Thailand Severance Pay: Employee Rights Under Thai Labor Law

What Is Severance Pay Under Thai Law?

Severance pay in Thailand is a legally mandated payment that employers must give to employees upon termination. It is not a courtesy or a perk — it is a legal right enshrined in the Labour Protection Act B.E. 2541 (1998), Section 118, which applies to every employer in Thailand with one or more employees.

The law was significantly amended in B.E. 2562 (2019) to add a new top tier: employees with 20 or more years of continuous service are now entitled to severance pay equal to 400 days of wages — up from the previous maximum of 300 days. This amendment was specifically designed to protect long-serving employees who dedicated decades to a single company.

Severance Pay vs. Other Termination Payments

Many people confuse severance pay with other amounts they may be entitled to. Understanding the distinction is critical because you may be owed all three — not just one.

• Severance Pay (เงินชดเชย) — The amount an employer must pay under Section 118 when terminating an employee. Calculated based on length of service.
• Notice Pay / Pay in Lieu of Notice (ค่าบอกกล่าวล่วงหน้า) — If the employer does not give at least one pay period’s advance notice before termination, they must pay wages for that notice period under Section 17. This is a separate payment from severance.
• Unfair Dismissal Compensation (ค่าเสียหายจากการเลิกจ้างไม่เป็นธรรม) — Additional compensation ordered by the Labour Court if it finds the dismissal was without reasonable cause. Governed by Section 49 of the Labour Court Establishment Act.

In other words, a terminated employee could potentially receive all three payments — severance, notice pay, and unfair dismissal compensation.

Who Is Eligible for Severance Pay?

Not every departure from a job triggers severance pay. Understanding the eligibility requirements — and the exceptions — is essential for any employee working in Thailand.

Requirements for Eligibility

1. Terminated by the employer — You must be terminated (fired, laid off, made redundant). The termination can include the employer not renewing a contract, closing the business, or relocating the workplace.
2. At least 120 days of continuous employment — You must have worked for the same employer for at least 120 consecutive days to qualify.
3. Not dismissed for serious misconduct under Section 119 — Employees dismissed for specific serious offenses lose their right to severance pay.

Cases Where Severance Pay Does NOT Apply

• Voluntary resignation — If you quit of your own accord, regardless of the reason, you are not entitled to severance pay.
• Expiry of a fixed-term contract — A genuine fixed-term contract that expires on schedule does not trigger severance (but see the important caveats under Special Cases below).
• Less than 120 days of employment — If your total continuous service is under 120 days, the law does not require severance.
• Dismissal for serious misconduct under Section 119 — See details below.

Does the Probation Period Count?

Yes, it absolutely does. The probation period is part of your continuous employment under the law. Even though many companies set a 90- or 120-day probation period, this is an internal company policy — it does not exclude that time from your length of service.

For example, if you started on January 1, passed your 120-day probation, and were terminated on December 1 of the same year, your total service is 11 months (including probation), not just 7 months. This matters because crossing the 120-day threshold is what qualifies you for severance in the first place.

Severance Pay Rates by Length of Service

The rates below are set by Section 118 of the Labour Protection Act. Severance is calculated based on the employee’s last rate of wages and their length of continuous service.

Length of Service	Severance Pay Entitlement
120 days but less than 1 year	30 days of wages
1 year but less than 3 years	90 days of wages
3 years but less than 6 years	180 days of wages
6 years but less than 10 years	240 days of wages
10 years but less than 20 years	300 days of wages
20 years or more	400 days of wages

What Counts as “Wages”?

Under Thai labour law, “wages” does not mean just your base salary. It includes all regular monthly payments made as compensation for work performed:

• Base salary
• Cost of living allowance — if paid every month as a fixed amount
• Position allowance — if paid every month as a fixed amount
• Regular commissions — if paid on a consistent monthly basis

Not included: Annual bonuses (tied to company performance), overtime pay, per diem allowances, travel reimbursements, and non-monetary welfare benefits.

Real Severance Pay Calculations

The formula itself is straightforward — the key is identifying the correct “wage” figure and the correct tier.

Severance = (Monthly Wages / 30) x Severance Days

Example 1: 2 Years of Service

Imagine you have worked for 2 years and your last monthly salary is ฿25,000.

• 2 years falls in the 1–3 year tier = 90 days of severance
• Daily wage = ฿25,000 / 30 = ฿833.33
• Severance = ฿833.33 x 90 = ฿75,000

You are entitled to ฿75,000 in severance pay before tax.

Example 2: 8 Years of Service

You have worked for 8 years. Your base salary is ฿40,000 and you receive a monthly position allowance of ฿5,000 (paid every month without exception). Your total “wages” for calculation purposes are ฿45,000 per month.

• 8 years falls in the 6–10 year tier = 240 days of severance
• Daily wage = ฿45,000 / 30 = ฿1,500
• Severance = ฿1,500 x 240 = ฿360,000

Notice that the position allowance adds ฿40,000 to your severance total (฿5,000/30 x 240). Always include regular allowances in your calculation.

Example 3: 22 Years of Service (New 2019 Rate)

You are a long-serving employee with 22 years of continuous service. Your last monthly salary is ฿60,000.

• 22 years falls in the 20+ year tier = 400 days of severance
• Daily wage = ฿60,000 / 30 = ฿2,000
• Severance = ฿2,000 x 400 = ฿800,000

Before the 2019 amendment, this employee would have received only 300 days = ฿600,000. The law change increased their entitlement by ฿200,000.

Want to calculate your exact severance amount? Use our Severance Pay Calculator for an instant breakdown including tax implications.

Special Situations You Should Know

Beyond standard termination, Thai labour law provides specific protections in several common workplace scenarios.

Workplace Relocation (ย้ายสถานประกอบการ)

If your employer relocates the workplace (for example, moving a factory from Bangkok to a province) and this significantly affects your way of life, you have the right to refuse the transfer under Section 120.

In this situation, the employer must:

• Announce the relocation at least 30 days in advance
• If you choose not to relocate, you can terminate the employment contract yourself and receive full severance pay based on your length of service, plus notice pay

This is one of the few situations where the employee initiates the departure but still receives full severance.

Business Closure

If the employer shuts down the business entirely, all employees are entitled to full severance based on their length of service. The employer must pay on the effective date of termination and must give advance notice of at least one pay cycle (typically one month for monthly-paid employees).

Retirement at Age 60

Under Thai law, an employee who retires at age 60 is entitled to severance pay — exactly as if they had been terminated. This applies even if the company sets a different retirement age in its policies. If the company has no retirement policy at all, the employee can request retirement at age 60 and receive severance.

Fixed-Term Contracts

Employees on genuine fixed-term contracts are generally not entitled to severance when the contract expires naturally. However, Thai courts apply strict criteria:

• The work must be for a specific project, seasonal work, or work with a definite conclusion — not the employer’s regular ongoing business
• If the employer has renewed the contract repeatedly or the work performed is the company’s normal business operations, courts may treat it as an indefinite-term contract — entitling the employee to full severance

If you have been on rolling one-year contracts for five years doing the same work as permanent staff, you likely have a strong claim for severance.

Mass Layoffs

When an employer lays off a large number of employees due to business restructuring, process changes, or adoption of new technology, additional rules apply:

• The employer must notify employees and the Labour Inspector at least 60 days in advance
• If the employer fails to give 60-day notice, they must pay special compensation in lieu of notice equal to 60 days of wages — in addition to regular severance
• Employees with 6 or more years of service are entitled to additional special severance of at least 15 days of wages per year of service (capped at 360 days of wages)

This means a long-serving employee in a mass layoff could receive regular severance plus special severance — a significant combined amount.

What to Do When Your Employer Refuses to Pay

If you have been terminated and your employer refuses to pay severance, do not give up. Thai labour law has a clear, step-by-step enforcement process specifically designed to help employees — and it costs you nothing.

Step 1: Send a Formal Demand Letter

Write a formal demand letter (จดหมายทวงถาม) to your employer. Include:

• Your start date and termination date
• Total length of service
• Your last monthly wage (with breakdown if it includes allowances)
• The exact severance amount you are owed (cite Section 118)
• A deadline of 15 days for payment

Send it via registered mail with return receipt so you have proof of delivery. Keep a copy for your records.

Step 2: File a Complaint with the Labour Inspector

If the employer does not pay within the deadline, file a formal complaint at the Department of Labour Protection and Welfare (กรมสวัสดิการและคุ้มครองแรงงาน) — specifically at the provincial office where your workplace was located, or the Bangkok Area Labour Protection and Welfare Office if in Bangkok.

• There is no fee to file a complaint
• You can file in person or authorize someone to file on your behalf
• Bring: copy of your ID card (or passport for foreigners), employment contract, pay slips, termination letter (if you received one), and your demand letter with receipt

Step 3: Labour Inspector Investigation

The Labour Inspector will summon the employer and investigate within 60 days of receiving your complaint. If the inspector determines that the employer must pay, they will issue a formal order requiring payment within a specified period.

If the employer is late in paying severance, they are also liable for 15% annual interest on the outstanding amount.

Step 4: Appeal to the Labour Court

If either party is dissatisfied with the Labour Inspector’s order, they may appeal to the Labour Court within 30 days of being notified.

• Employees pay no court fees in labour cases
• The Labour Court will attempt mediation first; if that fails, it proceeds to a judgment
• You are not required to have a lawyer, though consulting a labour lawyer is recommended for complex cases
• Labour Court proceedings are generally faster than civil court — most cases are resolved within a few months

Use the Severance Pay Calculator to determine the exact amount you are owed, then bring that figure to support your complaint.

How Severance Pay Is Taxed in Thailand

Severance pay is subject to personal income tax in Thailand. However, the tax code provides significant preferential treatment for severance to reduce the burden on terminated employees.

The Tax Exemption

Severance pay received under the Labour Protection Act is exempt from income tax up to the amount of the employee’s last 300 days of wages, with a maximum exemption of ฿300,000 — whichever is lower.

Tax-Exempt Amount = 300 days of last wages OR ฿300,000 (whichever is less)

Taxing the Amount Above ฿300,000

The portion of severance pay that exceeds the exemption can be taxed separately from your regular income using a special calculation method. This is a significant advantage because it prevents the lump-sum severance from pushing you into a much higher tax bracket.

The special calculation works like this:

1. Determine your total years of service
2. Divide the taxable severance (amount above ฿300,000) by the number of years of service
3. Multiply by 0.5 (a 50% expense deduction)
4. Apply the progressive tax rates to this annual figure, then multiply the resulting tax by the number of years

This method almost always results in far less tax than adding the severance to your regular annual income.

Tax Calculation Example

Suppose you received ฿800,000 in severance from 22 years of employment.

1. Tax-exempt portion: ฿300,000
2. Taxable portion: ฿800,000 - ฿300,000 = ฿500,000
3. Divide by years: ฿500,000 / 22 = ฿22,727
4. Apply 50% expense deduction: ฿22,727 x 0.5 = ฿11,364
5. Tax on ฿11,364: Falls within the 0% bracket (first ฿150,000 is exempt) = ฿0
6. Total tax: ฿0 x 22 = ฿0

In this case, the employee pays zero tax on the severance because the per-year amount after deductions falls below the tax-free threshold.

For lower-tenure, higher-salary employees, some tax may be owed — but the separate calculation method still yields a much lower tax bill than the standard method.

Summary of Severance Tax Rules

Item	Details
Is severance taxable?	Yes, but with significant preferential treatment
Tax-exempt amount	300 days of wages or ฿300,000 (whichever is less)
Amount above exemption	Can be calculated separately from regular income
Tax form	PND 90 or PND 91 (ภ.ง.ด.90/91)
Income category	Assessable income under Section 40(1)

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The rules are clear and the law is on your side — but only if you know what you’re owed and how to claim it. Don’t wait until you’re in a dispute to learn this stuff. Run the numbers now with our Severance Pay Calculator, and keep this guide bookmarked just in case.

Calculate your exact severance entitlement now with our Severance Pay Calculator, complete with tax breakdown and step-by-step explanation.