Today, we answer some questions concerning employee benefits in Thailand.
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:
- Probation period: For all positions, we will allot 3 months probation which either party should give 7 days notice for resignation or termination.
- 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.
- Annual bonus, variable depending on company’s performance.
- Vacation or annual leave, depending on position and length of stay with the company
- Sick leave, maximum 30 days per year
- What about medical benefits?
Below are our comments:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.