Thailand: Controversial minimum wage hike

The Wage Committee, under the Ministry of Labour, has announced an increase on a nationwide basis from 1 January 2013 in the daily minimum wage. The minimum wage will increase to 300 Baht regardless of age, sex, industry.

In some provinces, this national minimum wage represents an increase of more than 30% to the previous minimum wage. As the minimum wage in some neighbouring countries is 20% or even 6% of Thailand’s wage, workers in those countries have flocked to Thailand. 

The rise in labour costs resulting from the Wage Committee announcement has already had a substantial impact on small and medium sized enterprises (enterprises with less than 10 employees) and has led to employee layoffs and the closing of businesses in some cases. 

Medium and large companies are not as affected by the change due to the government’s reduction of corporate tax by 7% to compensate for this amendment.  Nevertheless, it is expected that some multinationals may consider investing in nearby countries due to more competitive cost structures. 

This change may also adversely affect some employees as certain employers are significantly reducing welfare, benefits, and overtime. 

Violation of this minimum wage announcement will result in a six -month imprisonment term for directors and/or a fine of 100,000 baht. 

Action for employers

Employers operating in Thailand need to ensure they are complying with the minimum wage announcement, as violation of the announcement may result in up to six -months imprisonment and/or a fine of 100,000 baht for directors of employing entitles who fail to comply.

Article written by Surapol Srangsomwong, Partner and Vanina Sucharitkul, Senior Associate.