You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

June 5, 2018

New Retirement Regime for Thai Private Sector Employees

Subscribe to Updates
Bangkok Post, Human Resources Watch Column

As Thailand gradually transforms into an ageing society, the potential economic and social burden of retiring workers is one issue that is likely to be on the minds of many employees, employers, and policymakers.

New amendments to Thailand’s Labor Protection Act have addressed this issue by introducing a retirement regime for the Thai private sector employees, placing severance obligations on employers, enhancing protection for employees, and creating a more effective framework for enforcement of labour laws.

The new Labor Protection Act (No. 6) B.E. 2560 (2017) was published in the Government Gazette on August 31, 2017, and came into effect on September 1, 2017, amending the previous Act. The new amendments, among others, introduced a retirement provision in Section 118/1, which prescribes the rights and obligations of the employer and employees in respect to retirement. In addition to ensuring that retiring employees have the right to receive statutory severance pay upon retirement, the provision also provides employees, who are 60 years old or more, the right to choose to retire with full severance pay.

Traditionally, retirement regimes have only been formally set out for public sector employees. For example, the Government Pension Act B.E. 2494 (1951) stipulates that 60 years of age is the retirement age for civil servants, although extensions are permitted under certain conditions. Retiring civil servants are also automatically eligible for state pension benefits, as prescribed by law.

In contrast, the previous Labour Protection Act B.E. 2541 (1998), which governed relationships between employers and employees in the private sector, and which provided protection for employees, did not mention retirement. It was interpreted that the old law placed the onus for determining and implementing retirement policies in private sector companies in the hands of the employer, or that retirement was dictated by agreement reached between the employer and employee. Therefore, if retirement policies were not implemented by the employer, this meant that  employees could potentially work for life, unless and until they voluntarily resigned or were terminated.

Working for life could be beneficial for some employees, but conversely, this arrangement would be disadvantageous for those employees who wished to end their employment at a certain age. Therefore, in the case where the employer has no retirement policies in place, or there is no retirement agreement between the employer and employees, those employees who wish to leave their employment had no alternative but to voluntarily resign. Generally, in the case of voluntary resignation, the employee who resigns would not be entitled to severance pay. Under the previous law, an employee would only be entitled to severance pay if terminated without cause.

Prior to the enactment of the new Labor Protection Act (No.6) B.E. 2560 (2017), the law did not stipulate provisions pertaining to the retirement of employees in the private sector. Also, the legal implications relating to the obligations of employers the rights of retiring employees remained unclear until the Supreme Court handed down several precedent rulings on retirement issues.

Supreme Court Rulings on Retirement

Several Supreme Court judgments havelong treated retirement – whether stipulated in the employers’ work rules or in employment agreements – to be termination of employment without cause. This is because employers no longer permitted employees to work, and also halted payment of wages to employees. As a result, the retiring employees were entitled to statutory severance pay. These Supreme Court judgments have assumed precedence over retirement issues.

New Retirement Regime for Private Sector Employees

Section 118/1 of the new Labor Protection Act (No. 6), B.E. 2560 (2017) seems to be a codification of the Supreme Court’s judgements and states the following:

“Retirement, according to the agreement between the employer and the employee, or as predetermined by the employer, shall be deemed as a termination of employment, in accordance with Section 118, paragraph 2. In cases where the retirement age has not been stipulated, or it has been stipulated so that it exceeds 60 years of age, the employee, who is 60 years old, may express their intention to retire to the employer. Such retirement shall be effective within 30 days from the date of such expression, and the employer shall pay severance to the employee in accordance with Section 118.”

Section 118/1 can be summarized as follows:

  • Retirement is deemed to be termination of employment, and the retiring employees are entitled to severance pay under Section 118.
  • If the employer has a retirement policy, or the employer agrees with the employee on retirement and the age of retirement, both parties are required to comply with such policy or agreement. However, the law does not prohibit both parties from agreeing otherwise, such as an extension for retirement or a renewal of employment.
  • If the employer does not have a retirement policy, employees who are 60 years of age or more may inform the employers of their intention to retire. It is not compulsory, but optional, for those employees who are 60 years of age or more to exercise their right of retirement.
  • Similar to no. 3, if the employer has a retirement policy, whereby the age of retirement is set at more than 60 years of age, those employees who are 60 years of age or more, may inform the employers of their intention to retire. It is not compulsory, but optional, for those employees who are 60 years of age or more to exercise this right of retirement.
  • The intention of the employee to retire will become effective 30 days after the date on which the employee informs their employer.

Under Section 118/1, employers still have the freedom to unilaterally determine and implement their retirement polices, or alternatively, to negotiate and mutually agree on retirement with their employees. Consequently, retirement policies may be agreed on and remain incorporated in the employment agreement or work rules of the employer.

In addition to codifying the court judgments, the new amendments to the retirement regime provide substantial benefits for employees in terms of the right to retirement, and the right to severance pay upon retirement. Significantly, employees are no longer faced with the possibility that they may need to work for life without the right to severance pay, as under the new amendments, they are entitled to conclude their professional lives, with the comfort of knowing that they have the right to severance pay simply by exercising their right to retire under the employers’ retirement policies, and in accordance with the law.

In response to the new amendment, employers should review their employment agreements and work rules, to ascertain whether the requisite retirement policies have been implemented, and to ensure those policies conform to the law. Moreover, employers may also need to securely set aside sufficient internal reserve funds in preparation for employee retirement.

Download Full Article
Related Professionals

Practices

Employment

Location

RELATED INSIGHTS​ 

February 22, 2021
Following the recent imposition of sanctions on Myanmar individuals and companies by the US, the UK and Canada have now imposed new sanctions. As with the US sanctions, these new measures impact UK and Canadian citizens and companies, and non-UK and non-Canadian companies and citizens with interests in those jurisdictions. The EU has indicated that it is planning to issue similar sanctions in the near future. New UK Sanctions In addition to the 16 individuals already sanctioned by the UK government, on February 18, 2021, the UK government announced that three individuals have been sanctioned for serious human rights violations and are now subject to asset freezes and travel bans. The full list of Myanmar individuals and companies sanctioned by the UK is available on the website of the Office of Financial Sanctions Implementation. Breaches of UK financial sanctions are criminal offences punishable in the UK by up to 7 years imprisonment and heavy fines. New Canadian Sanctions Also on February 18, timed to coincide with the UK sanctions, new Canadian sanctions were imposed on nine individuals. As with the UK, Canada already had a number of individuals in the Myanmar military on its sanctions list, and the new additions bring the total number of individuals sanctioned by Canada to 54. All assets of these individuals in Canada are now frozen, and they are banned from travelling to Canada. Canadian businesses or entities may not do business with any of the 54 individuals. Full details of the impact of the sanctions are available on the Government of Canada’s website, as is a database of the Myanmar individuals and companies subject to them. Breach of Canadian sanctions carries with it up to 5 years’ imprisonment in Canada and/or a large fine. Other Countries The EU is reportedly drawing up sanctions
Read More
January 26, 2021
On January 1, 2021, the government of Vietnam issued Decree No. 152/2020/ND-CP dated December 30, 2020, providing guidance concerning foreigners working in Vietnam (Decree 152). Foreign investors and expatriates should be aware of some notable new points.
Read More
January 12, 2021
Due to the resurgence of the COVID-19 pandemic in Thailand since December, 2020, Thailand’s Ministry of Labor recently published two regulations under the Social Security Act (SSA) in the Government Gazette: The Regulation on Entitlement to Compensatory Benefits in the Event of Unemployment Due to Force Majeure from the Pandemic of Dangerous Communicable Disease Under Relevant Law Relating to Communicable Diseases B.E. 2563 (2020) (the Force Majeure Regulation); and The Regulation on Determination of the Amount of Contributions to the Social Security Funds B.E. 2563 (2020) (the SSF Contribution Regulation). Details of the two regulations are provided below. The Force Majeure Regulation This regulation is similar to a previous regulation from April, 2020, during the first wave of the pandemic, stating that the definition of force majeure under the Social Security Act B.E. 2533 (1990) (the SSA) includes hazards from pandemics of dangerous communicable diseases (including COVID-19). This definition therefore affords protection to insured persons (i.e., employees) in the event that the COVID-19 pandemic results in their being unable to work, or their employers being unable to operate their business normally. This regulation allows the Social Security Office (SSO) to pay compensation to employees who: are insured persons who qualify to receive compensatory benefit in case of unemployment in accordance with the SSA; have to cease working temporarily during the period from December 19, 2020 onwards; and do not receive wages from their employer during the temporary cessation. This applies only if the circumstances above result from the following force majeure events related to hazards from COVID-19 (or other pandemics of dangerous communicable diseases that affect the public under the Communicable Diseases Act B.E. 2558 (2015)): The employee cannot work, or the employer does not allow the employee to work, because of quarantine or to comply with a COVID-19
Read More
November 3, 2020
Many Thai and international companies have expanded rapidly into Myanmar in recent years, in what had seemed to be an unstoppable expansion of cross-border trade resulting from the country’s emergence back onto the global stage. For those companies, the COVID-19 situation in Myanmar has been a cause for much concern and uncertainty—doubly so for those who had hired staff in the jurisdiction, as a lack of clarity regarding their obligations as employers was compounded by a lack of information on the situation on the ground.
Read More