Total operating costs can be very low when doing business in Thailand, yet they can also be very high. There can be huge discrepancies in the operating costs depending on the city, grade of the office, and how the company decides to staff itself. This guide offers practical help to foreign firms and startups trying to incorporate Thailand into their regional business plans and trying to support a particular segment of their business. It offers a cost model.
Salary and Payroll
Thailand’s salaries can vary substantially by city and position. On the whole, Bangkok’s salaries are the highest. By the latest business cost reports, the minimum wage in Bangkok is 354 THB, and while most roles are paid much more, the minimum provides a legal baseline. In addition to salaries, employers in Thailand are required to make a contribution to their employees’ social security, which is set at 5% of the employee’s salary, with a cap of 750 THB per month, as well as make skilled employee role market competitive hires and salaries. Companies looking to geographically decentralize their teams can find ample comparably paid labor outside of Bangkok, such as in Chaing Mai and various secondary business hubs.
A snapshot of a small software firm in Bangkok provides insight into how rough salary estimates translate into actual costs. For example, if the base salary is approximately 35,000 THB, the get-per-employee cost is about 46,970 THB (roughly USD 1,300), added on from gross pay, based on mandatory charges and thin layer costs. For professional services, the cost of bookkeeping is in the vicinity of 2,000 THB to 10,000 THB per month, depending on the volume of transactions and the complexity of the VAT filing, while the annual tax filing and the audit usually cost between 15,000 THB to 50,000 THB or more, depending on the size of the firm and the complexity of the business operations. These estimates provide a baseline rather than an upper threshold. The actual costs will depend on the size of the firm, the sector, and the split between outsourcing the compliance task and performing the task in-house.
Main Locations and Costs of Offices and Workspaces in Thailand
The bulk of Thailand’s office rents come from Bangkok’s Central Business District, where standard office space costs an average of around 700 THB per square meter per annum, while Grade A space is around 1,025 THB. Beyond base costs, air conditioning and other service-related costs generally add another 40-50 THB per square meter, per month. Given Thailand’s climate, these costs are real and often neglected when companies focus on the most visible costs of office space. When looking to reduce the cost of office space, companies generally have two options available. They can either choose secondary locations outside of Bangkok’s CBD, or they can opt for flexible or serviced office solutions that contain utilities and amenities, as well as a short-term lease, at a predictable cost.
Other Business Expenses
A realistic operating budget for Thailand should include more than just salaries and rent. Many different types of recurring costs must be captured. Examples include transport expenses, utility expenses, software licensing, and office supplies. Even government fees will slowly add up over time. None of these expenses will look large, but the total cost will be significant. Companies that are rapidly scaling their headcount should add a line for recruitment and onboarding. Even in a competitive labor market, there are still costs for employees in Bangkok when recruitment and onboarding is done internally. Investors in a foreign market will most likely overlook costs for compliance and other regulations. These costs become increasingly significant. Travel and client entertainment will be recurring monthly business costs for companies with a client facing function in Thailand. These costs should be included in the operating budget.
Cost Management Strategies
Some efficient management levers keep up the control of Thailand’s operating costs without compromising on quality and compliance. Shared services and Lean management techniques are keeping the workforce at optimum levels. It is important to avoid building excess staff. Choosing a secondary office location, which can consist of a different city entirely, can cut highly expensive and largest fixed costs. Outsourcing administrative functions and accounting is less expensive than building the ability in-house, especially for smaller teams without full time requirements. The most expensive fixed cost of almost all businesses is real estate. The optimal management of the operating costs of Thailand with shared services requires a well-managed choice of the secondary office location. In this case, a combination of onsite and offsite work is the most optimal. A combination of onsite and offsite work allows businesses to hire talented, lower-cost residents of remote cities, without losing the ability to reach the market by keeping an office and staff in Bangkok.
What Investors Should Budget For
In Thailand, the first step in constructing any operating budget should be estimating the payroll obligations, since payroll is likely to be the largest and most consistent ongoing expense for most service and knowledge-based businesses. First-time budgets most often get payroll obligations wrong by grossly underestimating the payroll burden. The gap between a gross salary and a payroll burden is almost always attributable to social security and benefits. Office and utility expenses should be separate line items, due to their relative variability based on location and the relative quality/grade of office space. Tax and compliance costs, including accounting, audit, and filing fees, should be considered as ongoing costs and not one-time costs. Since most first-time entries to the market run into unanticipated and unbudgeted expenses, a buffer for these costs should also be included.
Most Common Inquiries
How much does office space cost in Bangkok? In Bangkok’s CBD, regular office space costs around 700 THB per square meter, while air conditioning and Grade A space add another 40 to 50 THB per square meter per month, bringing the cost to around 1,025 THB per square meter.
What is the real cost of hiring in Thailand? The real cost of hiring in Thailand includes gross salary, social security capped at 750 THB per month per hired employee, and benefits. A Bangkok example shows that a 35,000 THB salary translates to a total employee cost of around 46,970 THB per month, or about USD 1,300.
What regular business costs should I account for? Utilities, Internet, and software costs should be budgeted, as well as recruiting costs, and professional services. Tax and audit compliance usually costs 2,000 to 10,000 THB a month for accounting and around 15,000 to 50,000 THB for filings and audits a year.
Are costs lower in Thailand’s regions? Yes, in general. Cities such as Chiang Mai have more affordable salaries and office costs. If your business does not need daily face to face client interactions with Bangkok based business, or does not rely on infrastructure in Bangkok, Chiang Mai or similar regions are worth considering.