Severance Pay in Thailand: Rules, Rates, Calculation & Tax (2026 Guide)
What is severance pay?
Severance pay — also called a severance payment, severance package, severance benefits, or redundancy pay — is financial compensation an employer pays an employee whose employment ends through layoff, dismissal without cause, downsizing, or business closure. Its purpose is to support workers through the transition between jobs, and it is normally paid as a lump sum.
The amount depends on the employment contract, the employee’s length of service, the Labour Protection Act, and company policy. On top of the statutory minimum, a full severance package may include: basic compensation based on the employee’s last rate of wages; additional payments such as unused annual leave or pro-rated bonuses; continued benefits like health insurance or pension contributions for a set period after termination; and outplacement services such as resume support, career counselling, and job-search assistance.
Statutory severance pay is a minimum right. An employer can always offer more, but it cannot offer less, and an employee cannot validly waive the statutory minimum in advance — these protections are a matter of public policy.
It helps to see Thailand’s approach in context. Severance practices vary widely by country. In the United States, for instance, there is no general federal law requiring severance pay; it is usually a matter of company policy or a negotiated severance agreement, frequently signed in exchange for a release of claims, and shaped by discrimination laws in employment. Thailand takes the opposite approach: severance is a statutory entitlement, so an employer offering severance pay is meeting a legal obligation rather than granting a favour. Whichever system applies, employees should understand their legal rights before signing any document on the way out.
At a glance
Who is entitled to severance pay in Thailand?
Entitlement turns on length of continuous service, not nationality.
Threshold
Any employee with 120 consecutive days or more of service is entitled to severance if dismissed without legal cause.
Below the threshold
Employees with fewer than 120 days of service receive nothing — which is why most employers keep probation periods to 119 days or less.
Foreign employees
Foreign employees are covered by the Labour Protection Act on the same terms as Thai nationals; severance entitlement does not depend on a work permit or visa status.
Probationary contracts
A probationary contract is treated as an indefinite contract, so once a probationer crosses the 120-day mark, the standard severance scale applies.
The legal basis: Thailand's Labour Protection Act
Severance is governed by the Labour Protection Act (LPA) B.E. 2541 (1998), supplemented by the Civil and Commercial Code (CCC). Thailand’s severance pay laws sit within this broader labour framework and apply to virtually all private-sector employers. The amendment introduced by Act No. 7 (B.E. 2562, 2019), effective 5 May 2019, revised the rates and added a new top tier of 400 days’ wages for the longest-serving employees. Statutory severance is legally required under the LPA — it is not discretionary, and any term in an employment contract that purports to remove or reduce it below the statutory minimum is unenforceable.
An employer may lawfully end an employment relationship when one of these applies: the agreed employment period is fulfilled; both parties mutually agree; the employee has completed the job’s duties; or either party serves valid notice. Termination is also possible in narrower cases, such as a serious breach of the employer’s lawful orders, or the transfer of the business to another employer without the employee’s consent.
Severance pay rates by length of service
How to calculate severance pay
Severance is calculated on the employee’s last rate of wages, then multiplied by the number of days set by the tenure table above. Because Thai severance pay calculation is based on length of employment, there is no single “typical severance package” — the entitlement scales with tenure, from 30 up to 400 days’ wages. To calculate severance pay accurately you need just two inputs: the last wage rate and the completed years of service, and the same severance pay calculation applies to Thai and foreign employees alike.
What counts as “wages.” For severance purposes, wages mean the basic salary plus any fixed, regular payments guaranteed to the employee. They exclude overtime, irregular bonuses, commissions that vary, and expense reimbursements. The daily rate is conventionally calculated as the monthly wage divided by 30.
Severance = (monthly wage ÷ 30) × number of days for the tenure band
These figures are the statutory minimums. Special severance (covered below) and pay in lieu of notice may stack on top.
Notice periods and payment in lieu of notice
Thailand does not set a fixed number of days for notice. Instead, Section 17 of the LPA ties notice to the wage payment cycle: the employer must give written notice on or before a wage payment date, and the termination takes effect on the next wage payment date.
- In practice this means at least one full pay period — roughly a month for monthly-paid staff.
- Notice is not required to exceed three months, even for very long notice clauses, unless the contract sets a longer period.
- If the contract specifies a longer notice period, the employer must honour it.
If wages are paid on the last day of each month and the employer gives notice on or before 31 August, the termination takes effect on 30 September.
An employer that wants the exit to be immediate can pay wages in lieu of notice equal to the notice period instead of waiting it out. Pay in lieu of notice is separate from severance pay — an employee dismissed without cause may receive both.
How to lawfully terminate an employee in Thailand
A clean termination process for an indefinite contract looks like this:
Skipping the written notice of cause is a common and costly mistake: without it, an employer may lose the right to rely on a “for cause” defence and end up owing severance after all.
When must severance be paid?
The timing depends on the reason for termination, but the law expects prompt payment:
Contract expiry
Severance is paid on the date employment ends.
Mutual agreement
Paid on the termination date both parties agreed.
Employer dismissal
Restructuring, downsizing, closure: paid at the time of termination.
Employee resignation
No severance is due, since severance protects against involuntary job loss.
Because the contract, company policy, and labour law all affect the deadline, both sides should track the sequence of events. Late or short payment exposes the employer to penalties and to an employee claim.
When severance is NOT required
Under Section 119 of the Labour Protection Act, an employer is exempt from paying severance when the dismissal results from the employee’s own serious fault:
- Dishonesty in performing duties, or a criminal offence committed against the employer.
- Intentionally causing the employer loss.
- Negligence that causes the employer serious harm.
- Breaching lawful work rules after a prior written warning.
- Absence for three consecutive working days without valid cause (regardless of intervening holidays).
- Imprisonment by a final court judgment.
Severance is also generally not owed in these situations:
- Voluntary resignation: the employee chooses to leave.
- Completion of a genuine fixed-term contract: only in the limited project- or season-based cases defined by the LPA. If a “fixed-term” contract does not truly qualify, authorities may reclassify it as open-ended — and severance becomes payable.
- Termination during probation before 120 days of continuous service.
- Business transfer with consent: where the employee agrees to continue under the new employer, preserving continuity of service.
Under Section 118/1, retirement is deemed a termination of employment, so a retiring employee is entitled to statutory severance at the same rates as a no-cause dismissal. Retirement only loses its tax exemption (see below), not the severance itself.
Special severance pay
On top of ordinary severance, the LPA provides special severance pay in two situations.
Unfair dismissal: an employee's remedies
Dismissal without reasonable cause — or refusal to pay what is owed — gives the employee strong grounds to act. There are two main routes:
Labour Inspector
For unpaid wages, severance, or pay in lieu of notice, an employee can file a complaint with the Labour Inspector, who can order the employer to pay.
Labour Court
For unfair termination, the employee can sue. The court may order reinstatement or, more often, compensation assessed on factors such as the employee's age, length of service, hardship caused, the reason for dismissal, and the amounts already due.
Common unfair or wrongful termination scenarios include termination without valid cause, failure to follow contractual or work-rule procedures, discriminatory termination, and constructive dismissal (where the employer makes conditions so difficult the employee is forced to leave). In practice, many disputes settle with an enhanced severance package.
Two practical points matter here. First, statutory rights cannot be waived in advance, but an employee may agree to a settlement after termination, often as part of a dispute resolution. Second, the limitation period for a breach-of-contract claim is long — up to 10 years — so employers should not assume an unpaid entitlement simply disappears.
Other termination entitlements and employer obligations
Severance rarely travels alone. On termination, an employer should also settle the employee’s final paycheck and address:
Keeping clean records — employee register, wage records, and the written notice of cause — is the simplest way for an employer to defend a later claim.
Is severance pay taxed in Thailand?
Severance pay is treated as assessable income for income tax purposes, but Thai law grants generous relief when termination is involuntary. No special severance pay laws override this — the rules sit inside the ordinary personal income tax system.
Since Ministerial Regulation No. 394 (effective 17 July 2024 and retroactive to 1 January 2023), statutory severance is exempt from personal income tax up to the lower of the employee’s last 400 days’ wages or 600,000 THB — a significant increase from the previous 300 days / 300,000 THB cap. Any amount above the cap is taxed at the normal progressive rates. The exemption does not apply to severance paid on retirement or at the expiry of a fixed-term contract.
In Worked example 2 above, the 500,000 THB severance sits below the 600,000 THB cap, so it would be fully exempt. In Worked example 3, 600,000 THB is exempt and the remainder is taxable — but a further deduction may apply.
Employees with five or more continuous years of service can use the one-time-payment deduction under Section 48(5) of the Revenue Code. It works in two steps before the progressive rates apply:
- Deduct 7,000 THB per year of service (the deduction cannot exceed the total payment).
- Deduct 50% of the remaining amount.
Progressive tax rates on one-time termination compensation
Because the rules combine an exemption, a special deduction, and progressive income tax brackets, the effective tax on a severance package is often far lower than the headline rate — but only if the payment is correctly classified and the employer withholds tax accurately.
How does severance pay affect unemployment benefits?
Severance pay and unemployment benefits are two separate systems in Thailand, and — unlike in some countries — receiving severance does not reduce or delay your unemployment compensation. Unemployment benefits are paid by the Social Security Fund (SSF) to insured employees (Section 33), not by the employer.
To be eligible for unemployment benefits, you must have contributed to the SSF for at least six months within the 15 months before becoming unemployed, register as a jobseeker with the Department of Employment, remain unemployed for at least eight days, and report your status monthly while staying available for work.
The wage used to calculate the benefit is capped (historically at 15,000 THB per month, with the ceiling rising from 2026), so the monthly payout is limited even for high earners. Employees dismissed for serious misconduct under Section 119, or already drawing old-age benefits, are not eligible. Foreign employees insured under Section 33 receive the same unemployment insurance benefits as Thai nationals.
In short, a laid-off employee in Thailand can usually receive both statutory severance from the employer and SSF unemployment benefits — the two do not cancel each other out. Note that the two are taxed differently: severance enjoys the income-tax exemption described above, while SSF benefits follow their own rules.
Frequently asked questions about severance pay in Thailand
Only if they have completed 120 consecutive days of service. Employers usually set probation at 119 days or less to avoid triggering the entitlement.
Yes. The Labour Protection Act applies to foreign employees on the same terms as Thai nationals; entitlement depends on length of service, not nationality or visa type.
It is assessable income, but statutory severance from an involuntary termination is exempt up to the lower of 400 days’ wages or 600,000 THB. Amounts above that are taxed at progressive rates, with a possible Section 48(5) deduction for 5+ years of service.
Generally on the date employment ends. Special severance for relocation is payable within seven days of contract cancellation. Late payment exposes the employer to penalties and claims.
No. Severance protects against involuntary job loss, so a voluntary resignation does not trigger it.
Yes. Retirement is deemed a termination of employment under Section 118/1, so the retiring employee receives statutory severance — though this severance is not tax-exempt.
File a complaint with the Labour Inspector for unpaid severance, or bring an unfair termination claim before the Labour Court, which can order reinstatement or compensation.
Statutory severance is a lump-sum right. It cannot be reduced just because you find another job, and it cannot be withheld for a lawful no-cause dismissal — it is lost only where the dismissal falls under a Section 119 cause. An employee can give up a claim through a release or settlement of claims, but only after termination, never in advance.
No. Severance is paid by the employer, while unemployment benefits come from the Social Security Fund. You can claim both, provided you meet the SSF contribution and registration conditions.
At a minimum: a statutory severance payment based on tenure, plus pay in lieu of notice (for an immediate exit), payout of unused leave, your final paycheck, any provident fund balance, continued severance benefits such as health insurance if agreed, and the required tax and service certificates.
Key takeaways
Severance pay in Thailand is a statutory minimum right tied to length of service, ranging from 30 to 400 days’ wages and payable to any employee — Thai or foreign — dismissed without legal cause after 120 days of service. Employers must respect the Section 17 notice rules, pay special severance where relocation or restructuring applies, and issue the right documents on exit. Employees enjoy strong protection: rights cannot be waived in advance, unpaid entitlements can be pursued through the Labour Inspector or Labour Court, and most severance is now tax-exempt up to 600,000 THB. Beyond the employer’s payment, laid-off workers can also claim unemployment benefits from the Social Security Fund, and their employee rights — including protection against wrongful termination — cannot be signed away before the job ends. For sizeable packages or contested terminations, professional advice usually pays for itself.
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