Terminating an employee in Thailand: the costly traps beyond severance

01The basic structure of severance

Ending an employment relationship in Thailand has predictable costs, provided you know which sum you are working out. The surprises we see are almost never “severe pay is higher than we thought”. They are “we assumed we did not have to pay, and we did”.

Statutory severance is banded by continuous length of service: the longer the service, the higher the band, expressed as a number of days of wages. How many bands there are and how many days each one carries is a question for the current text of the Labour Protection Act B.E. 2541 — and there is something worth noting here. The second-hand translations in circulation do not agree with one another. Some of them describe severance on ordinary dismissal; others describe the special additional rules for redundancy caused by machinery or technology upgrading, or by business restructuring. The two are structured differently and cannot be mixed.

Before you budget a redundancy, go back to the statute in force and confirm which set applies. Do not copy day counts out of any second-hand table.

That is our habit on questions of this kind: set out the structure, and leave the day counts to advisers checking the current official text. On a redundancy calculation involving real money, working from a table of unknown provenance costs more than the time it saves.

02Trap one: retirement counts as dismissal

This is the item Chinese-invested companies most often leave out of the sum. On a Thai law firm's reading of the case law, an employee's retirement is treated in law as dismissal and triggers statutory severance — whether retirement was agreed between the parties, set by the employer's own work rules, or requested by the employee.

So the reasoning “he chose to retire, we did not dismiss him” does not hold here. Where the employee gives notice of retirement, it takes effect once the statutory period has run from that notice, and the employer pays severance on that basis.

For manufacturing clients this feeds straight into the cost of two groups: plant management approaching retirement age, and long-serving technical staff. That money belongs in the budget in advance, not on the day someone hands in a letter.

03Trap two: re-hiring makes severance grow back

Two related rules come out of the same case law.

• Working on past retirement age means the employment was never interrupted. Where an employee keeps working for the same employer past the agreed retirement age and has never received severance, the employment is treated as continuous and unbroken. On eventual termination, severance is calculated on the whole length of service, at the final wage. So “leave the retirement unprocessed and let him keep working” is not a saving. It moves the bill later and settles it at a higher wage.
• Re-hiring someone who has already been paid severance grows a fresh entitlement. Where the new contract then runs continuously for a certain period, the employer owes statutory severance again when that contract ends, calculated on the wage under it.

There is also a boundary that gets missed. Where the employer's work rules set a retirement age but the employee was hired after he had already passed that age, the retirement rule does not apply to him, and he cannot claim severance on that basis. That has practical bearing on arrangements such as taking on a consultant who retired somewhere else.

04Trap three: the fixed-term exemption is far narrower than people assume

Many companies assume that a one-year contract, simply not renewed, carries no severance. To be exempt, a fixed-term contract has to meet every condition at once: the work must be a specific project, or temporary or seasonal work, and must not be part of the employer's ordinary business; the total term must not exceed the statutory limit; and the written contract must state the end date from the outset, with no extension clause.

Then the sentence that matters more: even where the form is entirely correct, a court may still order the employer to pay severance if the employee was in fact doing the same work as regular staff. The exemption is judged on the substance of the work, not on the drafting of the contract. Using fixed-term contracts across a workforce to keep severance off the books does not work in Thailand.

05How to keep this under control

• Build a single headcount cost sheet. For each employee: joining date, continuous service, current wage, years remaining to retirement age, and the potential severance exposure under the rules in force. It belongs next to the manpower budget, not in an HR folder on its own.
• Open retirement conversations a year out. Retirement, re-hiring and moving someone onto a consultant arrangement differ considerably in cost and in legal effect; deciding at the last minute usually leaves only the most expensive of them.
• Before a redundancy, confirm which set of rules applies. Ordinary dismissal, and redundancy driven by technology upgrading or business restructuring, carry different notice obligations and a different compensation structure.

What your own employment structure, contract forms and exposure actually add up to has to be checked item by item against the payroll roster, the contract texts and what each role does in practice. The time to run that check is before the annual manpower budget or a decision on the production line, not after it.

Two neighbouring pages sit alongside this one: the baseline on employment, work permits and social security in Thailand, and the new employment costs in 2025–2026.