When a Bonus Payment Becomes Mandatory: Labor Law in Thailand
As a general rule, a bonus agreement in a Thai employment contract is a voluntary benefit. However, under certain circumstances it may become mandatory. A clause that would eliminate the bonus in the event of a negative annual result would also be unlawful. ππππ π©ππ ππͺπ‘π‘ ππ§π©πππ‘π πππ§π...
LEGAL
In the business world, employers particularly value those employees who perform productive work and are committed to the company. Many employers therefore offer employees the chance of a bonus in order to motivate them to work hard and commit to the company. Employees are usually paid such a bonus at the end of the year, depending on their performance. The amount of the bonus is at the discretion of the employer.
Yet, a legal dispute often arises when the employer exercises its discretion not to pay a bonus to individual employees or to all employees. The Thai Supreme Court has now delivered a judgment on the bonus in the Thai employment contract.
Letβs start with a definition of a bonus according to Labor Law in Thailand: when employees receive an additional payment on top of their regular remuneration, this payment is often referred to as a βbonusβ. For example, an employer may pay its employees a bonus if the employer is convinced that their performance is outstanding. This type of bonus is then paid as a βperformance bonusβ.
In principle, the employer may assume that this type of voluntary βbonusβ is not a wage component under Thai labor law the bonus is therefore not βwagesβ as defined in the Labor Protection Act B.E. 2541. According to the Supreme Courtβs decision, the employer is not legally obliged to pay this bonus to an employee.
But beware: the legal situation changes completely if specific criteria for a bonus payment are defined in an employment contract. If an employee has met these criteria, Thai Labor Law entitles him or her to claim the bonus. It is then no longer a βvoluntary benefitβ, but a compulsory payment.
In the ruling by the Supreme Court, the employment contract stipulated that the employee would receive a βbonusβ at the end of the year if he had been employed for a certain period of the year. If this condition was met, the court ruled that the employee was entitled to receive the bonus payment.
Furthermore, the court also clarified that the employer may not refuse or defer payment of such a bonus with the justification that the company did not make a profit during the period in question.
In practice, this means that the wording in the employment contract must make it very clear that it is at the discretion of the company to pay a βprospectiveβ bonus.
Therefore, on Thai Labor Law it is important to avoid any kind of positive or, preferably, exclusionary conditions, the fulfilment (or non-fulfilment) of which the employee can invoke in case of dispute.
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