Thailand Employment Law: How to Compliantly Notify Employees During Entity Closure

Introduction: Why Thailand’s Labour Laws Matter in Closure Situations

Thailand remains a popular hub for foreign investment, thanks to its strategic location, skilled workforce, and improving infrastructure. But for companies planning to shut down operations—whether as part of a business pivot or an M&A restructuring—it’s vital to understand the country’s employment regulations.

Under Thailand’s Labour Protection Act, employers are legally required to notify employees of termination and follow due process in cases of layoffs or company closure. Failure to comply can lead to fines, lawsuits, or reputational damage.

This guide is tailored for HR leaders and operational heads from Singapore-based firms seeking to close Thai entities while retaining critical talent through an Employer of Record (EOR) model.

Overview of Thailand’s Employment Law Framework

Thailand’s employment law is governed primarily by:

• Labour Protection Act B.E. 2541 (1998) 
• Labour Relations Act B.E. 2518 (1975) 
• Workmen’s Compensation Act B.E. 2537 (1994) 
• Civil and Commercial Code 

These laws apply equally to Thai and foreign companies operating in Thailand. Among the most relevant for closures is the Labour Protection Act (LPA), which outlines rules for employment termination, severance pay, and advance notice requirements.

📚 Reference: Thailand’s Labour Protection Act (English Translation) – Ministry of Labour, Thailand

Employer Obligations During Company Closure

If you're shutting down your Thailand entity, employee termination procedures must be handled correctly and humanely. These are not only legal obligations but also critical to protecting your employer brand and avoiding litigation.

Your core responsibilities include:

• Providing written notice of termination
• Paying severance and statutory benefits
• Notifying relevant authorities (e.g., Social Security Office)
• Cancelling employee work permits for foreign nationals

Importantly, there is no “at-will” termination in Thailand. All dismissals must be backed by legal cause or follow correct procedural steps.

Required Notice and Termination Process

🔔 Advance Notice Requirement

The standard advance notice for terminating an employee (excluding misconduct cases) is at least 1 full pay cycle (usually 30 days), unless you pay wages in lieu of notice.

• Written Notice: Clearly state the termination reason and effective date. 
• Mass Layoffs: If the closure affects more than 10 employees, the employer must also notify the local labour inspector and employee committee (if present). 

📌 Note: If your business is relocating and it affects employee livelihoods, written notice 30 days in advance is mandatory under Section 120 of the LPA.

Severance Pay and Final Compensation

Thailand mandates severance pay based on tenure, unless the employee is terminated for gross misconduct.

📊 Severance Pay Table (LPA Section 118)

Other compensation includes:

• Unused annual leave payout
• Pro-rata bonus (if customary)
• Reimbursement for any unpaid allowances

📚 Reference: Thailand BOI: Termination & Severance

Thailand Work Permit Cancellation: What Employers Must Do

If your employees include foreign nationals, you must comply with the Alien Working Act B.E. 2551 (2008).

Steps for Work Permit Cancellation:

1. Return the work permit to the Ministry of Labour within 15 days of termination. 
2. Notify the Immigration Bureau of the end of employment.
3. Ensure the employee's visa is cancelled or transferred if they remain in Thailand.

📚 Reference: Thai Immigration Bureau Guide

Failure to cancel work permits properly can lead to fines of up to THB 100,000.

Exceptions: Probation, Gross Misconduct, and Resignations

❗ Probationary Employees

Employees under probation are still entitled to notice or wages in lieu unless their employment contract specifies otherwise.

❗ Termination for Cause

An employee can be dismissed without severance pay if they:

• Commit fraud or criminal acts
• Violate company rules despite written warnings
• Are absent without permission for 3+ days
• Cause serious damage to the company

However, these must be well-documented and provable in court.

📌 Note: Legal precedent in Thai Labour Courts tends to favour employees, so ensure cause-based terminations are legally sound.

Risks of Non-Compliance

Non-compliance with Thailand labour laws during closure can result in:

• Fines imposed by the Ministry of Labour
• Wrongful termination lawsuits
• Mandatory compensation orders from Labour Courts
• Public backlash and reputational harm

These risks can also delay your entity closure timeline and lead to unplanned costs.

How an Employer of Record (EOR) Helps Retain Talent Without an Entity

If you're closing a Thai entity but want to retain key employees, using an Employer of Record (EOR) in Thailand is a strategic move.

An EOR enables you to:

• Legally employ Thai staff without a local entity
• Outsource compliance, payroll, and statutory filings
• Ensure continuity with customers and partners
• Avoid risks tied to improper termination or rehire

At AYP Group, our Thailand EOR solution allows you to:

✅ Hire quickly and compliantly post-closure

✅ Retain talent without HR headaches

✅ Meet statutory obligations for terminations

✅ Offload legal risk and maintain goodwill

Learn more: Thailand Employer of Record (EOR) Service

Conclusion & Next Steps

Shutting down a Thai entity isn’t as simple as issuing pink slips. With strict notification rules, severance pay mandates, and visa obligations, failing to follow due process can expose your company to significant risk.

The good news? With the right strategy—including transparent employee communication and a trusted EOR partner like AYP Group—you can exit compliantly and retain your best people.

✅ Key Takeaways:

• Thailand’s Labour Protection Act requires clear notice and severance for most terminations.
• Employers must cancel work permits and visas for foreign workers within 15 days.
• Violating labour laws during closure can delay exit and lead to costly disputes.
• Using an EOR lets you retain key Thai employees without maintaining a legal entity.

👋 Ready to Close Your Thai Entity — and Keep Your Talent?

Let AYP Group help you transition your workforce seamlessly with compliant EOR solutions in Thailand and across Asia.

👉 Talk to an expert today