Thailand has introduced a compulsory retirement age designed to provide those retiring with a severance payment following amendments to the Labor Protection Act.
The Labor Protection Act (No.6) B.E. 2560 (2017) (the Act) has been amended to combat the obstacles that retirees encountered when attempting to receive severance pay. For the first time in Thai employment law, the Act lays down a compulsory retirement age to which employers must adhere. The Act also deals with the granting of severance pay to retirees. In past years, had an employer failed to identify the age of retirement (whether in an employment agreement, work rules, or HR policy), the employee was expected to carry on working until he or she was unfit to do so. This practice caused many employees to resign voluntarily, with the result that they were then unable to claim severance pay under Thai law.
Under the new law, if an employee reaches the retirement age of 60 years, and the employer has not set a retirement age, or the age set is over 60 years of age, then the employee will be able to retire by duly informing the employer of the intention to cease working. After a 30-day period, the retirement will become effective with the employee being entitled to full severance pay in line with the provisions of the Act.
An employer that fails to pay severance pay to a retiring employee may be fined up to Thai Bhat 100,000 (USD 3,188 : GBP 2,287 : EUR 2,588), or imprisoned for a term of 6 months, or both.
The amendments to the Labor Protection Act have been made to cement the court’s rulings that retirement is considered to be a termination of employment. This clarifies the employer’s obligations upon the employment relationship ending when an employee reaches retirement age. It also relieves aging employees from the obligation to continuing working until they are no longer fit to do so and ultimately resigning.
Written by Kraisorn Rueangkul and Ponpun Krataykhwan of DFDL and Roger James of Ogletree Deakins