Hiring in Thailand: severance pay and social security costs

01Termination is not just paying out the final wages: the severance ladder

The two costs Chinese-invested factories in Thailand most often underestimate are the lump sum paid out on termination and the contributions that run every month. Thai labour rules have been amended heavily over the past two years — an amendment to the Labour Protection Act took effect at the end of 2025, and the social security bases went up from 2026 — so budgeting and withholding on the old figures is an easy way to cross the line.

Under the Labour Protection Act B.E. 2541, a termination without fault on the employee's side carries severance by length of service: 30 days' wages at 120 days or more but under one year, 90 days at one to three years, 180 days at three to six years, 240 days at six to ten years, 300 days at ten to twenty years, and 400 days' wages at twenty years or more.

• Retirement counts as termination. Retirement by agreement, and retirement at the employee's own request (which takes effect 30 days after notice), are both treated as termination and trigger severance. If a retired employee is re-engaged and the new contract runs a continuous 120 days, severance falls due again when that contract ends.
• The fixed-term exemption is narrow. To fall outside severance, the work must be a specific project, temporary or seasonal, and outside the ordinary business; the total term must not exceed two years; and the contract must be in writing, state the end date, and carry no extension clause. Every one of those has to hold. The courts look at what the work actually is, not at the label on the contract.

02Social security and statutory contributions: do not use the old base from 2026

An employee has to be registered for social security on hire, and employer and employee each declare and pay 5% of wages every month. From 1 January 2026 the bases change: the minimum base is THB 1,650 a month, and the maximum base rises from THB 15,000 in three steps — THB 17,500 for 2026 to 2028 (a monthly ceiling of THB 875 each), THB 20,000 for 2029 to 2031, and THB 23,000 from 2032. Withholding against the old ceiling of THB 750 is now a breach.

• Employee Welfare Fund (EWF). In force from 1 October 2025. Employers with 10 or more employees must join, and an existing provident fund (PVD) exempts you. Employer and employee each contribute 0.25%, rising to 0.5% from October 2030. Both the contribution and the change form for employees who leave are due by the 15th of the following month, and late payment carries a further 5% per month.
• Annual employment report. An employer with 10 or more employees must file an annual employment report with the labour authority each January. This has moved from reporting only when inspected to a filing you owe whether or not anyone asks.

03Leave entitlements were raised at the end of 2025

Amendment No. 9, in force on 7 December 2025: maternity leave rises from 98 days to a maximum of 120 days, of which the employer pays for up to 60; paternity leave of 15 days on full pay is new; and where a newborn has complications, up to 15 days of post-natal childcare leave is available at 50% of wages. Paid sick leave stays capped at 30 working days a year, and an employee with one year of service is entitled to no fewer than 6 days of paid annual leave. An employee handbook written to the old figures is already out of date.

04Staff posted in from China: the thresholds are high, and BOI is the way around them

A foreign national needs a work permit for almost any kind of work in Thailand. For a company without BOI promotion, each foreign employee generally requires THB 2 million of registered capital and four Thai employees; a holder of a Chinese passport is also subject to a minimum salary threshold of THB 35,000 a month. A BOI-promoted company is exempt from those ratios and gets shorter processing times — one of the practical reasons many factories go for BOI first. See whether a wholly foreign-owned project can get BOI.

Since September 2025 the labour authority has run a digital work permit system, and applications can be submitted online.

05What has to be checked before any of this goes into a budget

Note. The days and rates above are compiled from the announcements in force at the date of writing. Retrenchment for particular reasons, such as machinery or technology upgrading, carries its own notice and compensation rules. Go by the official rules current at the time.

Severance exposure, the social security base and the foreign-to-Thai headcount ratio come out differently at every factory — they turn on the contract wording, the wage structure, and whether you hold a BOI approval. Before any of it goes into a budget, our advisers have to work through your contracts, your payroll and your approval documents item by item. See also monthly tax compliance.