The recently approved Ministerial Regulation No. 292 amended the personal income tax exemptions on income such as money or any benefits received from the Provident Fund.

Before the amendment, the exemption was available only upon the death of the income recipient. Now it applies where an employee retires at the age of 55 or older, or where an employee retires before reaching 55 years old, but the money is retained in the fund when he/she reaches age 55.

As assessable income is exempted from inclusion for computation of income tax payment, this amendment will ensure support of an employee after retirement.

Contact MSNA’s tax advisors for personal income tax preparation and submission.

In Thailand, the employers or companies with 1 or more employees have to register and submit the social security fund to the Social Security Office. To register the employees or insured person into the Thailand social security system, the employers or an authorized person can submit the Registration Forms as follows:

1. The Employer/company Registration Form (SSO 1-01)
2. The Insured Person/employee Registration Form (SSO 1-03)

Note that for the employers whose head offices are in Bangkok, the Registration Forms have to be submitted at the Social Security Office area 1-7. For the employers whose head offices are in the provincial area, the Registration Forms have to be submitted at the Provincial Social Security Office where their head offices are located.

Registration forms must be submitted to the Social Security Office within 30 days from the date on which the employee has started working with the company otherwise an employer shall be liable to imprisonment for a term of not exceeding 6 months or to a fine of not more than 20,000 Baht, or both.

In case the number of employees is increased, the employer has to submit a new employee Registration Form if the employee has never received social security card before. When an employee left the company, the employer has to submit the application to take out his/her name from the social security system. When the employer changed any information such as office address or company name, application to change information must be submitted to the respective Zone Office of Social Security not later than the 15^th day of the following month in which the change has taken place. If any wrong information is given, it can affect the rights and benefits of the registered insured persons.

Contact MSNA for consultation on Thai labor law and assistance in Thailand social security registration.

Today, we answer some questions concerning employee benefits in Thailand.

Questions:

We are about to start our business operation so we would like to know your comments on our proposed compensation and benefits that we will give to our employees:

1. Probation period: For all positions, we will allot 3 months probation which either party should give 7 days notice for resignation or termination.
2. Working hours, 48 hours per week Mondays to Fridays 8AM to 5PM and Saturdays 8AM to 12 noon. For Operations Technicians and Supervisors, shifting schedules will be Mondays to Sundays 7 AM to 4 PM and 2 PM to 11 PM whereas shift allowances will be given and those who worked on Sundays or public holidays will be given a day off in lieu.
3. Annual bonus, variable depending on company’s performance.
4. Vacation or annual leave, depending on position and length of stay with the company
5. Sick leave, maximum 30 days per year
6. What about medical benefits?

Answer:

Below are our comments:

1. For probation period, what you suggested is OK. However, many companies usually use 119 days because once an employee completes 120 days, (or 4 calendar months) you will have to pay him the severance pay (1 month’s salary) and payment in lieu of advance notice (if you want the employee to stop coming to work right away). Please read this article: Severance pay – tax implication. However, please note that actually the employees can just quit right away and they will not have to pay you if they don’t tell you in advance even if they signed a contract saying that they will tell you 7 days in advance. Only if you can prove that their leaving the company without the advance notice caused you damage can you take the case to court.
2. For working hours, if you will make admin staff or managers work on Saturdays, you will not be an attractive employer. Even our companies, we don’t work on Saturdays unless we pay them OT rate per law. From our experience, when people know that a company works on Saturday, they don’t want to work there unless the pay is really high. The way to do it is that you can assign some of the employees to work on Saturday and have another day during the week off in addition to Sunday. However, it should be preset each month.

For shifts, also you want to assign the holidays for the shift employees each month in advance. We do not know if you have a lot of competitor employers because you may want to give these employees 2 days off per week too. The day that they are off, and they come to work during their normal work time, they will get 1 time their usual hourly rate (salary/30days/8hrs) extra for OT pay (because they already got 1 time in their normal monthly salary on their holidays). However, if you make them work before or after their usual hours, you will have to pay 1.5 times the usual rate on the normal work days and 3 times on their holidays.

3. For bonus, please do not tie bonus to company’s performance in sales or profit because it will be a non-tax deductible expense for the company. If you want to be an attractive employer, you want to tell your employees they will get a bonus according to their work performance.
4. For vacation, the law says at least 6 days per year, but you can choose to give them more. We see many of our multi-national clients use their global policy in giving bonus and vacation to the employees, which makes the employees feel very good because they feel they are part of the global company. Manufacturing companies in Thailand usually follow Thai labour law in terms of vacation they give to their employees. Some companies have provident fund so as to make the employees want to stay longer. If you want, we can refer you to some provident fund companies so you can see different structures that may be useful to your benefit scheme.
5. For sick leave, if an employee gets sick too much, the law does not say you can let him go without severance pay. (But if he disappears 3 days in a row without a doctor certificate saying that he is sick and has to take those days off, you can let him go immediately without severance pay). So you will have to use other means to discourage the employees from taking too many sick days. Some companies use a rewarding system like if they do not take days off as sick or to take care of their personal business at all in a month, they will get extra money, like Baht 500 or 1,000.
6. For medical benefits, the employees can get most hospital treatment for free because they contribute monthly into the social security system. However, it is up to your company’s policy if you are to provide allowance for medical expenses or health insurance.

Contact MSNA for your questions and more information on Thailand labour law.

Yesterday, the company owners decided to terminate one of our Thai company’s employees. He started working with us in April 2010. Consulting our company lawyers, we thought he is entitled to receive a compensation payment of 3 months. However, he talked to his own lawyer who told him that he is entitled to receive 5 months’ monthly salary. Being in-between chairs, I would highly appreciate if you could find time to drop me a mail with a clear written step-by-step procedure regarding contract termination and payment of compensation.

Answer:

When an employer company in Thailand wants to terminate an employee, they need to give an advance notice in writing before or on the date the salary payment is due for the termination to take effect on the next salary payment due date. In your case, you normally pay your employees on the 28^th of the month, so the salary is due on 28^th. You need to give him the advance notice within 28 June to take effect on the following salary payment due date, 28 July. If the employer terminates an employee and wants the termination to take effect right away, the employer has to pay the employee all the wages/salary that should have been owed if the termination would take effect on the following wage/salary payment due date. This is called payment in lieu of advance notice. In your employee’s case, you will have to pay him June and July salaries, plus 3 months’ severance payment. The total you have to pay him is 5 months. You can make him come to work until 31 July if you want but you need to give him the termination notice by 28 June which is today.

Need expert advice on Thai Labour Law? Contact MSNA for consultation.

As an accounting firm that provides accounting service to foreign companies in Thailand and also work permit service to foreigners, MSNA gets asked by our clients very often about employing foreigners when they don’t have a work permit. What should they do to be able to expense the salary?

If your Thailand company employed a foreigner who does not have a work permit then your company is hiring an illegal foreign worker, which is against the law. You will not be able to take advantage of the expense. The same applies to the case where he has a work permit with another company, but will work for your company too. If you hire a foreigner, your company must sponsor his work permit so as to be legal for the both of you. Or in other words, his work permit has to have your company as one of the employers.

If you hire foreigners who work outside of Thailand (Some of our clients are software companies and hire foreigners who work outside Thailand), this way, they don’t need to have a work permit. However, you need to withhold 15% when you pay them each time. In this case, you can use their invoice and a copy of their passport as the supporting documents for the expense and you have to submit the withholding tax of 15% to the Revenue Department within the 7^th of the month following the payment.

Contact MSNA for your tax and work permit questions.

The extra income from gratuity or service charges that entertainment establishments give to its employees could not be included in the Baht 300 daily minimum wage. Because it was money from customers and not from the employer, service charges are considered as welfare under the Labor Relations Act.

However, if any employer insists on including the service charge, he must discuss it with the workers first. In case both sides could not agree, Labor Court of Thailand will mediate to resolve any employment change issues. The Supreme Court has also ruled that an employer could keep 22% of the service charge for workers’ welfare and share the rest among the staff.

Contact MSNA for questions about Thailand Labor Law

The Thai Government has recently approved a 15-day paternity leave for state officials or employees whose wives have given birth to take care of the new mothers and babies. The draft royal decree permits the state officials or employees to take up to 15 days off at full salary within 30 days of the child’s birth.

If the state officials wanted to take the days off to take care of their wives after the mentioned 30-day period, it would be up to their supervisor, at the director general or equivalent position, if the officials would receive payment during the leave period.

The officials taking extra days off to take care of their newborns would not be entitled to the salary payment.

The draft royal decree also allows state officials who have not been ordained as Buddhist monks or on a pilgrimage to Meccato take religious leave with salary payment for up to 120 days, while officials wishing to take leave for vocational rehabilitation were entitled to leave with salary payment for up to 12 months.

Contact MSNA for your questions on this draft royal decree and for more information about Thai Labor Law.

We have to transfer some of our senior employees from our own company to a sister company along with the reserve funds designated for those employees in case of retirement and resignation. Is there any tax point to be considered?

Answer:

When you transfer your employees from your company to work with your sister company which is considered a separate legal entity, along with the reserve funds designated for those employees in case of retirement and resignation, you are allowed to treat the transferred reserve funds as tax deductible expense for the purpose of computing net profit during the transfer period, without conflict with Section 65 ter. (1) and (9) of the Revenue Code. However, the transferred amount is not considered as income of your sister company because the transfer of reserve is considered a transfer of future payment obligations to the transferred employees. Accordingly, the sister company is not allowed to claim a deduction upon making payment (from the transferred reserve funds) to transferred employees upon their retirement or resignation.

Contact MSNA for your accounting and tax questions and business needs.

Is there any exemption on taxes if we have a disabled employee hired to work with our company?

Answer:

Under Royal Decree (No. 499) BE 2553, a business entity employing a disabled employee with an identification card issued under the Persons with Disabilities Empowerment Act, that has paid employee remunerations, including salaries, overtime wages, bonuses, hardship allowances (if any), medical expenses and social security fund contributions, in accordance with its obligations under the employment contract, is entitled to a corporate income tax exemption.

Contact MSNA for more information on accounting and tax in Thailand.

Today, THAI ACCOUNTANT answers a question from one of our payroll clients regarding the Workmen’s Compensation Fund contribution.

Question:

We have just received a letter from the Social Security Office regarding the Workmen’s Compensation Fund submission. Our Thai staff told us that they are forms to be submitted for this year and for the previous year’s workmen’s compensation fund contribution. Why do we have to pay for both years now?

Answer:

Companies in Thailand who have employees normally receive some forms from the Social Security Office in December or early January of each year.

1. Form “Kor Tor 26 Kor” is the form that the Social Security Office estimates the amount of Workmen’s Compensation Fund contribution for the new year (2012) for your company to pay. It is estimated from 2011 salaries that the official has seen from the Social Security form filed monthly throughout 2011. In this form, it says the amount you have to pay for the fund of 2012. The payment must be made to the Social Security Office within this month (January 2012).
2. Form “Kor Tor 20 Kor” which appears on the same paper under Form Kor Tor 26 Kor of the year 2012, is for the company to fill out the total figure of 2011 payroll (but for each employee, the maximum annual salary for workmen’s compensation fund calculation purpose is not more than Baht 240,000 only). The figure is obtained from the worksheet we will talk about in no.3 below. This form is to be compared with the amount you paid in Form “Kor Tor 26 Kor” of the previous year and make you pay the difference within the end of February (in case you paid too little in 2011) or give you the refund (if you paid too much in 2011).
3. The third form which is a separate sheet of paper is the worksheet to show the calculation of the annual salaries to attach to Form “Kor Tor 20 Kor”.

Contact MSNA for further assistance and information on Workmen’s Compensation Fund and Thailand Labour matters.