Thailand: Test for employment relationship

Employers may sometimes try to avoid statutory obligations under Thai labour law by entering into contractor agreements instead of employment agreements. Under Thai labour law, employees are entitled to certain statutory entitlements including public holidays, annual leave, maternity leave and severance pay. Conversely, contractors are not entitled to these statutory entitlements.

Employers may sometimes try to avoid these statutory obligations by entering into contractor agreement instead of employment agreements. However, a contractor agreement may still be considered an employment agreement. Determining whether a worker is a contractor or an employee depends on the nature of the working arrangement and not the label given to the agreement.

Irrespective of what the agreement is called, courts will look into the nature and substance of the arrangement on a case-by-case basis to determine whether an employment relationship has in fact been created. Generally, the courts will focus on two key issues: (1) the way in which wages or remuneration is paid and (2) the extent and nature of the employer's authority to supervise that contractor.

The Thai Labour Court has a tendency to be lenient towards employees in order to protect their entitlements. If a worker is deemed an employee, the employer may be liable for payment of entitlements such as holiday pay, overtime and other statutory allowances.

Impact for employers

In determining how to engage a worker, companies should consider the totality of the relationship with a particular focus on the proposed way in which remuneration is paid and the extent to which they will have authority to supervise and control the work of the worker.

Further details are available here.