Thursday, August 26, 2010

Labour Law in Thailand

Obtaining a good understanding of Labour Law in Thailand is important when managing a business. There are hundreds of examples of small businesses that have had trouble with employees and ex employees simply because they did not understand or adhere to Labour Law requirements.

Here are some of the more basic parts of the Labour Law that all business owners and managers in Thailand should understand, and are based primarily on the Labour Relations Act 1975 and the Labour Protection Act 1998.

Firstly, you need 4 Thai staff earning minimum salary in order to obtain a work permit.

Social welfare
All staff salaries are deducted 5% (up to Baht 750/month) for the purpose of social welfare. This then provides basic medical benefits for employees at selected hospitals.

Any organisation with more than 6 Thai staff needs to provide employment contracts, rules and regulations and also to put public holidays and an organisation structure on a public notice board. Procedures for utilising leave days should also be posted.

All employees are subject to a 3 month probation period, during which they can be terminated at any time without severance being due. This 3 month period can be extended by 30 days, but this must be notified in writing. Upon passing or failing probation, you must notify an employee in writing.

An employee contract can be terminated for any of the following reasons:

1. Resignation by giving appropriate notice – a minimum of 30 days notice is required for full time staff (although this may be longer if outlined in the Employee’s Contract i.e. for senior management position, but does not need to be more than 90 days), and resignation must be via written notice. Resignation by email, telephone or SMS will not be considered formal resignation.
2. Dismissal for misconduct / negligence resulting in damage to the organisation.
3. Death
4. Termination as per the terms and conditions outlined in the employment contract, specific to each employee and position.
5. Physical or mental disability as examined and certified by the Organisation’s doctor.
6. Retirement at the age of fifty five, subject to a review by at the sole discretion of the Organisation.
7. Provision of false or misleading information on the employee application or in any document / form submitted by the employee to the Organisation.
8. Termination due to organisation re-structure / budgetary issues, or for the introduction of machinery that reduces the need for human labour.
9. Imprisonment of the employee

Severance must be paid to terminated employees as follows:
1. An employee who has completed 90-120-days of service (probation) but less than a year is entitled to severance pay equivalent to thirty-days of current wage/basic only.
2. An employee who has completed one-year of service but less than three years is entitled to severance pay equivalent to ninety-days of current wage/basic only.
3. An employee who has completed three-years of service but less than six years is entitled to severance pay equivalent to one hundred eighty-days of current wage/basic only.
4. An employee who has completed six-years of service but less than ten years is entitled to severance pay equivalent to two hundred forty-days of current wage basic salary only.
5. An employee who has completed ten-years of service is entitled to severance pay equivalent to three hundred-days of current wage/basic salary only.
6. If the organisation undertakes a relocation of their work location, the employee has the right to refuse assignment at the new location and claim 50% of the customary severance for not-for-cause dismissal. The organisation must also provide 30 days written notice of the impending move.

NO severance will be due to an employee if they have been terminated for the reasons below:
1. Committing an intentional criminal offense against the Organisation.
2. Willful damage to the Organisation – equipment, relationships, business or brand.
3. Serious damage caused to the Organisation because of his negligence and carelessness.
4. Violation of professional rules and regulations or the legal and reasonable orders of the Organisation in spite of written warning given to him/her (with the exception of a very serious damage caused, the Organisation has no need to give a warning). All written warnings will remain on record and in effect not longer than one year from the date of violation, and can be removed sooner in accordance with the performance of the recipient.
5. Unreasonable failure to report for duty to the appropriate senior manager / supervisor as assigned for three consecutive days not including public holidays or days-off.
6. Criminal conviction and receiving final judgment for imprisonment with the exception negligence and misdemeanor.

Working hours and leave

Employees may not be asked to work longer than 48 hours per week, and 6 days per week, or less for jobs defined as dangerous. Working restrictions also exist for pregnant employees.

A wife variety of leave days can be utilised by employees in Thailand, including up to 30 days per year for medical leave. If an employee takes 3 days or more consecutively for medical leave, you may ask to ass a doctors certificate. Additionally, employees are permitted personal leave to handle government issues, and a minimum of 6 days per year annual leave once they have completed a year of employment. Other sources of leave are also permitted relating to monkhood, military service and others.

Additionally, a  minimum of 13 public holidays per year must be granted to employees, selected from the standard list.

All managers and owners are encouraged to learn about Thailand Labour Law, and to incorporate strict HR practices at their organisation. A good source of this structure is the Thailand HR Suite, who provide HR templates for businesses in Thailand.

Written by Stuart Blott, General Manager, Fusion Business Concepts - Member of the Sutlet Group

Thursday, August 5, 2010

Cost effective ways to run your HR function Thailand

Whilst many may view Thailand as a low cost country when it comes to HR, the reality is that it is all relative. Yes, staff wages here are much lower than western countries, but as an SME we often earn revenues that are lower than our western counterparts. As such, the need to run an efficient HR department/function is just as important here in Thailand as in other countries. We’ll focus our attention on recruitment, systems and retention.

Utilising the large recruitment firms in Thailand is an expensive endeavour and primarily designed for the larger organisations here. As such, as an SME, the best option for recruitment is to utilise the plethora of online recruitment tools available in Thailand; this is by far the easiest and most cost effective manner in which to obtain applications. But which online tools are the best, and how should they be utilised to achieve the best possible results? Ideal for recruiting middle and senior-level staff and – ideal for recruiting lower and middle-level staff

The above job websites offer excellent rates when advertising multiple positions simultaneously, costing as little as Baht 2,000/position. Contact them and ask for their latest promotional rates.

Job boards such as provide a good opportunity to recruit part time staff and/or lower level staff.

The problem with posting job advertisements online is that because these systems are so user friendly, applicants can literally apply for anything they search for with the click of a button. This results in your inbox being filled with applications that sometimes are completely irrelevant to your advertisement or from applicants who have not really read the job description and who are therefore unsuitable for the position. To minimise these problems:
  • Really think about the position you want to fill. As a small business, you may find it necessary, and cost-effective, to combine responsibilities from several roles in to one i.e. HR / Office Manager, Marketing / Customer Service Manager, Accounting / Finance Manager.
  • Determine what attributes and skills are most important for you, and write the job description keeping these in mind. Focus on job skills and attitude, and try not to be too demanding when it comes to skills that you can easily teach or train.
  • If you are advertising a position that requires good English skills, post the job in English only and ignore any resumes that arrive in Thai.
  • If there are specific skills that are very important, emphasis these immediately in your posting. You want to discourage applicants who do not meet your minimum requirements.
  • If you are recruiting on a budget, list the salary prominently, but refer to the engaging corporate culture and opportunities for growth (discussed below).
  • Refer to your employee benefit program and opportunities for growth (see below)

The other benefit to using job websites are that most packages will allow you to then search their database of candidates via a simple login. You can then submit requests to people if you wish to see their resume; this can be useful when building a database of prospective candidates for current or future positions.

University recruitment – if you require low cost/entry level employees with a degree, approach a university. Often they will allow you to post a notice about an internship or full time position if it is suitable for their students.

Internal HR systems
There are various ways to ensure your organisation is more cost effective when it comes to HR, and they are all related to maximizing the efficiency of your employees and your systems.

Inefficient systems cost you money. Whilst it is not as obvious as other costs, having your staff working at 60% capacity means that you are wasting 40 % of your wage bill. Now, that seems like something that needs to be addressed! So, what can be done:
  • Get involved: Review your team roles, job descriptions and daily activities, Begin daily morning meetings where teams explain what they are doing that particular day. Your involvement as the owner/senior manager will begin the process of improving efficiency.
  • Get organised: Launch employee rules and regulations, contracts, IT policies, time sheets, job sheets and others to confirm job roles and provide monitoring tools. All these dual language templates, and more, can be purchased from the Thailand HR Suite.
  • Demand accountability: Begin formal appraisals, ask for weekly and monthly reports, ensure that progress is monitored and communicated. Your goal is to ensure that when staff are given a task they KNOW that you’ll be asking about it when it is due, not that it can be forgotten.
  • Launch a warning system: Employees should know that if they break the newly established rules or are underperforming, there are consequences. This should take the form of a simple warning process whereby you following these steps when an employee; formal verbal warning, formal written warning, second formal written warning, dismissal. Warnings should be recorded in employee files and stored for 12 months maximum. Warnings should be clear and steps to improve performance should be presented clearly, and signed by the employee. As an added benefit, dismissal in this way will reduce the chances of having to pay severance. 
Retention and benefits
Retention is a key issue for SME’s in Thailand. Preventing that top sales person from defecting to a bigger, multinational competitor is a tough task, but not an impossible one. How can an SME on a budget provide employees with suitable benefits, with the goal of retaining their top team members?
  • Launch an employee benefits program: your team need to know that they mean something to the organisation. This can be done cost effectively. Key is to improve benefits as employees are promoted, and in line with their time at the organisation.
  • Be creative with your benefits program: you don’t need top of the line health care, pension plans and champagne at staff birthday parties. Here are the types of benefits you should be offering:
  1. Company pays for lunch on Friday
  2. Everyone leaves work early on Friday
  3. All staff birthdays include a card signed by all employees, and cake
  4. Staff trips are organised every year – remember, in Thailand this does not have to cost a fortune. A couple of minibuses, a trip to a waterfall or beach, lunch and some dinner can easily be done by under Baht 700/person with a little bit of planning.
  5. Basic annual bonus plan: equivalent of 3% of monthly salary goes in to a savings account and is paid as a bonus at the end of the year.
  6. Pay mobile expenses for employees that need it for business purposes
  7. Provide basic health insurance for middle/senior staff; basic plans from AIA start from just Baht 2,500/year/person.
  8. Launch employee of the month and employee of the year awards – be creative with what these might be. For employee of the year, Baht 5,000 cash is great, but a return flight to Chiang Mai, free hotel night and some spending money is much more exciting
  9. Make staff loans available at fair interest rates
  10. Get yourself on training company email lists and look out for cost effective programs –send your staff on training where required. Some government sponsored courses can be as cheap as Baht 3,000 for 4 days! This is valuable for your employees AND for your organisation as these new skills are applied to operations.
  11. Increase annual leave over time as employees are with you longer.
  12. Have sit down meetings with employees to discuss potential growth within the organisation, and your expectations of them before they can achieve this.
  • Follow through with your benefit program and budget accordingly. Don’t miss an employee of the month award! Do not forget staff bonuses or a staff trip! Your commitment to the program will sell it as much as the 12 items above; it must be something you do willingly and gladly, not begrudgingly.

It is entirely possible in Thailand to cost-effectively recruit, manage and retain excellent teams and HR systems. Taking a little more time, and being a little creative, will save you money and result in a more productive and efficient team. 

Written by Stuart Blott, General Manager, Sutlet Group Co., Ltd

Welcome to Thailand HR

Thailand HR aims to provide an online resource for all issues related to HR in Thailand. Over the coming months and years we will explore HR practices, trends, ideas and problems and then present solutions and views from a range of experts. Importantly, all articles and content posted here will relate specifically to Thailand and, where possible, will take in to account local knowledge, regulations and nuances.

Thailand HR is produced by Fusion Business Concepts, a leading provider of HR services in Thailand, and a Member of the Sutlet Group. To learn more about business in Thailand, don't forget to check out these informative blogs:

Thai Biz 101
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