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

September 5, 2014

Subcontracted Workers and Employer Liability

Bangkok Post, Corporate Counsellor Column

Businesses in Thailand, particularly manufacturers, have used workers employed as subcontractors through agreements with third parties to meet fluctuating demand, reduce labor costs, and otherwise benefit from the flexibility that subcontracted employees provide.

However, the addition of Section 11/1 of the Labor Protection Act (LPA) in 2008 and its interpretation by the Supreme Court in 2012 makes a number of significant changes to Thailand’s labor law that may expose employers using subcontractors to liability. The following article explains the current law and looks at situations where employers are likely to incur liability under Section 11/1. The goal is to raise employer awareness and thereby reduce the risk of liability resulting from subcontracted employees.

LPA Section 11/1

The LPA generally provides strong protection to employees in Thailand. Enacted in 1998, it sets the standards and employee benefit rules with which employers must comply, including those related to minimum wage, working hours, overtime pay, etc. Employer violations of the LPA carry both civil and criminal penalties, and employees have ample access to the labor courts.

Within a few years of the LPA being enacted, the Labor Ministry found that businesses were using subcontractor agreements to avoid their obligations under the Act. The ministry viewed this as an abuse resulting in an inequality between the wages and benefits of regular and subcontracted employees. In 2008, parliament amended the LPA to include Section 11/1 in an attempt to clearly define the obligations of businesses using subcontracted employees. Its aim was to protect subcontracted employees who do the same work as regular employees, where such jobs were part of the “production process or business” of the company.

LPA Section 11/1 states:

“Where an operator authorizes a person to provide personnel to work, which is not a job placement business, and such work is part of the production process or business under the responsibility of the operator, and whether or not such person will supervise the performance of work or be responsible for payment of wages to those who do such work, the operator shall be deemed the employer of those engaged to do such work.

The operator shall arrange for an employee hired for a wage who works in the same manner as an employee under a direct employment contract to, without discrimination, receive fair rights, benefits, and welfare.”

Although the addition of Section 11/1 appeared to be a clear call to businesses to change their practices, many may not have been aware of the amendment or may have believed that the benefits they provided to subcontracted employees were already “fair.”

Whatever the reason, they continued to provide different benefits and welfare to subcontracted employees, resulting in the filing of lawsuits for violations of Section 11/1. The LPA sets forth criminal liability in the form of a fine not exceeding THB 100,000 for violations of this section.

Case Study

The following example may help to clarify Section 11/1 and an employer’s obligations:

A vehicle manufacturer operating a production facility in Thailand produces each vehicle using multiple production processes. All of the processes are essential to the production of the vehicle and are thus considered part of the “production process or business” of the company. The company provides its regular employees with a Cost of Living Adjustment, a food allowance, and a transport allowance.

If this company hires a subcontractor to provide employees to work in any stage of the production, and the work is the same as that performed by its regular employees, then the subcontracted employees will be deemed employees of the company for the purposes of Section 11/1. Thus, the company must provide “fair rights, welfare, and benefits” to all subcontracted employees, without discrimination. But what does “fair” mean?

Fair Rights, Welfare, and Benefits

In 2012, the Supreme Court faced such a case. In that case, the company provided what it believed to be “fair” rights, welfare, and benefits to the subcontracted employees, but which were actually significantly less than those provided to its regular employees.

The Supreme Court ruled that the company, in order to comply with Section 11/1, must pay its subcontracted employees the same benefits and welfare as it did to its regular employees. In other words, “fair” means the “same” when it comes to providing benefits to subcontracted employees.

In conclusion, the Supreme Court’s interpretation of Section 11/1 means that subcontracted employees can no longer be used as a method for reducing labor costs, and employers utilizing subcontracted employees must be aware of their obligations in order to avoid potential claims in the future.

RELATED INSIGHTS​ 

September 2, 2025
On August 26, 2025, the Thai cabinet approved a one-year postponement of mandatory contributions to the Employee Welfare Fund. Originally scheduled to take effect on October 1, 2025, the enforcement date has been deferred to October 1, 2026. The decision to delay the implementation stems from ongoing economic uncertainties in Thailand, driven by several external and domestic factors. These include increased trade tariffs imposed by the United States, the recent rise in the national minimum wage, and continued geopolitical tensions resulting from unresolved disputes with neighboring countries. These challenges have placed significant pressure on both businesses and the labor market, prompting the government to offer temporary relief through this deferral. As a result of the postponement, the following regulations will now come into effect on October 1, 2026: Royal Decree determining the Commencement Period for Savings and Contributions to the Employee Welfare Fund; Ministerial Notification specifying the Rates of Savings and Contributions; and Ministerial Notification outlining the Criteria and Procedures for Employers to Provide Assistance in Cases of Termination of Employment or Death. The Labour Welfare Fund Committee has formally endorsed the postponement. Contribution Rates Unchanged Although the implementation has been delayed, the contribution rates remain unchanged: October 1, 2026–September 30, 2031: Employers and employees each contribute 0.25% of the employee’s wage to the fund. From October 1, 2031, onward: Contributions increase to 0.5% of the employee’s wage for both parties. All other rules and conditions concerning the Employee Welfare Fund remain in full effect.
August 29, 2025
On August 15, 2025, Laos’ Immigration Police Department introduced a pilot online arrival registration system for foreign passport holders entering the country. Under the new system, visitors to Laos will be able to register their arrival online up to three days in advance and will be exempt from filling out paper forms at the border. Starting September 1, 2025, online registrations will be accepted at four major international border checkpoints: Wattay International Airport in Vientiane, Luang Prabang International Airport, Pakse International Airport in Champasak Province, and the First Lao-Thai Friendship Bridge linking Vientiane and Nong Khai Province in Thailand. Foreign passport holders arriving in Laos from this date onward will be able to complete the online registration via the official website of the Department of Immigration: http://www.immigration.gov.la/. Upon successful registration, travelers will receive a QR code valid for three days, which must be presented to border authorities upon arrival to verify the registration. During the pilot phase, which is expected to run until early 2026, travelers who have not registered online will still have the option to complete a paper form at the checkpoint. After the pilot phase, the online registration system will become mandatory nationwide, and paper forms will no longer be accepted. This initiative marks a significant step toward modernizing Laos’ immigration procedures. Transitioning from traditional paper-based entry forms to a streamlined digital system will greatly enhance efficiency at border checkpoints. The submission of traveler information ahead of arrival is expected to drastically reduce processing times and alleviate congestion at arrival counters, especially during peak travel periods.
August 20, 2025
On August 7, 2025, the government of Vietnam promulgated Decree No. 219/2025/ND-CP on foreign workers working in Vietnam (Decree 219), introducing substantial reforms to the management of foreign employees. Taking immediate effect upon issuance, and superseding earlier regulations on foreign employees under Decree No. 152/2020/ND-CP as amended by Decree No. 70/2023/ND-CP (collectively referred to as “Decree 152”), Decree 219 sets out clear timeframes and application requirements for work permit issuance, while adopting more flexible policies to support business operations. The key new provisions are as follows: 1. Relaxed Requirements Regarding Job-Posting Under Decree 152, employers were required to follow a complex process to apply for work permits or work permit exemption certificates for foreign employees. This included posting an advertisement for any position the employer wished to fill with a foreign employee on a designated online portal for a given amount of time, to demonstrate that the company tried, but failed, to find a suitable Vietnamese candidate for the position. This job-posting step now only applies when the foreigner will work in Vietnam under a local labor contract. Foreigners coming to Vietnam as intra-corporate transferees (i.e., as secondees) or working under service contracts are exempt. The job-posting period is also reduced from 15 calendar days to five business days. Employers may also now post the advertisements on multiple websites instead of only the online portal of the Ministry of Labor, Invalids and Social Affairs (now the Ministry of Home Affairs after government restructuring) or the provincial-level employment service center. 2. Work Permit Application Dossier Previously, employers were required to complete a preapproval step, whereby they had to submit a dossier explaining their foreign labor demand that required approval from the labor authority. Once approval for the foreign labor demand was granted, the approval dossier was an integral part of
August 20, 2025
With the shift in US policy to discourage DEI programs among government and private-sector employers, some companies have been cutting back. But US companies should be cautious in eliminating their DEI programs globally, as some elements of these programs are obligations under local laws in Vietnam, Thailand, and Cambodia.