Severance Pay in Thailand: 2026 Employer Guide & Rates

What Severance Pay in Thailand Actually Is

Severance pay is the compensation an employer must pay an employee who is terminated without cause. It is governed by Sections 118 to 122 of the Labour Protection Act B.E. 2541 (1998), as amended. Importantly, severance is separate from any payment in lieu of advance notice, unused annual leave, or contractual bonuses. Employers therefore cannot treat one payment as covering the other.

The entitlement applies to almost all employees, regardless of nationality or seniority, once they have completed 120 days of continuous service. It covers Thai and foreign staff alike, and it cannot be waived in advance through an employment contract. Any clause that purports to reduce the statutory minimum is unenforceable, because the Act sets a floor that private agreements cannot lower.

Current Severance Pay Rates by Length of Service

The amount of severance increases with the employee’s uninterrupted period of service. Since the 2019 amendment (Labour Protection Act No. 7 B.E. 2562, effective 5 May 2019), a sixth tier rewards long-serving staff. The table below sets out the statutory schedule that employers must apply today.

Each figure is calculated on the employee’s last rate of wages, which includes the base salary plus any fixed allowances paid in return for work. Variable commissions and discretionary bonuses generally fall outside the calculation. However, employers should review each pay component carefully, because Thai courts look at the substance of a payment rather than its label.

When an Employer Owes No Severance

Section 119 sets out the only situations in which an employer may dismiss an employee without paying severance. These grounds are narrow, and the burden of proof rests firmly on the employer. The recognised grounds include:

• Dishonest performance of duties or an intentional criminal offence against the employer;
• Intentionally causing damage to the employer;
• Causing serious damage to the employer through gross negligence;
• Violating lawful work rules after a valid written warning (a warning remains effective for one year);
• Abandoning the job for three consecutive working days without reasonable cause; or
• Imprisonment under a final court judgment.

In practice, employers frequently lose these cases because the documentation is incomplete. A vague warning letter, a missing investigation record, or an inconsistent disciplinary policy can convert a “for cause” dismissal into an unlawful termination overnight. Consequently, employers should treat written records as the single most important defence. For a fuller analysis of the risks, see our guide to unfair termination in Thailand.

Special Severance for Relocation and Restructuring

Beyond ordinary severance, the Act imposes additional obligations in two commercially significant scenarios that foreign investors encounter often.

Business relocation (Section 120)

If an employer relocates its place of business in a way that materially affects an employee’s normal living, it must give at least 30 days’ notice. An employee who declines to move may then terminate the contract and claim special severance of at least 50 percent of the ordinary Section 118 amount. Where the employer fails to give the required notice, it must also pay an extra 30 days’ wages in lieu.

Reorganisation and automation (Sections 121–122)

When a termination results from reorganising the business, introducing machinery, or changing technology, the employer must notify the Labour Inspector and the affected employees at least 60 days in advance. Missing that deadline triggers an additional 60 days’ wages in lieu of notice. Moreover, employees with more than six years of service receive further special severance of 15 days’ wages per year of service, capped at 360 days’ wages. This top-up applies on top of ordinary severance, so automation-driven layoffs can become surprisingly costly.

How Severance Pay Is Taxed

Severance pay in Thailand is treated as assessable income, but a useful exemption softens the impact for employees. Statutory severance is exempt from personal income tax up to the value of the employee’s last 300 days of wages, capped at 300,000 baht, whichever is lower. Any amount above that threshold is taxable in the usual way.

This exemption applies only to severance paid under labour law. It does not extend to retirement payments, ex gratia settlements, or amounts described as severance but paid for another purpose. Employers act as withholding agents, so accurate classification matters for both compliance and employee relations. For the broader picture on individual taxation, review our overview of personal income tax for foreigners in Thailand, and confirm current thresholds with the Revenue Department.

Practical Steps for Foreign Employers

A disciplined process reduces both cost and litigation risk. Before terminating any employee, prudent employers should:

• Calculate the full statutory severance, plus payment in lieu of notice and accrued benefits;
• Confirm whether any Section 119 ground genuinely applies, supported by written evidence;
• Check whether relocation or restructuring rules trigger special severance;
• Prepare a clear settlement agreement and final pay statement; and
• File any required notices with the Labour Inspector within the statutory timeline.

Authoritative guidance on employer obligations is published by the Ministry of Labour. Nevertheless, the rules interact in ways that are easy to underestimate, particularly for group restructurings spanning several entities. Early advice almost always costs less than a labour court judgment.

Frequently Asked Questions