Deemed Retirement Age Now 60 – Right to Statutory Severance

The Labor Protection Act of 1998, Section 118, (LPA) requires all employers in Thailand to pay severance to employees who are “terminated” by the employer without legal cause (as described in LPA Section 119).  The Thai courts interpret “termination” to include scenarios where an employee retires at the retirement age stipulated in the employer’s Work Rules or in the employment contract. See here for more information.

As previously reported here, the law was silent on scenarios where an employee wishes to retire but the age of retirement was not stipulated in the employer’s Work Rules or in his or her individual employment contract.  Up until 1 September 2017, there was no default or deemed retirement age under the Labor Protection Act.  Therefore, if an employer’s Work Rules – or the individual employment contract of a particular employee – was silent on the retirement age, the employee could not retire and collect severance (unless the employer agreed) because there was no retirement age stipulated.  Under prior law, if an employee voluntarily resigned because he or she could not work anymore due to his or her age, or health conditions, etc. (regardless of his or her age), he or she would not entitled under Thai law to receive retirement severance pay, although some companies might still offer a voluntary ex gratia retirement package.  But, and this is very important, a severance or ex gratia payment was not compulsory under Thai labor law before 1 September 2017.

Effective 1 September 2017, the LPA was amended to address situations where there was 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.  Employees will therefore now have the ability to retire when they reach 60 years of age, unless the applicable Work Rules or employment contract stipulates a different (lower) retirement age, and a right to the applicable severance pay will be triggered (the maximum amount of severance pay is 10 months).  This change to the law does not require employees to retire at this age; it only gives employees the option to retire at that age and recover statutory severance.  And, for example, if an employee continues working past 60 and retires at age 65, that employee will still be entitled statutory severance.

The introduction of a default retirement age should not affect any companies which already stipulate a retirement age lower than 60 in their Work Rules.  But if a company has a higher retirement age (for example, 65), an employee can now retire at 60 and is entitled to statutory severance.