Terminating Employees in Thailand: Legal Grounds, Severance and Risks

Terminating an employee in Thailand involves more than issuing a termination letter and calculating statutory severance. Employers must consider notice requirements, the employee's length of service, the legal grounds for dismissal, outstanding payments, and the possibility of an unfair dismissal claim.

The Labour Protection Act B.E. 2541 (1998), as amended, establishes minimum employment protections that employers must observe. A dismissal may trigger several separate obligations, and satisfying one does not necessarily eliminate the others. For example, paying statutory severance does not automatically prevent an employee from challenging the fairness of the dismissal before the Labour Court.

For employers operating in Thailand, a structured termination process can help control legal exposure, reduce disputes, and ensure that the decision is supported by appropriate documentation.

1. When Can an Employer Terminate an Employee?

Thai law does not generally require an employer to establish one of the specific serious grounds listed in Section 119 of the Labour Protection Act before ending every employment relationship. However, the reason for termination can materially affect severance entitlement, notice obligations, and the risk of an unfair dismissal claim.

Employers should distinguish between three questions:

• Is the employer legally entitled to terminate the employment relationship in the circumstances?
• What statutory payments are due when the employment ends?
• Could the employee challenge the dismissal as unfair or otherwise unlawful?

These questions are related but separate.

For example, an employer may decide to dismiss an employee because of poor performance. That decision does not automatically qualify as a ground for withholding statutory severance under Section 119. Unless a valid statutory exception applies, the employer may still owe severance and notice-related payments.

Similarly, a genuine business restructuring may provide a legitimate commercial reason to reduce headcount, but the employer must still comply with applicable payment and procedural requirements.

Practical recommendation: Identify the actual reason for termination before preparing the termination letter. Assess the legal consequences of that reason rather than assuming that the employer's internal classification of the dismissal determines its legal effect.

2. Notice of Termination and Payment in Lieu of Notice

Notice requirements are separate from statutory severance.

For an employment contract of indefinite duration, Section 17 of the Labour Protection Act generally allows either party to terminate the contract by giving written notice at or before a wage payment date, with the termination taking effect on the following wage payment date. The applicable notice period is subject to statutory limits and the terms of the employment arrangement.

An employer may, where permitted by law, terminate the employment immediately by paying wages in lieu of notice for the relevant period.

The precise calculation depends on the employee's wage arrangements, the contract, the timing of notice, and the applicable statutory provisions. Employers should not automatically assume that one calendar month's salary is sufficient in every case.

Before issuing notice, the employer should review:

• Whether the employment contract is for a fixed or indefinite term.
• The contractual notice provision and the employee's wage payment cycle.
• Whether immediate termination is intended.
• The amount of payment in lieu of notice, if applicable.
• Whether a statutory exception affects the notice obligation.

A contractual notice clause should not be treated as permission to disregard mandatory legal requirements.

Probationary employees

Probation does not automatically exempt an employer from Thai employment protection laws.

A probationary employee may still be protected by statutory notice and severance provisions, depending on the circumstances and length of service. Employers should therefore assess the actual employment relationship rather than assuming that termination during probation carries no financial consequences.

3. Statutory Severance Pay in Thailand

Under Section 118 of the Labour Protection Act, an employee who satisfies the statutory service requirement will generally be entitled to severance when employment is terminated, unless a valid exception applies.

The ordinary statutory severance rates are based on the employee's continuous period of service.

The calculation is based on the applicable statutory definition of wages and the employee's relevant wage rate. It should not automatically be based on total compensation, including every allowance, reimbursement, bonus, or benefit.

Whether a particular payment forms part of the statutory wage calculation depends on its nature and the relevant legal principles.

Example: An employee with seven years of continuous service falls within the 240-day severance tier. If the employee's relevant monthly wage is THB 60,000 and that amount is the appropriate wage basis, the illustrative severance calculation would be:

THB 60,000 × 240 ÷ 30 = THB 480,000.

This is an illustration only. The actual calculation must reflect the employee's wage structure, service history, and applicable law.

Employers should also check whether the employee has prior periods of service that must be counted, particularly where employment has been renewed, interrupted, transferred, or restructured.

4. When Can an Employer Terminate Without Statutory Severance?

Section 119 of the Labour Protection Act sets out specific circumstances in which an employer may terminate an employee without paying statutory severance.

These include:

1. Dishonest performance of duties or an intentional criminal offence against the employer.
2. Intentionally causing damage to the employer.
3. Gross negligence that causes serious damage to the employer.
4. Violation of lawful and fair work rules, regulations, or orders after a written warning, subject to the statutory exception for serious cases.
5. Abandonment of duties for three consecutive working days without reasonable cause, whether or not intervening holidays occur.
6. Imprisonment under a final judgment, subject to the statutory qualification applicable to offences committed through negligence or petty offences.

These exceptions should be interpreted carefully. An employer cannot simply label conduct as misconduct and assume that the statutory severance exemption applies.

For example, poor performance, failure to meet a sales target, or disagreement with a supervisor does not automatically constitute one of the grounds listed in Section 119.

Where the employer intends to rely on a written warning, it should verify that the warning satisfies the applicable legal requirements, addresses the relevant conduct, and remains effective under the statutory rules.

The importance of the termination letter

Section 119 also imposes a critical requirement: if the employer intends to rely on a statutory ground to withhold severance, the facts constituting that ground must be stated in the termination letter or communicated to the employee at the time of termination.

If the employer fails to do so, it may be prohibited from raising that ground later.

A termination letter that merely states “misconduct,” “poor performance,” or “breach of company policy” may therefore be inadequate where the employer intends to rely on Section 119.

The employer should identify the relevant conduct accurately and ensure that the stated reason is consistent with the evidence. This does not mean that every allegation belongs in the letter; rather, the letter should be legally sufficient and factually supportable.

5. Can an Employee Claim Unfair Dismissal Even After Receiving Severance?

Yes. Payment of statutory severance does not automatically eliminate the risk of an unfair dismissal claim.

Under Section 49 of the Act on the Establishment of Labour Courts and Labour Court Procedure B.E. 2522 (1979), the Labour Court may award damages or order reinstatement in an unfair dismissal case, subject to the applicable legal framework and the court's assessment.

Thai law does not treat every dismissal as unfair simply because the employee disagrees with the decision. However, a court may consider the circumstances of the dismissal, the employer's reasons, the employee's conduct and service history, and other relevant facts.

Potential risk factors include:

• Termination without a reasonable or supportable explanation.
• Inconsistent treatment of employees in comparable circumstances.
• A stated reason that conflicts with contemporaneous records.
• Retaliation for exercising a protected legal right or raising a legitimate workplace complaint.
• Discriminatory treatment or other unlawful conduct.
• A dismissal process that is inconsistent with applicable law, contractual commitments, or the employer's own relevant rules.

There is no universal formula that allows an employer to calculate unfair dismissal exposure solely from length of service or monthly salary.

The legal and financial risk should therefore be assessed independently of the statutory severance calculation.

6. Termination Due to Restructuring or Redundancy

Employers may need to reduce headcount because of economic conditions, changes in business strategy, automation, or organisational restructuring.

A genuine commercial rationale is relevant, but it does not automatically remove the employer's statutory obligations.

Depending on the circumstances, ordinary severance, notice-related payments, and other outstanding entitlements may be payable. Additional statutory obligations may also arise in certain relocation or technology-related redundancy situations.

For example, Sections 120–122 of the Labour Protection Act address special severance and related requirements in specified circumstances involving relocation or certain business restructuring associated with machinery or technology changes.

The exact requirements depend on the type of change, the statutory conditions, the number of affected employees where relevant, and the procedures that apply.

Before implementing a restructuring, the employer should determine whether the proposed action falls within any special statutory regime and whether advance notification, consultation, or additional payments are required.

A general announcement that a role has become redundant is not a substitute for this assessment.

7. Fixed-Term Contracts and Non-Renewal

Employers sometimes assume that a fixed-term employment contract can end without severance simply because the stated expiry date has arrived.

That assumption is unsafe.

Under Thai law, expiry of an employment contract may still constitute termination for statutory severance purposes. The exception for certain fixed-term employment arrangements is narrow and subject to statutory conditions.

Broadly, the exception concerns specified project work outside the employer's normal business, occasional work, or seasonal work that must be completed within the relevant statutory period, with the agreement made in writing at the beginning of employment and the other statutory requirements satisfied.

A fixed-term label alone does not establish entitlement to the exception.

Employers should examine the actual nature of the work, whether it falls within the statutory categories, the agreed duration, the written contract, and whether the arrangement complies with all applicable conditions.

Where a fixed-term contract is used for ordinary ongoing business operations, or where the statutory conditions are not satisfied, severance may still be payable.

The employer should also assess the consequences of terminating the contract before its agreed expiry date, including any contractual or statutory liability.

8. What Payments Should Be Reviewed When Employment Ends?

Severance is only one part of the termination calculation.

Depending on the circumstances, an employer may need to assess the following:

Payment in lieu of notice: Payable where the employer terminates immediately without giving the notice required by law.

Statutory severance: Calculated according to the employee's qualifying continuous service and relevant wage rate, unless a valid statutory exception applies.

Outstanding wages and other earned amounts: Salary, overtime, holiday pay, commissions, or other amounts may remain due, depending on the applicable law, contractual terms, and facts.

Unused annual leave: Payment may be due for unused annual leave under the applicable statutory provisions. The calculation can differ depending on the reason employment ends and the type of leave entitlement.

Special severance: Additional payments may be required in certain statutory restructuring or relocation situations.

Potential unfair dismissal damages: A separate exposure that may arise if the dismissal is found to be unfair.

These categories should not be treated as automatically payable in identical circumstances. Each must be assessed under its own legal basis and calculation rules.

Employers should also verify the applicable payment deadlines and any consequences of late payment. Delayed payment can create additional liability, including statutory interest or other consequences where provided by law.

9. Documentation and Evidence Before Dismissal

A well-prepared termination process starts before the termination letter is issued.

Employers should preserve documents relevant to the decision, including:

• The employment contract and amendments.
• Job descriptions and applicable work rules.
• Performance evaluations and records of performance discussions.
• Written warnings and evidence of prior disciplinary action.
• Relevant investigation records, where misconduct is alleged.
• Business records supporting a restructuring decision.
• Calculations of notice pay, severance, and outstanding entitlements.
• The final termination letter and evidence of delivery.
• Records of payments made to the employee.

The documents should be consistent with the stated reason for termination. Creating a justification after the decision has already been made may weaken the employer's position if the employee challenges the dismissal.

For misconduct cases, the employer should also distinguish between allegations, findings supported by evidence, and conclusions that can properly be relied on under Section 119.

For restructuring cases, the employer should retain records demonstrating the commercial rationale and the process followed.

10. A Practical Checklist for Employers

Before terminating an employee in Thailand, employers should confirm the following:

1. The reason for termination has been identified and legally assessed.
2. The contract type, length of service, and applicable notice requirements have been reviewed.
3. The employee's statutory severance entitlement has been calculated.
4. Any intended reliance on Section 119 is supported by evidence and correctly communicated.
5. Any restructuring or relocation-related obligations have been assessed.
6. Outstanding wages, leave pay, and other contractual or statutory entitlements have been calculated.
7. The termination letter accurately reflects the decision and its legal basis.
8. The relevant records are complete, consistent, and retained securely.
9. The required payments and filings will be completed within the applicable deadlines.
10. The employer has assessed the risk of an unfair dismissal claim and the available evidence.

Where the employee is senior, has long service, holds a specialised role, or is involved in a sensitive workplace dispute, a legal review before termination may be particularly important.

Conclusion

Terminating an employee in Thailand requires a structured assessment of legal grounds, notice, statutory severance, outstanding payments, and potential unfair dismissal exposure.

Employers should not assume that probationary status, fixed-term wording, payment of severance, or an internal finding of misconduct automatically resolves every legal issue. The applicable statutory conditions and the evidence supporting the decision must be examined carefully.

The termination letter is especially important where the employer intends to rely on a statutory ground for withholding severance. An otherwise supportable defence may be weakened if the employer fails to communicate the relevant facts at the legally required time.

NATTAPHAK LAW FIRM assists businesses with employment documentation, termination reviews, severance assessment, and Thai labour law compliance.

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. The legal consequences of termination depend on the employment contract, the employee's service history, the facts supporting the decision, and the law applicable at the time. A case-specific legal review should be obtained before taking action.