Companies typically use an Employer of Record for fast entry without ownership restriction concerns, payroll management once a local entity exists, and entity setup for firms with a durable Thai presence in mind. The Foreign Business Act's restrictions on foreign ownership in many activities are the defining feature of Thai entity planning.

Employer of Record in Thailand

An EOR allows a company to hire in Thailand without navigating the Foreign Business Act's restrictions on the specific business activities a majority foreign-owned company can conduct, and without registering directly for Thai Social Security. It suits companies testing the Thai market, hiring representative or support staff, or wanting to avoid the foreign ownership complexity of certain business activities while still accessing local talent. It is less suited to companies whose planned Thai activities are unrestricted or who have secured the necessary licences and are ready for direct, long-term local operations.

How payroll works in Thailand

Thai payroll withholds personal income tax (PIT) at progressive rates and requires both employer and employee contributions to the Social Security Fund, which covers healthcare, disability, death, child allowance, old-age, and unemployment benefits, subject to a contribution salary cap. Payroll is monthly, and a year-end bonus, while not universally a strict statutory mandate, is common market practice, particularly among larger and multinational employers. Provident fund participation, a voluntary supplementary retirement scheme, is common among competitive employers though not legally mandatory in all cases.

Payroll frequency and reporting obligations

Monthly payroll is standard, with PIT withholding and Social Security Fund contributions remitted monthly to the Revenue Department and Social Security Office respectively. Annual PIT reconciliation and reporting is required, with employees generally required to file their own annual return incorporating employer-withheld amounts. Social Security registration must occur promptly upon hiring, and the contribution salary cap needs to be applied correctly in payroll calculations.

Key payroll nuances

There is no strict statutory 13th-month or year-end bonus mandate, but it is common and often expected practice, particularly in larger organisations and certain sectors, and should be factored into competitive compensation planning. Severance pay is mandated by law on termination without cause, calculated on a sliding scale based on length of service, and can be substantial for long-tenured employees. Social Security Fund contributions are capped at a maximum salary threshold, which needs correct application. Foreign employees require a work permit tied to a specific employer and role, and payroll processing needs to align with valid work authorisation status.

Pay components and employer costs

Typical pay components include base salary and, commonly, a year-end or performance bonus. Employer costs beyond salary include the employer share of Social Security Fund contributions (subject to the salary cap) and, where offered, provident fund contributions. All-in statutory employer cost is comparatively modest by regional standards, though the potential severance liability on termination should be modelled as part of total workforce cost planning.

Benefits and leave entitlements

Statutory annual leave is six days after one year of continuous service, a relatively modest legal minimum, with most competitive employers offering considerably more. Sick leave is a statutory entitlement of up to 30 paid days per year. Maternity leave is a statutory entitlement of 98 days, with a portion funded through the Social Security Fund. Public holidays are set nationally and generally number around 13 to 16 per year including substitution days. The Social Security Fund provides Thailand's core statutory healthcare and social benefit coverage for covered employees.

Hiring and employment contracts

Written employment contracts are standard practice, though not universally mandated by statute for every term. Probation periods are commonly capped at 119 days by convention, a specific figure tied to statutory severance thresholds that trigger just under the 120-day mark. Fixed-term contracts are permitted but must genuinely reflect temporary or project-based work to avoid conversion risk. Statutory severance pay applies on termination without cause based on a length-of-service sliding scale, and failing to pay it properly exposes the employer to legal claims.

Entity setup in Thailand

Foreign companies must consider the Foreign Business Act, which restricts or requires special licensing for majority foreign ownership in many business activities. A Thai limited company with foreign ownership requires either operating in a non-restricted activity, obtaining a Foreign Business Licence, or securing incentives through the Board of Investment (BOI), which can also grant land ownership and work permit benefits. Registration is completed through the Department of Business Development, followed by tax registration and Social Security Office registration before hiring. End-to-end setup typically takes six to twelve weeks, with BOI applications or Foreign Business Licences extending this further where required.

EOR vs Payroll Management vs Entity Setup — Thailand

Frequently asked questions