Complete Guide to Payroll Services and Compliance in Thailand

Thailand is Southeast Asia’s second-largest economy, with a GDP of roughly 540 billion dollars. The booming businesses and rising earnings in Thailand have reduced unemployment. Thailand’s GDP is expected to grow by 4.1% in 2022. Nonetheless, businesses looking to set up their international payroll in Thailand will discover that employing a payroll outsourcing provider is the best option.

If you want to understand payroll policies and procedures in Thailand comprehensively, that is exactly what this page covers.

How Is Payroll Calculated in Thailand?

Payroll rules and regulations in Thailand you should keep in mind while calculating the payroll are:

• The Thai workweek is usually Monday through Friday, with a maximum working 48 hours per week
• Employees that work more than 48 hours per week will be paid overtime
• Within a single working day, rest intervals are usually an hour-long, and overtime pay varies depending on the day and the number of hours worked
• Any hours worked more than the typical eight on a regular workday are compensated at 150 per cent of the employee’s hourly rate
• On a holiday or day off, a shift of up to eight hours is rewarded at 200 per cent of the base rate, while labor beyond eight hours is compensated at 300 per cent of the base hourly rate
• The contract between the employer and the employee determines the pay date. In addition, the date for overtime pay, holiday pay and overtime compensation are set in advance
• The employer is required to provide at least 13 public holidays to employees
• Employees can take up to 30 days of paid sick leave per year
• The payroll cycle which is followed in Thailand is usually monthly

Important elements of the salary structure in Thailand 

In Thailand, salary restrictions depend on whether your company employs Thai locals or foreign nationals. Net taxable income, social security contributions, value-added tax (VAT), corporate income tax, specific business tax (SBT), and property tax are the most significant tax considerations to remember when a firm manages its payroll in Thailand. To understand the essential elements of salary structure in Thailand, it is first essential to understand the Thailand payroll tax rate: 

• For non-residents’ taxes: Income will be taxed at the same progressive tax rate as Thai residents. A non-gross resident’s income may be taxed at a rate of 15%.
• Corporate Income Tax is 20%
• Income Tax Return (ITR): For corporate income tax reasons, consolidated returns are not permissible; each company must file its tax return. For the first six months of the tax year, taxpayers must self-assess and submit an advance corporate income tax payment
• Payroll tax: The employer withholds tax on employee earnings and remits it to the government every month

How to set Up payroll in Thailand?

To register a business in Thailand, you must first create a legal entity, which can take several months. If foreign interests own more than 49 per cent of the company’s shares, the corporation must abide by Thailand’s Foreign Business Act.

A non-resident company is allowed to process payroll for Thailand citizens. Another alternative for a non-resident company to pay its Thai employees is to engage a fully outsourced service such as a PEO that will hire and manage employees’ payroll on their behalf.

In the second situation, it’s crucial to remember that, as the Employer of Record, the corporation is still entirely responsible for ensuring that all employment, immigration, tax, and payroll rules are followed. On the other hand, payroll calculations, payments, and filings can all be delegated to a payroll processing company.

A step-by-step process of payroll processing in Thailand

The process of setting up payroll in Thailand can be broken down into several easy-to-understand steps. Here is your step-by-step Thailand payroll guide:

Step 1

Within 30 days of starting employment, an employer must register an employee as an “insured person” who is aged between fifteen to sixty years old and works in a company with one or more employees with the social security office.

Step 2

The employer must make sure that the new employees have submitted all the required documents such as a signed employment contract, identity proof, social security fund form, provident fund registration fund, etc. The Labour Protection Act, the Labour Relations Act, the Civil and Commercial Code, and the Labour Procedure Act control employment contracts and labor relations. The Labour Protection Acts B.E.2541 govern new employees in Thailand, whether they are Thai or international (A.D.1998).

Step 3

The company must pay the corporate income tax. In Thailand, businesses are taxed at a rate of 20%. The corporate income tax rate in branches is also 20%. Corporate tax rates, on the other hand, may vary as follows.

• Small businesses having a net profit of 300,000 to 3,000,000 Baht are taxed at 15%
• Small businesses with a net profit of more than 3,000,000 Baht are taxed at 20%
• Thailand’s Stock Exchange companies are taxed at a rate of 20%
• Companies freshly listed on the Thailand Stock Exchange or the Market for Alternative Investment are taxed at 20%
• Companies engaged in international transportation are subject to a 3% tax
• Companies that profit outside of Thailand are taxed at a rate of 10%

Step 4

Companies that exceed an annual turnover of 1.8 million must pay a sales tax. The current value-added tax (VAT) rate is 7%.

Step 5

Some other taxes the company might have to pay are petroleum income tax and withholding tax.

Petroleum Tax – An indirect tax paid annually on the net profit earned while carrying out the petroleum exploration and production business.

• Act B.E. 2514 (status 1)- 50%
• Act B.E. 2522 (status 2)- 35%
• Act B.E. 2532 (status 3)- 50%
• Disposal of profits- 08%

Withholding tax rates – For transfer of petroleum

• Property or rights- 50%
• Payment of interest- 50%
• Payment of dividend- 08%
• Payment of interest- 15%

Payroll contributions

When employed in Thailand, there are four sorts of important employee contributions to consider:

Monthly Tax Deduction

All the foreign employees in Thailand who are non-residents are subjected to a tax on income from sources in Thailand. They are only eligible to pay the tax if they have been staying in Thailand for more than 180 days.

Workmen’s Compensation Fund

This compensation fund replaces the employer’s liability and provides quick and equitable protection to employees against injury, disease, accidents, death, or disability. For this Workmen’s compensation fund, 0.2% to 1.0% of wages are contributed.

Employees’ Provident Fund

The Provident Fund is a voluntary arrangement between the company and the employee that allows the employee to save for retirement. Contributions to the fund range from 2% to 15% of an employee’s base income and the fund are viewed as a perk to encourage employees to stay with the company for a longer period.

Social Security Fund

Employers and employees in Thailand both pay 5% social security contributions, which are due on the 15th of each month. Delays in submitting and remitting to the municipal authorities result in a 2% penalty.

Payroll cycle 

A company in Thailand must closely examine its options and decide which payroll type is ideal for the firm before setting up payroll in Thailand. The following are the four primary payrolls in Thailand options available:

Thailand payroll options for companies

There are 4 payroll regulations that employers can choose from. Here are the following options- 

Remote

Businesses are allowed to operate under a single payroll system. The process is to add employees to the parent company’s payroll in Thailand.

Internal

It requires the employers to hire experienced and efficient HR managers who have a deep understanding of Thailand’s employment laws.

Local payroll processing

Companies can also choose to work with a Thailand payroll company to help them with the payroll rules and regulations in Thailand.

Payroll outsourcing

Finally, another option you can explore is to work with an outsourcing partner like Multiplier. Multiplier is a team of qualified experts who will understand your requirements and help you in outsourcing payroll policies and procedures in Thailand.

Entitlement and termination terms

Employees must serve a notice period of 1-3 months in a job. Although probationary periods are not specifically mentioned in Thai legislation, employees who work for 120 days or more are entitled to severance pay if they are terminated. As a result, many businesses impose a 119-day probation period to avoid paying severance fees. In Thailand, severance pay is calculated as follows:

Exemption from paying severance

In Thailand, there are some exceptions to the severance laws, and an employee cannot claim severance compensation in the following situations:

• Dishonesty in the performance of tasks or illegal conduct against the employer
• Committing any kind of harm to the employer on purpose
• Negligence that causes significant financial loss to the employer
• Following a written warning, violating work rules or regulations
• For three days in a row, an employee hasn’t done their job
• Incarceration for criminal acts

How can Multiplier help?

The process of understanding and setting up payroll cycles can be exhaustive and time-consuming. If you are planning to expand your business overseas, Multiplier can help you with it.

Multiplier can take care of all the legal formalities associated with setting up payroll cycles, employment contracts, tax payments, and much more. Multiplier will work 24/7 with you and give you the best experience while operating your business.