Local Thai Staff

[Asiarelay]

We have in our company rules a retirement age of 65. One of our local Thai staff has now reached that age and it is time for him to go. I have been told by my deputy (Thai) that I will have to pay severance pay to him if I want him to leave. As he has worked for more than 10 years this will mean 1 years salary.

I have looked at the Thai labour protection act 1998 and it mentions nothing about retirement.

We also have a Provident fund that we contribute 10% of the staff salary to and he will get a lump sum from this.

Can anyone confirm whether this is correct ? I am from the UK and this whole idea seems ludicrous !

[Prudent_rabbit]

I believe if you have it in your contract that it is stated at the age of 65 you must retire then no compensation would be payable, especially if a provident fund has been set up

If that isn't "If employee has worked for 10 years upwards: 300 days' wages

In regards to retirement, there is no statutory retirement age under Thai law. The retirement age depends on each employer's policy, however there is a mandatory retirement age of 60 for all government & civil service workers, this includes universities, schools etc. This is for permanent employees only

I would suggest you contact a labor law specialist

[Asiarelay]

Consulted a Thai Labour Lawyer. Provident Fund and Severance pay are considered separately. Basically if you the employer want someone to leave at any age then you have to pay severance pay as per Thai Labour Law.

I have basically told our staff that if they reach retirement age and I want them to leave then the company will pay severance as per the Thai Labour Law.

However I have also said that if I don't want them to leave then I will not pay and they can either carry on working or resign.

[torrenova]

Could they not require you to enforce the company rules which they contracted to ? My guess would be that some, if not this employee, would be looking to retire but with the severance pay. Are you not effectively rewriting the rule book because you don't like the implications of adhering to it ?

If I was approaching 65 and wanted to retire, I would certainly be more than a little peeved at you moving the goalposts and effectively denying me my retirement package unless I force you to make me leave. That is surely not good for business.

[CWMcMurray]

If he has seen others (who you aparrently didnt want to stick around after 65) allowed to retire at 65 with full severence, you might end up casueing yourself problems.

I guess then you might very well get an employee who was a little resentful and hel_l bent on doing what ever he could to make you want to fire him without going far enough to allow you to fire him without severence.

Kind of looks like a senerio where your are rewarding your worst employees and sticking it to your best... you may want to think about the precendents you are making.

If your employees realize that only lousy employees get to retire with severence, then it wont be long until they learn thats what they need to become...

----------------------

Just saw that you have already told your employees that you will only give them severence if you want them to retire, not if they want to retire....

I wouldn't be surprised if the employee in questions performance will start to decline as he tries to ensure that you do not want him to stick around. I am also equally sure that all of your employees are going to be watching and learning...

Edited December 25, 2009 by CWMcMurray

[CWMcMurray]

Jusat though of a possible compromise.... If you do not want the employee to leave at this time because you need them, then negocaite with them for a specific timeline until they can retire with severence.

[Asiarelay]

All we have in our staff regulations is that staff may take their provident fund between 60 and 65. This the company contributes 10% of their salary to every month. The staff contribute between 5 and 10 % I think this is reasonable by Thai standards but am willing to be corrected. We have not moved any goalposts.

It was only recently that we learned that there was no official retirement age in Thailand. Up until that point we assumed that at retirement age the staff would leave with their provident fund pot only as would a UK based member of staff. This may seem like an oversight however my Thai deputy had never heard of this either.

If staff do not perform their duties in a satisfactory manner then they will receive written warnings to this effect. After 3 such warnings they would be dismissed without severance. All staff here value their jobs as we have excellent conditions of service for the location.

Would be interested to know if other companies adhere to Thai Law as regards retirement. It is often difficult to find things like this out as so many Laws here are not followed exactly.

Have to admit that I was quite angry when I discovered this. Felt like I was the typical farang being ripped off ! Having got over my anger I will probably take a more conciliatory approach to future retirements and pay severance as required under the Thai Labour Law.

[flemmie]

I can confirm that we also adhere to Thai Law in this respect, and even beyond it. Apart from the Provident Fund, we will pay our staff up to 10 months additional salary as an indemnity when they retire and a same amount in Special retirement Benefits (negotiated some time ago and which have become an acquired right in the meantime in our company - a foreign bank). The indemnity is based on the law grid:

worked-

up to 120 days ---> 30 days indemnity

120 - 1 year ---> 90 days

1 - 3 years ---> 120 days

3 - 6 years ---> 180 days

6 - 10 years ---> 240 days

10 years+ ---> 300 days (10 months)

I have one lady retiring this mnths after 20 years of service, she goes home with a check for 20 months.

[CWMcMurray]

One other point... it may seem ludicrous from a UK perspective, but you also have to remember that in the UK the government provides an old age pension. Here in Thailand, I believe the max payout for old age is thb 500 per month and many do not qualify for this...

So it really is apples and oranges... there is no social safety net, so it is not completely unexpected that the Thai system may have other ways of compensating.

If you want to compare it to the US system... the employer needs to pay 7.5% of the employees salary to the Social security fund every paycheck (the employee has to pay the other 7.5%), so just think about how much more it would cost you if you had to do this for each employee. If you add up 7.5% every month for 20 years... that would be the equivalent of 18 months salary the company would have had to make in SSI contributions alone.

Also under the "Western System" you would need to contribute to every employee's SSI fund every month, where under this system you only have to pay for the employees that stay with your company long enough to be eligible to retire. This is in addition to the standard Provident Fund (or 401k as it is called in the US).

So maybe not as ludicrous as it seems at first...

Edited December 25, 2009 by CWMcMurray