What measures can an employer use to cut labour costs in accordance with Thai law?

Given the current economic situation, many employers are in difficult financial circumstances and as such need to cut their labour costs to protect their business. Some of the ways this can be achieved are as follows:

i. Temporary Suspension of the Business

An employer can temporarily suspend their business (in whole or part) for whatever cause (other than due to force majeure) for a legitimate reason which affects their business and causes the employer to be incapable to operate their business as normal. In order to do this the Employer must do the following:

Pay Wages (75%): Pay wages to the employee(s) who are sent home in an amount not less than seventy-five per cent (75%) of wages for working days that were received by the employee before the suspension took effect. This money must be paid to the affected employee(s) for the entire period which the Employer does not require the affected employee(s) to work (this can be for as long as necessary).

Give Written Notice: The Employer must give advance written notice of the suspension to the affected employee(s) and the Labour Inspector of not less than 3 working days before the suspension takes effect.

Necessity for Suspension: Employers should be aware that such necessity to suspend the business must be sufficiently serious such that it impacts the operation of the business to the extent that it is unable to function as usual (such as the COVID-19 situation etc).

ii. Requesting Staff to Take Leave Without Pay

Another commonly used approach to saving costs is having the staff take leave without pay from work. In order for an employer to be able to do this, they shall need the written consent of the employee for such arrangement. Such consent letter should also be approved & signed by the employer and be clear about when the leave without pay shall commence and expire.
Employer’s using this approach with foreign (non-Thai) staff on a work permit should be careful as not paying such staff and the employees not paying income tax and social security during such period may later create problems for such staff when they go to extend their visa and renew their work permit.

iii. Requesting the Employees to Take a Pay Cut

According to Thai labour law an employer can unilaterally increase an employee’s salary & welfare benefits but if the employer wishes to decrease the employee’s salary & benefits then they must obtain the employee’s express written consent before they implement such change. If the employee does not agree then the employer cannot force the change and if it does so then the employee can submit a complaint with the Labour Department to force the employer to pay the employee their normal wages & benefits.

If an employer wishes to use this cost saving approach then we recommend that it apply to all levels in a company and that the reason be clearly explain to everyone so they understand the necessity for such change.

Contacting DLO
Should you require any legal support relating to labour law in Thailand then please contact us at
Dharmniti Law Office Co., Ltd.
2/2 Bhakdi Building 2nd Floor, Witthayu Road, Lumphini, Pathumwan, Bangkok 10330
Tel: (66) 2680 9777
Fax: (66) 2680 9711
Email: ryan@dlo.co.th or info@dlo.co.th