Thailand is one of the most attractive countries for sourcing high-quality IT professionals. The attractive labour costs compared to Western countries, growing technological infrastructure and a unique blend of Asian work culture make it a conducive destination for global companies looking to expand their workforce beyond borders.
The proposed Thailand 4.0 Policy has plans to promote science, technology, innovation and digitalisation in product development. The science and technology workforce was more than 2 million in 2021.
The country also boasts business-friendly laws and liberal trade policies, a definite magnet for foreign investments. It is also a country with one of the lowest employer taxation rates. Moreover, its strategic location in Asia, coupled with its efforts to digitise product development and innovation, positions Thailand as a key player in the international business landscape.
If you, too, are considering outsourcing your IT talent needs from this Southeast Asian nation, you need to research the local laws and compliance requirements. Hiring in Thailand has several benefits and our in-depth blog will give you all the details about employer requirements.
But before we get into the hiring specifics, let us know some key facts about the country. As a foreign employer, it is essential to know details about the native language, currency, business environment and taxation.
Key Facts About Thailand
Things Employers must know about Hiring in Thailand
Whenever hiring from a foreign country, employers must be attentive to its labour laws, regulations and necessary compliance. That is precisely because contract agreements, payroll taxes, employee benefits, etc, differ from country to country. For hiring in Thailand, you must be aware of the following:
Labour Laws of Thailand
The Labour Protection Act B.E. 2541 (1998) and its subsequent amendments regulate the labour landscape in Thailand. Employers should know the below provisions from the law before hiring from Thailand.
Labour Contracts
In Thailand, verbal and written employment contracts are permissible. As a foreign employer, it is recommended to have a written contract that specifies all the terms of employment. This prevents any scope for misunderstandings in the future.
Thailand has two types of contracts:
- Indefinite contract: This is an open-ended contract with no time limit. It does not stipulate an end date. The employment engagement continues until the employer or employee decides to terminate it. A notice period is liable if the employee works for more than 120 days.
- Definite term: This contract is signed with a definite contract period specifying a start and end date. It is usually signed for two years and also includes the probation period.
Working Hours
In Thailand, the working hours are 8 hours daily, including a one-hour break during the day. It follows a standard of 48 hours per week. Employees should have at least one day off in a week.
Minimum Wages
Daily wages in Thailand differ among its provinces. At present, the daily minimum wage in Thailand ranges from 328 baht (US $9.10) in the provinces of Narathiwat, Yala and Pattani to 354 baht (US $9.80) in the provinces of Phuket, Rayong and Chonburi.
Payroll Cycle
Thailand follows a monthly payment cycle. The employer can decide the payment date, but it should be mentioned in the employment contract.
Employee Benefits and Social Security
Every employer must familiarise themselves with the employee benefits and social security measures drafted by the local government of a country.
Leaves
Employees who have worked continuously for a year are entitled to 6 days of paid annual leave. Whether these leaves lapse or can be accumulated and carried forward depends on the employer's and employee's agreement.
Under the Labour Protection Act, Thai employees are legally entitled to leave with pay for various different types of leave, like:
- Public holidays: There are 13 major public holidays in Thailand.
- Sick leaves: Maximum of 30 days per year. Leave for more than 3 consecutive days requires a medical certificate.
- Personal leaves: 3 paid personal business leaves per annum.
- National service leave: Male employees who are called to service in the military or participate in such exercises must receive full salaries for this leave. It should not exceed 60 days in a year.
- Family planning leaves: Employees can take paid leave if they are undergoing medical sterilisation procedures.
- Maternity leave: 90 days of leave per pregnancy, but the pay is for 45 days.
Overtime
Overtime cannot exceed 36 hours per week. The compensation depends on which days the employee works overtime:
Regular weekday: 1.5x of the standard hourly rate
Weekend: 2x of the standard hourly rate
Public holiday: 3x of the standard hourly rate
Termination
An employer wishing to terminate an employee immediately without notice can do so if they have a legal cause like:
- Gross negligence
- Dishonest performance
- Intentional acts or causing damages to the employer
- Serious violations of the company’s rules
For dismissal without legal cause, prior notice of 1 month should be given to the employee.
Social Security
Thailand’s social security system comprises mandatory contributions in health, disability, work injury, unemployment and death. Employers must register their employees with the Social Security Fund (SSF). Both employers and employees make equal contributions every month as stated:
As per these, the total employment cost behind per employee is 5.20-6%, one of the lowest payroll costs in comparison to other countries.
Taxation
Companies in Thailand are taxed on total income. The corporate tax rate is 20%. For companies that have low paid-in capital below 5 million baht, the taxes are subject to the following:
Value-added tax (VAT)
The standard VAT is levied on the sale of goods and services. It is currently reduced from 10% to 7% until September 2024. The export rate is zero-rated and services like transport services, goods sold within customs-free zones are exempted.
Business Culture in Thailand
Did you know Thailand is often called the “Land of Smiles?” This is because a smile goes beyond a mere recognition of one another, but has more interpersonal messaging. Such little nuances of a specific region are important to learn before doing business or hiring talent. Here are some business etiquette rules followed in Thailand:
- Greetings: Thai people generally raise their hands to greet one another. The gesture is called wai. While handshakes are appropriate, Thais do not embrace each other as greetings.
- Small Talk: People are more comfortable with small talk rather than being too frank about things. They prefer an indirect approach to resolving issues and avoid getting into major arguments. In this case, conflict resolutions may take some time.
- Hierarchy: Thailand respects hierarchies and team leaders. So when meeting with new people for business, clearly establish your role and position in the company.
- Dress code: Business attire in Thailand is conservative. Dark colours should be avoided.
A foreign company may have Western management concepts, but when hiring in Thailand, respect their cultural and religious beliefs.
Compliance Risks in Thailand
A survey conducted by Nikkei Research & Consulting in Thailand found European/American companies (71%) putting more emphasis on corporate compliance in the country. It is a good sign that foreign companies necessitate local compliance.
Here's an overview of the key compliance risks associated with hiring in Thailand:
1. Social Security and Taxation: Employers must register their employees with the Thai social security system and make monthly contributions. Additionally, withholding and remitting employee income tax is a crucial compliance aspect. Failure to comply with these regulations can result in penalties and interest on unpaid amounts.
2. Data Protection and Privacy: Thailand's Personal Data Protection Act (PDPA) imposes obligations on collecting, using and protecting personal data. Employers must ensure they have lawful reasons for processing employees' personal data. In such a case, the employee must be notified and adequate data protection measures should be in place.
3. Discrimination Laws: Thai labour laws also prohibit discrimination in the workforce based on race, gender, religion or nationality. When hiring in Thailand, ensure you are fair and non-discriminatory in your candidate selection. Violations can lead to legal challenges and harm to the company's brand.
4. Intellectual Property Rights: Ensuring that employees do not infringe upon intellectual property rights during their employment, especially in roles involving research, development or creative work is crucial. Employers should have clear policies and agreements in place to protect intellectual property.
5. Auditing: All companies, partnerships, joint ventures and branches of foreign companies in Thailand must be prepared for annual audits. They must prepare financial statements for their assigned accounting period to the Ministry of Commerce. Failure to comply with audit-related laws may result in a penalty of up to 100,000 baht (US$2,848).
Understanding and addressing these compliance risks proactively ensures a smooth and lawful operation in Thailand for foreign companies.
Hiring in Thailand Vs. Hiring in India
Thailand does provide many cost-effective benefits for hiring talent, with low labour costs and payroll taxes. But another bright market for IT talent is India. Here are some benefits for foreign companies that rely on India for their tech professionals.
Language Barriers: India has a significant advantage in terms of language proficiency, especially when it comes to English. It is the second-largest English-speaking country in the world, with a vast population fluent in English, making communication much easier with foreign employers. In Thailand, English proficiency is limited outside major cities and tourist areas. It is found to be the lowest in Thailand, which requires a translator to avoid misunderstandings.
Rental Prices: The cost of setting up an office or business operations can vary significantly between countries. Thailand, particularly Bangkok, has seen a surge in rental prices for commercial properties. In contrast, India offers a wide range of options from metropolitan cities to tier-2 and tier-3 cities, where rental costs are considerably lower.
Economic Growth: India has one of the fastest-growing economies in the world, driven by a mix of services, manufacturing and technology sectors. This growth is supported by government reforms, a young and vibrant workforce and increasing foreign investment. India's scale and pace of economic development provide businesses with a dynamic market environment and expansion opportunities. While Thailand also offers economic opportunities, India's economy's scale and diversity are currently unmatched.
Talent Availability: India boasts a large, diverse and highly skilled workforce. With a strong education system, particularly in engineering, technology and business management, India produces millions of graduates each year suited for global recruitment. The availability of a vast talent pool makes India a global hub for IT outsourcing. This contrasts with Thailand, where the talent pool is smaller and may not offer the same depth in certain sectors, particularly in high-tech and knowledge-intensive industries.
Trust Rapid To Simplify Hiring in India
If you're convinced about hiring from India, turn to Rapid EOR. Over 20 years of experience in the dynamic Indian market has given us unparalleled insights into the challenges and opportunities of recruiting here.
We offer services to cater to the unique needs of a diverse workforce, offering tailored contracts that meet your specific business objectives and address customised employee benefits. Rapid EOR guarantees that your operations remain compliant with India's intricate regulatory landscape, a critical aspect of doing business there. With our comprehensive HR platform and dedicated team managing the administration and payroll, we ensure seamless HR operations for your business.
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