filing necessary motions.
  • Follow up until judgment.
  • Correspondence by email, telephone and in person meetings when necessary.