Are you worried about the Payroll Management of your business in Thailand? For this are you dependent on some payroll management software and a couple of employees? Be sure that this is not going to help you in the long run without the support of professional accounting services in Thailand.
Thailand is famous as one of the most preferred tourist destination. But apart from tourists, now the country is attracting foreign investors as well. Thailand is ranked 21st in the Ease of Doing Business (EODB) rankings, as announced by The World Bank.
Few remarkable statistics which can help you know the economical status of the Thai Market are as follows –
- Thailand is the second-largest economy in south-east Asia
- The population of the country is 70 million with a GDP per capita of US$6450
- Overall GDP of Thailand has grown by 50% during the last 10 years
- The unemployment rate of Thailand is as low as 0.75%
The above statistics establish the fact that the Thailand market is having enough economical potential to support major business establishments. Therefore, if you are thinking of registering your company in Thailand, you are on the right track. But before that, you must understand the business registration process.
Along with the business registration, you must know the process of employment and payroll management as well. Let us brief the process of setting up payroll for a Thai operation.
How to get started?
As a foreigner, you can establish three types of business entities in Thailand –
- Partnership Firm (Ordinary or Limited)
- Offices (Regional, Branch or Representative)
- Limited Companies (Private or Limited)
Foreign companies must apply for Foreign Business License to operate in Thailand. You must also note that the foreign business licence in Thailand is governed by the Foreign Business Act. In the act, there are certain businesses that foreign investors can never involve in Thailand.
In order to register a company, you must first create a legal entity in the country, which can take up to two months. The Partnerships and Companies Registration Office, the Department of Business Development, and the Ministry of Commerce must all authorise a Memorandum of Association before it can be used by an organisation.
Following the approval of their MOA, the company’s leadership must complete a Declaration of Business structure, as well as include Articles of Association and a shareholder list. It’s worth noting that Thai law treats large corporations with several locations as a single entity. This means that if the local Thai branch faces any litigation, the head office will be held accountable.
The minimum capital requirement to start up a business in Thailand is as follows:
- 2 million baht or US$65000 for a Limited Company; and,
- 3 million baht or US$96000 if you need Foreign Business License.
However, you must note that there is no minimum capital requirement for opening an in-country bank account to process payroll.
Employment Considerations
In Thailand, there is no legal provision for the publication of written work contracts. They are, however, recommended, and agreements between employers and workers are, by definition, contracts. Labour unions and collective bargaining are not illegal in Thailand, although they are rare.
Thai workers, like those in most Western countries, work eight hours a day, Monday through Friday, with a one-hour lunch break. A one-hour break is a legal requirement after five consecutive hours of work. However, many businesses, work half-days on Saturdays. On regular working days, overtime is charged at a rate of 150 per cent of wages, 200 per cent for normal working hours on holidays, and 300 per cent for overtime on holidays.
Thailand has strict regulations on the employment of foreign employees. For each foreign employee they wish to recruit, companies must have two million baht or US$65,000 in registered capital.
Compensation and Severance
The minimum hourly wage will be between 313 baht (US$10.00) and 336 baht (US$10.80) in 2020, and companies should be aware of any new increases that could be implemented in the coming years. Salary in Thailand is usually paid monthly, either in cash or by bank transfer.
Employees should request a 30-day notice period if they are terminated, but this is not needed. They should expect severance because they engaged in illegal activity or demonstrated gross negligence to their employer. The length of service determines the severance pay. It starts at 30 days’ pay for those who have worked more than 120 days. It can progress through six bands to 400 days’ pay for those who have worked more than 20 years.
Tax and Social Security
Thailand has a straightforward income tax scheme that extends to both residents and non-residents, with employers deducting tax contributions from workers’ wages. As of 2020, the first 150,000 baht a year (approximately US$4800) is tax-free. It has seven bands of progressively higher income tax rates, increasing in 5% increments, over the earnings.
The maximum tax rate for all profits above five million baht or US$160,000 is 35 per cent. Social security contributions are 5% for both the employee and the employer, and they are due in the middle of each month.
There is a 20% corporate tax rate and a 7% VAT rate, with certain exemptions for specific sectors. Companies with annual revenues of more than 1.8 million baht or US$58,000 must file for VAT with the Revenue Department.
Employers must also contribute to the Workmen’s Compensation Fund, according to payroll legislation. Employee contributions range from 0.2 per cent to 1% of wages, depending on the degree of risk of each work position and the employer’s prior safety record.
Holiday and Leave
After the first year of employment, the official minimum holiday entitlement in Thailand is six working days per year, though it is normal for employers to give between ten and fifteen days. Employees are also eligible for compensation for 15 days of paid vacation each year.
Paid time off is available for national service, preparation, exams, and sterilisation procedures. Maternity leave is 98 days long. The employer pays for the 45 days and 45 days more by the government through social security payments. In Thailand, there is no legal provision for paternity leave. Paid sick leave is available for up to 30 days a year.
Your Take!
Now as you are knowing about the employment regulations in Thailand, recruitment is going to be pretty easy for you. But the payroll management is associated with various employment and labour laws. To know all these laws requires experience and exposure to their practice.
For this reason, you must take the help of accounting services in Thailand. Leading accounting services in Thailand like Konrad Legal can help in your payroll management process in the following ways:
- Help you in streamlining Payroll Processes for your business
- Eliminate unwanted expenses in setting up in-house Payroll Department
- Work in Compliance with Government Regulations
- Provide you with the comfort to focus more on your business
Primarily, Accounting Services in Thailand focuses on the following payroll management activities:
- Monthly payroll calculation, including Pension Fund
- Preparation of documents for bank auto-payments
- Preparation of monthly payslips
- Work in compliance with the Employment Ordinance of Thailand
- Filing Employers’ Returns to the Revenue Department in Thailand
Moreover, there are many other ways by which accounting services in Thailand can help you in payroll management. A payroll management software is simply a tool that cannot help properly without a professional with relevant experience and knowledge.
Konrad Legal team members are having more than two decades of experience in handling the payroll management process for foreign companies in Thailand. The premium legal and accounting firm has a 99% client retention rate since its incorporation in Bangkok. For our help, book your session of free consultation by mailing us at [email protected].
