What Severance Pay Rules Must Employers Follow in Thailand?

Which Employees Qualify for Severance Pay?

• Employees terminated by your company without cause as defined under the Labour Protection Act are generally entitled to statutory severance.
• Employees on indefinite or fixed-term contracts qualify if they have completed at least 120 days of continuous service and are not dismissed for a lawful cause that disqualifies severance.
• Fixed-term employees are entitled to severance if the contract ends early or if the term expires but the arrangement does not meet the narrow statutory exemption for fixed-term work.
• Employees who resign due to serious breach by the employer (constructive dismissal) may claim severance if a labour court treats the resignation as unfair termination.
• Employees are not entitled to severance if dismissed for specified gross misconduct, such as intentional criminal acts against the employer, serious dishonesty, or willful violation of work rules causing serious damage.
• Probationary employees with less than 120 days of service, true freelancers, and independent contractors do not qualify for statutory severance.

What Are the Legal Timelines for Paying Severance?

Under Thai law, severance must be paid on the effective termination date, together with all outstanding wages and other statutory payments. In practice, you should prepare the calculation and supporting documents before the last working day so payment can be made immediately. If the employee is not physically present, arrange bank transfer on the termination date and keep proof of payment. Any delay can be treated as non-payment of wages, exposing your company to legal claims and potential criminal liability. Where there is a dispute about the amount, you should still pay the undisputed portion on time while documenting the basis for any difference.

What Penalties Apply if Severance Is Not Paid Correctly?

Failing to pay severance correctly in Thailand can lead to labour inspections, employee complaints, and court orders for back pay. Courts can award statutory severance, additional damages, and interest, and responsible directors or managers may face criminal fines for non-compliance. Disputes are typically handled through the Labour Inspector or Labour Court, and your company will need clear records to defend its position.

• You may be ordered to pay unpaid severance plus up to 15 percent annual interest.
• Labour courts can award additional compensation for unfair termination in serious cases.
• Criminal fines can be imposed on the company and responsible officers for willful non-payment.
• Non-compliance can trigger inspections and closer scrutiny of your broader HR practices.
• Disputes and adverse judgments can damage your employer brand and make hiring harder.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as a provider found via https://www.playroll.com/employer-of-record does not remove the underlying obligation to comply with Thai severance rules. In most EOR models, the EOR is the legal employer on paper and is directly responsible for calculating and paying statutory severance. However, your company usually bears the economic cost under the commercial agreement and may be pursued if the arrangement is viewed as disguised employment. Thai authorities and courts will look at the real control and benefit of the work to determine who is effectively the employer. You should ensure your EOR contract clearly allocates severance responsibilities, funding, and cooperation in case of disputes.

Be 100 Percent Compliant in Offering Severance with Playroll

Thailand’s severance framework is structured around clear service-based tiers, but applying them correctly can still be tricky when you factor in allowances, variable pay, and complex termination scenarios. Playroll helps your team interpret the Labour Protection Act in practice, so you know when severance is triggered, which earnings count as “wages,” and how to handle resignations, mutual separations, and performance terminations. With localized guidance, you can standardize your internal checklists and avoid last-minute surprises on an employee’s final day.

Beyond calculations, Playroll’s Employer of Record and global payroll solutions help you document each step of the termination process, from notice letters to final payslips and bank transfer proof. Your company gets consistent workflows, audit-ready records, and real-time support when a termination becomes sensitive or contested. That means fewer disputes, faster resolutions, and a much lower risk of fines or reputational damage in the Thai market.