The Importance of the Minimum Wage Rate Compliance

22
March
2018

From 1 April 2018, the new minimum wage rate will take effect in Thailand. The daily wage sees an increase of between THB5 to THB22, dividing Thailand into seven groups based on the location and cost of living in the respective areas.[1]  This new hike of up to 7% was adjusted to promote equality and fairness to labourers since the last adjustment of the nation’s present minimum wage rate in 2013.

Every business operator as the employer should check and adjust the payroll to follow the new minimum wage rate accordingly or the business may be subjected to employment related sanctions both by monetary and criminal measures.

Any employer who fails to meet the minimum wage requirement under the monetary sanctions will have to:

  • pay the shortfall wage to the employees;[2]
  • pay additional 15% of the shortfall wage after every lapse of 7 days from the due date of payment for every 7 days that the amount remains outstanding;[3]
  • pay a default interest at the rate of 15% per annum for the shortfall wage to the employees;[4]
  • pay the shortfall contribution (both employer and employees’ portion) calculated based on the short fall amount, to the social security fund together with a surcharge at the rate of 2% per month for the shortfall of contribution to social security fund until the proper payment is made in full (in any case, the amount of surcharge shall not exceed the contribution payable by the employer);[5]
  • pay the shortfall contribution (both employer and employees’ portion), calculated based on the short fall amount, to the provident fund together with a surcharge at the rate of 5% per month for the shortfall of contribution to provident fund until the proper payment is made in full.[6]

In addition to the above monetary sanctions, if the regulatory authorities find out that the business operator failed to comply with the new minimum wage rate thereby making the wage payment lesser than the amount required by law, then the business operator may also be subjected to criminal sanctions in accordance with the applicable laws. For instance, under the Labour Protection Act B.E. 2541 (1998), failure to pay the proper wage shall be penalised with imprisonment not exceeding 6 months, or a fine not exceeding THB100,000, or both. The punishment can be imposed on:

  • the person who gives an order or performs such action; or
  • neglects an order or neglects a duty as required as a Managing Director; or
  • any person who is responsible for carrying out the business of such legal entity which commits such criminal offense.

However, the offences under the Labour Protection Act can be settled by paying the designated amount of fine. There may be other potential criminal charges applicable to business operators depending on the circumstances which will require a more in-depth analysis at that stage.

Given that there are many risks involved with the new minimum wage rate announcement, every business operator should check with their local authorities on the rate applicable and comply with the requirements accordingly.

If you have any questions or require any additional information, please contact Threenuch Bunruangthaworn, Archaree Suppakrucha, Panwadi Maniwat or the ZICO Law partner you usually deal with.


This alert is for general information only and is not a substitute for legal advice.

 

[1] The Nation, ‘Modest variable minimum wage hike comes under criticism form workers and employers’ (The Nation, 19 January 2018) http://www.nationmultimedia.com/detail/national/30336603 accessed 12 March 2018.

[2] Labour Protection Act B.E. 2541 (1998), paragraph 1 of s 90.

[3] ibid, s 9.

[4] ibid, s 9.

[5] Social Security Act B.E. 2533 (1990), s 49.

[6] Provident Fund Act B.E. 2530 (1987), paragraph 3 of s 10.