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February 3, 2017

Thailand Introduces New Minimum Wage Rates for 2017

Bangkok Post, Corporate Counsellor Column

The minimum wage in Thailand has been driven—both theoretically and historically—by the cost of living, inflation, and work efficiency, which often vary from province to province.

The government, through the Ministry of Interior, first passed legal measures to regulate the minimum wage for workers in Thailand in 1972. Consideration was made to the cost of living, standard of living, cost of goods production, business capacity, and the economic and social conditions applicable to specific local geographical areas.

Minimum Wage Rate

In 1998, the term “Minimum Wage Rate” was included in the definition section of the Labor Protection Act for the first time. Section 5 of the Act defines “Minimum Wage Rate” as the minimum rate of wages determined by the Wage Committee under this Act.

While a formal legal definition of Minimum Wage Rate has not yet been set, the Wage Committee in 2016 applied the rationale of “a sufficient wage rate for a worker to develop skills to enable such worker to have a livelihood that is appropriate to his or her economic and social conditions, and to have a standard of living that matches with local business capacity” to determine the applicable minimum wage rate, pursuant to the explanatory notes to the Notice of the Wage Committee titled “Minimum Wage Rate (No. 8).” The term “per day” means seven hours for work that endangers the health and safety of employees, and eight hours for all other work.

The national minimum wage rate that was established in 2013, whereby all workers would be granted a uniform wage rate of THB 300 (approximately USD 8.50) per day regardless of the province in which they were employed, came to an end earlier this year.

Provincial Variation

According to the “Minimum Wage Rate (No. 8)” Notice, which came into effect on January 1, 2017, Thailand’s minimum wage system will now vary from province to province, similar to the pre-2013 national minimum wage system. The main reason behind the change was to support the standard of living of workers residing in major cities, such as Bangkok, where the cost of living is comparatively higher. The 2017 minimum wage rate system has been adjusted to match the cost of living, inflation, and work efficiency in each individual province. This marks the first minimum wage adjustments since 2013.

The table shows the minimum wage rates applicable to each province. An employer is prohibited from paying a wage that is lower than these minimum wages to an employee.

Skilled Labor

In accordance with the National Wage Committee’s Notification on Wage Rates for Skilled Workers According to Skills Standards (No. 6) on January 24, 2017, “Skilled Workers” are entitled to higher minimum wages, effective April 24, 2017.

For specific professions, the minimum wage rates will range between THB 370 and THB 600 per day, depending on the worker’s skill level. These professions include mechanical drawing technicians, tungsten inert gas (TIG) welders for mechanical and metal work, transmission technicians, hydraulic technicians, cooler and air conditioning pipe welders, large air conditioner technicians, air conditioner assemblers, small cooling room technicians, auto-milling machine technicians, electrical discharge machine (EDM) and wire-cut EDM technicians, and mold polishers.

Penalties for Noncompliance

Employers who fail to pay the minimum wage rates prescribed under the law may face an imprisonment term of up of six months, or a fine not exceeding THB 100,000, or both. It is important for employers to be aware of the relevant minimum legal requirements with regard to wages, and when these will take effect, in order to avoid punishment for failing to fulfill their duties.

Overall, the new minimum wage rates for both unskilled and skilled workers signal the Thai government’s strategy to progressively move the Thai labor force up the value chain. However, it is important that the government also continues to ensure that Thailand maintains the key elements of affordability and price attractiveness in its labor force, particularly within Asean, in order to secure and solidify Thailand’s position as a manufacturing hub and country of choice for investors.

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