Sacking An Employee - What Employers Should Know

Under such bleak economic climate, it is bad enough for business to have to close and lay off employees. However, employers should not make this worse by exposing themselves to unfair dismissal claims by laid off employees. To minimize the possibility of such claims, employers need to be aware of employees' legal entitlements when terminating employees.

Gross Misconduct?

Unless the employee has committed a gross misconduct, an employer cannot terminate the employee's employment without having to provide any prior notice on termination and pay severance pay to the employee. This is also known as termination with cause.

Gross misconduct is serious misconduct by the employee e.g. employee having been imprisoned by a final judgment of a court (except for offenses arising out of negligent acts or for petty offenses) or employee performing an act of gross negligence which causes the employer to suffer severe losses.

Termination Without Cause

Generally, if the employee's employment contract had been terminated not due to gross misconduct (also known as termination without cause), the employee shall be entitled to the following:

(a) Prior Notice on Terminating Employment Contract

Prior notice on terminating the employee's employment has to be issued by the employer to the employee. Minimum prior notification period has to be according to that provided for in the employment contract, working rules or notice of the employer.

However, the minimum prior notification period must not be shorter than that prescribed by law. According to the labor protection law, this period must at least be one wage cycle of the employee. For example, if an employee is receiving wages on a monthly basis and the employer issued prior notice on termination to the employee on February 10, 2009. The employee's last working day will be March 31, 2009, not March 10. The employee's wage cycle is March 1 to March 31.

(b) Damages In-Lieu (Instead) of Prior Notice on Employment Termination

Alternatively, if the employer wants to terminate the employee's employment immediately and have the employee leave work, the employer shall have to pay the employee's wages up to the employee's last working day and then terminate the employee.

(c) Severance Pay

The employer has to pay the employee severance pay. In Thailand severance pay is calculated based on the latest wages amount of the employee and the duration of his or her employment.

Any fixed benefits paid to the employee must be considered as part of wages and be included in severance pay calculation. Fixed benefits are, for example, an employer pays the employee 2,000 Baht every month for traveling expenses, regardless of how much traveling the employee did.

Section 118 of the Labor Protection Act B.E. 2541 (1998) provides for the amount of severance pay payable to the employee:

If the employee had worked for 120 days but not 1 year, severance pay amount is equivalent to 30 days of wages.

If the employee had worked for 1 year but not 3 years, severance pay amount is equivalent to 90 days of wages.

If the employee had worked for 3 years but not 6 years, severance pay amount is equivalent to 180 days of wages.

If the employee had worked for 6 years but not 10 years, severance pay amount is equivalent to 240 days of wages.

If the employee had worked for more than 10 years, severance pay amount is equivalent to 300 days of wages.

Example of severance pay calculation

XYZ Company Limited employed Mr. B as the employee at a monthly salary of 10,000 Baht. Each month, XYZ Company Limited also provides 2,000 Baht to Mr. B as his traveling expenses.

Now, after having worked for 2 years and 3 months at XYZ Company Limited, his employment was terminated due to poor performance. Mr. B severance pay will be calculated as follows:

10,000 + 2,000 = wages per day
30

400 Baht = wages per day

After having worked for 2 years and 3 months, Mr. B is entitled to severance pay equivalent to 90 days of wages i.e. Mr. B had worked for more than 1 year but not 3 years. Therefore, 400 Baht wages per day x 90 days = 36,000 Baht severance pay.

Note: The employer also does not have to give prior notice on termination or pay severance pay to the employee if the employee completed a fixed period employment contract i.e. an employment contract whereby its employment starting date and ending date are clearly specified in the employment contract. (Please see my article "Fixed Period Employment Contract for a Wise Employer" in Pattaya Mail newspaper December 12, 2008 issue for the legal meaning of a fixed period employment contract)

(d) Vacation Days Not Used

Any annual vacation days that the employee is entitled to and are not yet used shall be paid to the employee.

Final Tip

The employer must bear in mind that if the employee deemed that he or she had been unfairly terminated by the employer due to whatsoever reasons, even after having received prior notice of termination and severance pay, the employee still has the right to file an unfair dismissal claim against the employer at the Labor Court.

This risk can be minimized by having the employee sign a letter of release to waive the right of making any future claims against the employer.

Written by David Tan. David is a Lecturer of Business Law at Asian University and author of the book "A Primer of Thai Business Law", available online at www.chulabook.com. In Bangkok the book is available at all Kinokuniya and Asiabooks bookstores. Any questions or comments to David should be sent to blas.inter at yahoo.com

David Tan Articles:

Does 90-year Lease Exist? - David Tan is a Lecturer of Business Law at Asian University. He has kindly provided us with a series of legal articles looking at property and employment law in Thailand. We start by clearing up the 90-year lease issue.

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Employee Failing Probation - David Tan's series of legal articles move on to employment law. He starts with a look at the requirements for terminating employees who are on a probationary period.

Fixed Employment Contracts - Fixed period employment contracts are a technique employers can use to avoid having to pay severance and provide prior notice of employment termination to employees.

Sacking an Employee - What are the legal implications for an employer to sack an employee in Thailand?

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Contract Protection for Buyers of Condos - How can you be sure your new condo will turn out like the pictures in the glossy brochure?