Expatriate Secondment Arrangements in Thailand: How to Properly Mitigate the Risk of the Thai Host Company Being Considered and Liable as the Employer

Introduction

Expatriate secondment arrangements are common in multinational business operations but may give rise to unintended employment risks in Thailand.

Although the employment contract may remain with an overseas entity, Thai courts may look beyond the contractual arrangements and consider the realities of the working relationship. If a Thai host company is found to have acted as an employer, it may be liable for severance pay, payment in lieu of notice, and compensation for unfair dismissal, even if it is not the contractual employer.

This Update summarises the key factors considered under Thai labour law and relevant Supreme Court precedents, together with practical measures to minimise the risk of a Thai host company inadvertently acquiring employer status.  

Employer Status under Thai Labour Law and Supreme Court Precedents

Section 5 of the Thai Labour Protection Act B.E. 2541 (1998) (“LPA“) defines an employer as a person who employs and pays wages to an employee. The definition also extends to persons acting on behalf of the employer, including authorised representatives of a company (where the employer is a juristic person) and those delegated to perform employer functions.

When determining who the employer is, Thai courts focus on the actual working relationship rather than the wording of the contract alone. In particular, the courts will consider main factors such as: (i) who controls and supervises the employee’s work, (ii) who bears the employment costs, (iii) which work regulations govern the employee, and (iv) who benefits from the employee’s work.

In applying these factors to the circumstances of each case, Thai courts may consider indicators such as whether the company directs the employee’s day-to-day activities, pays their wages, sets their working hours and workplace requirements, approves leave, enforces company policies, evaluates their performance, or has the authority to take disciplinary action.

Additionally, the LPA contains a statutory provision under which a business operator may be legally deemed as an employer in certain labour outsourcing arrangements. Specifically, section 11/1 of the LPA provides that where a business operator engages another person to supply workers (other than through a licensed employment agency) to perform work that forms part of the business operator’s business, the business operator is deemed to be the workers’ employer, regardless of who supervises them or pays their wages.

Key Considerations for the Thai Host Company in Expatriate Secondment Arrangements

In light of the above legal principles and Thai Supreme Court interpretation, companies should carefully structure and implement expatriate secondment arrangements to ensure that the overseas entity remains the sole intended employer,  both in the documentation and practice. The following measures may help mitigate the risk of the Thai host company being regarded as an employer under Thai labour law.

Do’s 

1. As a starting point, ensure that the secondment arrangement is properly documented and expressly states that the overseas entity remains the sole employer throughout the secondment period. The documentation should clearly delineate the respective roles and responsibilities of the overseas employer, the Thai host company, and the secondee.

2. More importantly, ensure that key employment decisions, including performance reviews, remuneration adjustments, promotions, disciplinary actions, and termination, remain solely within the authority of the overseas employer.

3. Ensure that reporting lines clearly establish that the secondee remains accountable to, and is supervised solely by, the overseas employer rather than the Thai host company.

4. Ensure that the secondee’s salary, benefits, bonuses, and other employment-related costs are paid and administered by the overseas employer. Any payment arrangement should be carefully structured and documented so the Thai host company is not perceived as assuming the responsibilities of an employer.

5. Where the involvement of the Thai host company is necessary, limit its role to local support and administrative matters, such as work permit and visa arrangements, the provision of office facilities, and other logistical assistance.

6. Finally, and most importantly from a practical perspective, ensure that both the contractual documentation and the actual working arrangements demonstrate that the secondee remains under the direction and control of the overseas employer and performs services primarily for its benefit.

Don’ts

1. Most importantly, do not allow the Thai host company to make independent decisions relating to the secondee’s employment or working conditions, including recruitment, performance evaluations, remuneration, promotions, disciplinary actions, or termination. 

2. Likewise, do not allow the Thai host company to exercise day-to-day managerial control or supervision over the secondee in a manner that suggests the existence of an employer-employee relationship.

3. Avoid arrangements under which the Thai host company appears to be the primary beneficiary of the secondee’s services.

4. Do not allow the Thai host company to enter into, co-sign, or otherwise become a party to any employment agreement with the seconded expatriate.

5. Finally, do not rely solely on disclaimer clauses in the secondment agreement. If the actual working arrangements suggest otherwise, Thai courts may still regard the Thai host company as an employer, a co-employer, or a person acting on behalf of the employer.

A Real-Life Example: When a Thai Host Company Was Not Deemed an Employer

The following Supreme Court case highlights the factors Thai courts consider when determining whether a Thai host company should be regarded as an employer or a person acting on behalf of the employer.

Supreme Court Judgment No. 1856/2561 (2018)

The Court found that the employee was employed by, and seconded from, a Singapore company. The employee also acknowledged that the employment agreement had been entered into with the Singapore company and that the Thai company was not a party to the agreement. Further, the employee’s assignment to Thailand followed the Singapore company’s instructions, while the Thai company provided only local administrative support to facilitate the employee’s work in Thailand. The Court also confirmed that the two companies remained separate legal entities despite being part of the same corporate group. Importantly, the Court held that administrative assistance, such as work permit arrangements, tax and social security filings, and other local support, was not sufficient to make the Thai company an employer or a person acting on behalf of the employer under the LPA. Accordingly, the Thai company was not liable for severance pay, payment in lieu of notice, or unfair dismissal compensation.

Concluding Words

Expatriate secondment arrangements are common in cross-border business operations. However, when employment disputes arise, Thai courts will look beyond the contractual documentation and focus on the realities of the working relationship when determining whether the overseas entity, the Thai host company, or both should be regarded as the employer under Thai labour law.

Companies should therefore ensure that both their documentation and day-to-day practices consistently reflect the intended employer relationship to minimise the risk of unintended employer status and related employment claims against the Thai host company.

If you have any queries on the above, please reach out to our Partner listed on this page.

For regional employment matters, please see Rajah & Tann Asia’s Employment Practice for more information.

Contribution Note:

This Legal Update is contributed by the listed Contact Partner, with the assistance of Associate Irawin Vinitkul.