The current Labor Protection Act of 1998 (Section 118) generally requires all employers in Thailand to pay severance to employees who are “terminated” by the employer without legal cause (as further described in Section 119). The Thai courts interpret “termination” to include scenarios where an employee retires at the stipulated retirement age in the employer’s Work Rules or in the employment contract.
However, the law is silent on scenarios where an employee wishes to retire but the age of retirement is not stipulated in the employer’s Work Rules or in his or her individual employment contract, and there is no default or deemed retirement age currently under the Labor Protection Act. Therefore, if an employer’s Work Rules – or the individual employment contract of a particular employee – is silent on the retirement age, the employee will never technically retire because there is no retirement age stipulated.
Under such circumstances, if an employee voluntarily resigns because he or she cannot work anymore due to his or her age, or health conditions, etc. (regardless of his or her age), he or she will not receive retirement severance pay (although some employer companies may still offer a voluntary ex gratia retirement package, but that is not compulsory under the Thai labor law).
The government wants to address scenarios where there is no express retirement age in the Work Rules of an employer company (or in the applicable employment contract) by introducing a “default or deemed retirement age” of 60 years old. (The government also wants to amend the Labor Protection Act to expressly confirm that retiring employees are entitled to severance pay, which is consistent with the current interpretation of the Thai courts, but this is more of a technical issue.)
If and when the law is actually in effect, all employees will have the ability to retire when they reach 60 years of age, unless the applicable Work Rules or employment contract stipulates a different (lower or higher) retirement age, and consequently, applicable severance pay – up to a maximum of 10 months wages if the employee has worked for 10 years or more – will be triggered.
However, the parameters of alternative retirement ages that employer companies and employees can agree upon, so as to avoid the default retirement age of 60 years under the new law, remain uncertain. Some employer companies may want to introduce lower or higher retirement ages in their Work Rules; but the greater the difference between the default age under the new law (60 years old) and the “agreed” alternative retirement age between employers and employees, the higher the chance that such alternative retirement age may be unenforceable.
The Cabinet has now approved in concept the 60 year old “default or deemed retirement age”, but the National Legislative Assembly (NLA) still needs to consider and approve it, and the amendment then needs to be published in the Royal Gazette before the law takes effect – which should then contain rule and application details – after which the above uncertainties should be clarified.
In any event, the introduction of a default retirement age should not affect any companies which already stipulate a certain retirement age in their Work Rules.
It also appears quite clear now that the NLA will ultimately agree with the Cabinet (as this is not a controversial issue) to enact legislation on this matter, but the exact timeframe for doing so is very hard to predict. Some news sources report that the Cabinet wants the NLA to approve the amendment as soon as possible so that it can take effect by the middle of this year (2017). However, this timeframe is not set in stone and could be delayed for various reasons.