What You Owe When You Dismiss an Employee in Thailand
Most employers in Thailand think of dismissal cost as one number. Your bookkeeper asks what the severance is, you look up the table, you pay it, and you assume the file is closed.
It is not one number. Thai law gives a dismissed employee up to four separate money claims, and they come from three different statutes. You can pay the severance correctly and still lose a case over the other three. Employers who get surprised in the Labour Court are almost never surprised by the severance table. They are surprised by what sits next to it.
Here is each head of claim, where it comes from, and where employers lose money on it.
1. Severance pay under Section 118
Severance is the payment you owe simply because you ended the employment. It is not a penalty and it does not depend on fault. If the employee did nothing wrong and you dismissed them, you owe it.
The rate depends only on length of continuous service.
| Continuous service | Severance you owe |
|---|---|
| 120 days but less than 1 year | 30 days at the last wage rate |
| 1 year but less than 3 years | 90 days |
| 3 years but less than 6 years | 180 days |
| 6 years but less than 10 years | 240 days |
| 10 years but less than 20 years | 300 days |
| 20 years or more | 400 days |
Three things about this table cost employers money.
The base is wider than salary. Severance is calculated on “wages”, and wages means what you pay in return for work during normal working hours. That includes pay calculated by output. If your salesperson earns a salary plus a sales commission that is tied to work done in normal hours, both parts go into the base (judgment 4625/2559). What stays out is genuine welfare. A hardship allowance and a housing allowance paid only while the employee works out of province, and stopped when they come back to the office, are welfare and not wages (judgment 2660/2556). Get this line wrong and you underpay by twenty percent while believing you paid in full.
Service means unbroken service. The clock runs from the first day the employee worked for you until the contract actually ends, with no gap. If the earlier contract genuinely ended and the relationship restarted later, you do not add the two periods together unless you agreed to add them or a statute says you must (judgment 3081/2567). The reverse also catches employers. If an employee reaches your retirement age and you let them keep working and keep paying them, you have not dismissed anyone. You have extended the retirement individually. When you later dismiss them, the service clock runs all the way back to the original start date (judgment 3114/2567).
A fixed-term contract rarely saves you. Section 118 does not apply to a genuine fixed term, but the exception is narrow. It only covers a specific project outside your normal business, occasional work with a set end, or seasonal work. The work must finish within two years and the contract must be in writing from the start of the employment. Rolling a two-year contract three times over a hotel advertising manager does not qualify, because advertising a hotel is the hotel’s normal business (judgment 4111/2564). Worse, if your fixed-term contract lets either side terminate early on notice, the term is not fixed at all and the exception disappears (judgment 6144/2555).
Retirement counts as a dismissal under Section 118/1, so severance is due at retirement. And if you set no retirement age, or you set one above sixty, an employee who reaches sixty can give you notice and retire with severance thirty days later. That is the employee’s right, not yours.
2. Payment in lieu of notice
This is a different bill from a different statute. Section 17 of the Labour Protection Act, read with Section 582 of the Civil and Commercial Code, says that to end an indefinite contract you give written notice at or before a wage payment date, and the termination takes effect on the next wage payment date. You never have to give more than three months.
If you want the employee off the premises today, you can do that. Section 17 lets you pay the wages that would have run to the notice date and release them immediately. Section 17/1 then requires you to pay that money on the day they leave.
Two traps here.
The period is measured to your next wage payment date, not in calendar months. In one case an employer gave notice on 29 July and the next payment date was 15 August, so the notice pay was eighteen days (judgment 2660/2556). Employers who pay a flat month sometimes overpay and sometimes underpay.
A probation contract is an indefinite contract. Section 17 says so in terms. There is no free dismissal window at day 89 or day 119. If you end a probation and the employee has passed 120 days, you owe severance as well.
You do not owe notice pay if you dismiss under Section 119 of the Labour Protection Act or Section 583 of the Civil and Commercial Code. Those are the misconduct grounds.
3. Special severance
Two situations carry extra payments on top of ordinary severance, and both are triggered by a notice failure rather than by unfairness.
Relocation, Section 120. If you move a workplace, you must post a clear notice where employees can see it, continuously, for at least thirty days before the move. The notice must say who moves, where, and when. If you skip that notice, an employee who does not want to move gets thirty days’ wages as special severance in place of notice. An employee who says the move seriously affects their normal life or their family, and gives you that in writing within thirty days, can treat the contract as ended on the move date and claim special severance at no less than the Section 118 rate. You have seven days from the end of the contract to pay. If you disagree with their reasons, you must file with the Labour Welfare Committee within thirty days of their letter. Employers who simply ignore the letter lose by default.
Machinery and technology, Section 121. If you cut headcount because you changed machinery or technology, you must notify the labour inspector and the affected employees at least sixty days ahead, with the reason and the names. Miss that and you owe sixty days’ wages as special severance in place of notice, on top of ordinary severance. The good news is that paying it also discharges your notice obligation under the Civil and Commercial Code.
Section 122 then adds more. Where a Section 121 dismissal hits an employee with more than six years of service, you owe a further fifteen days’ wages for each completed year, capped so that the total under that section does not exceed 360 days’ wages. Any part-year over 180 days counts as a full year.
4. Damages for unfair dismissal
This is the claim employers understand least, because it is not in the Labour Protection Act at all. It sits in Section 49 of the Act for the Establishment of Labour Courts and Labour Court Procedure B.E. 2522.
Section 49 works differently from everything above. If the Labour Court decides your dismissal was unfair to the employee, the court’s first remedy is to order you to take the employee back at the same wage. Only if the court thinks the two of you can no longer work together does it fix a sum of money instead.
When the court fixes that sum, the statute tells it what to weigh. The employee’s age. Their length of service. The hardship the dismissal caused them. The reason you dismissed them. And the severance they are already entitled to.
Notice what is not on that list. There is no formula, no multiplier and no cap. The number is the court’s discretion applied to those five factors, which is why two employers with identical severance exposure can end up with very different damages.
Notice also what “unfair” means here. It is a separate question from whether you owed severance. You can pay severance in full, in time, and still be held to have dismissed unfairly. And you can win on unfairness while still owing severance, which is exactly what happened in judgment 3306/2567, where the court found the dismissal had proper cause but still ordered severance because the misconduct was not serious enough to remove the right to it.
Only the Labour Court can award this. A labour inspector has no power to order it (judgment 8335/2560). That matters for how a claim against you is likely to arrive, and post 2 in this series covers it.
When you owe nothing
Section 119 lists the six grounds on which you owe no severance at all. Dishonesty in duty or an intentional criminal offence against you. Intentionally causing you damage. Gross negligence causing you serious damage. Breaching your lawful and fair work rules or orders after a written warning, or without any warning if the case is serious. Abandoning duty for three consecutive working days without proper reason. And a final prison sentence.
The written warning in ground four is valid for one year from the date of the employee’s act, not from the date you wrote it.
Whether a breach is “serious” is decided case by case on what actually happened, not by what your work rules call it. Your rules do not have to label an offence as serious for a court to find that it was (judgments 13894/2555 and 9042/2559). In 9042/2559 an engineer drank alcohol while on duty at an oil drilling rig, and the court found a serious breach on the nature of the work and the risk, whatever the rule book said. The test the court applies is how much damage the breach did or risked, to you, to other employees, to the workplace and to public order.
That cuts both ways. In 3306/2567 a regional manager fined her own subordinates in small amounts under a staff meeting resolution, when the work rules listed seven penalties and no fine among them. The employer’s own investigation showed she took nothing for herself. The court held the breach was not serious, so a written warning was required first, and because none had ever been issued the employer owed severance.
Then there is the trap in the last paragraph of Section 119, which decides more cases than any other sentence in the Act. If you dismiss without severance and you do not set out the facts of the reason in the termination letter, or tell the employee the reason at the time of dismissal, you cannot raise that reason later. Not in the inspector’s investigation, not in court. Employers who write “your employment is terminated effective today” and nothing more have given away every misconduct defence they had.
Interest and the surcharge
Section 118 severance falls due on the dismissal date. When you do not pay, Section 9 charges you interest at fifteen percent per year for the period of default, running from that date. Annual leave pay under Section 67 falls due three days after dismissal under Section 70, so its interest starts on the fourth day. The Supreme Court applied exactly that split in 3306/2567.
Section 9 has a second paragraph employers rarely read. If you intentionally fail to pay without reasonable cause, then once seven days have passed from the due date you also owe a surcharge of fifteen percent of the unpaid amount for every further seven days. That compounds fast. You can stop both the interest and the surcharge by depositing the money with the Director-General for the employee.
Section 70 also sets the deadline that catches careless payroll. On a dismissal, every sum you owe under the Act must reach the employee within three days.
A worked example
Take an employee on 30,000 baht a month plus a monthly sales commission averaging 10,000 baht, paid on the last day of each month, with two years and four months of service. You dismiss on 12 March for poor performance, with no written warning on file, and you write a termination letter that gives no reason.
Severance sits in the one-to-three-year band, so 90 days. The base includes the commission because it is tied to work in normal hours, so you are calculating on 40,000 a month and not 30,000.
Notice pay runs from 12 March to the next wage payment date, which is 31 March.
Annual leave accrued and not taken is payable pro rata, because poor performance is not a Section 119 ground.
Your Section 119 defence is gone twice over. Poor performance is not one of the six grounds anyway, and your letter gave no reason, so the last paragraph of Section 119 shuts the door.
If the employee also claims unfair dismissal, the court weighs the five Section 49 factors and fixes whatever figure it thinks right, on top of everything above.
Interest at fifteen percent runs on the severance from 12 March.
What actually protects an employer
None of this is about paying less. The employers who come through a labour dispute cheaply are the ones whose paperwork was already correct before anything went wrong.
Your work rules have to exist, be lawful and fair, and set out your disciplinary steps. Your warning letters have to state the specific act and tell the employee not to repeat it, or they are not warning letters at all. Your termination letter has to carry the factual reason. Your payroll has to know which allowances are wages and which are welfare. And you have to decide whether to dismiss promptly, because an employer who learns of serious misconduct and then keeps the employee working for weeks has a harder time arguing the misconduct was serious.
Every one of those is a document. All of them are cheaper to fix before a dismissal than to argue after one.
Where to get this checked
We act for employers. If you are about to dismiss someone, or you have had a letter from a labour inspector, send us the employment contract, the work rules, any warning letters and the termination letter. Those five documents decide most cases.
Aphiwat Bualoi Law Office Co., Ltd., Chiang Mai. Write to aphiwat@aphiwatlaw.com.
This post explains the law in general terms and is not advice on your situation.
Aphiwat Bualoi Law Office 
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