In Southeast Asia, Thailand is one of the best markets for regional team expansion as it boasts a comprehensive talent pool and excellent infrastructure, plus easy access to the rest of the region. The purpose of this guide is to provide a practical resource for foreign investors on the ‘where’, ‘cost’ and ‘how’ of hiring in Thailand legally.
Talent Market Overview
Thailand’s talent pool is divided into many markets and the appropriate hiring location is highly dependent on the role being filled. Both large-scale operations and corporate support functions can be situated close to HQ, clients and regulators, yet will require the building of a team from Bangkok, which likely has the strongest talent pool. For larger scale and distributed teams, Chiang Mai, at a significantly lower cost, has a large pool of tech talent, as well as strong engineering and creative skill sets. Outside of the major hubs, numerous smaller cities in Thailand support roles and functions readily. The concentrated nature of the client base dictates the location of sales and marketing talent. Customer support and shared service functions can be outsourced to nearly all of Thailand’s smaller cities. Enterprise functions are best served by Bangkok, while Chiang Mai is the best choice for technical roles without the need for client contact in Bangkok.
The Cost of Hiring in Thailand
Knowing a few figures can help us analyze the costs of hiring in Thailand. The Bangkok minimum daily wage is currently set at 354 THB, though most professional hires are paid significantly above this. Employers pay 5% of a hire’s salary, capped at 750 THB per month, which helpfully makes this cost predictable since it does not change with the level of a hired employee. On the professional services side, monthly accounting can cost between 2,000 and 10,000 THB based on the volume of transactions and the complexity of VAT (Value Added Tax) returns, and annual tax returns and audits can cost at least 15,000 THB to 50,000 THB. One example from a small software company in Bangkok can serve as an initial budget guide. The example lists the total employee costs at 46,970 THB per month (around USD 1,300) from a screen-captured salary of 35,000 THB per month and the fully loaded employee costs of statutory contributions and other costs.
Hiring Models
Foreign businesses typically opt for one of four models to build a team in Thailand. Each having pros and cons. Direct employment through a locally registered entity provides full flexibility over compensation and cultural and management preferences, but requires that the entity itself be set up and maintained first. Contractor or freelance arrangements provide more flexibility and faster starts at the expense of real misclassification risks if the working relationship functions more like employment rather than like independent contracting. An Employer of Record lets foreign companies hire staff in Thailand without the need to set up their own entity. The Employer of Record takes care of the staff’s employment and payroll as well as the legal compliance in Thailand in exchange for a service fee. This model tends to suit companies that are testing the market, as it does not require a full local presence. An outsourced shared-services structure works well for non-integrated functions like finance, administration of HR, or customer support.
Payroll and Statutory Costs
In Thailand, the total cost of employment extends beyond the gross wage. An employer’s contribution to social security, which is limited to 750 THB per month per employee, is in addition to gross pay. Additionally, to be competitive for employees with the right skills, employers generally need to offer health insurance and/or a range of benefits. Overtime and paid leave are governed by labor laws and need to be factored into the cost of employment from the beginning, rather than be considered after a team has been built. While year-end bonuses are not legally mandated to be paid, they are expected in most businesses, and severance is provided in the case of termination without cause, and is paid in accordance with the length of service. Companies have to choose between a trade-off of having complete control of payroll by doing it themselves and having no control by signing a contract with a local payroll provider, which is the best option for smaller teams.
Team-Building Strategy
Companies from abroad that are setting up in Thailand begin developing operations by establishing their finance, operations, and customer-interfacing departments. These functions are needed to run day-to-day operations and, comparatively, easier to recruit here. Specialist and managerial functions are usually built once core operational functions are established to a point where they can articulate what the senior functions will be expected to own. Aligning business goals with location strategy can help team-building economics. For example, it can make sense to locate customer-interfacing and finance functions in Bangkok and locate technical and back-office functions in a lower cost center, like Chiang Mai, as that can decrease salary costs without compromising quality. Once a team is built, retention focuses on salary bands and established local managers. Thai professionals, similarly to other skilled professionals, value career growth and professional development over salary.
Risks in HR and Compliance
Misclassification occurs when there is a gap between the legal definition of a contractor relationship and the reality of an employer-employee relationship. Payroll and tax obligations are ongoing. In Thailand, tax and social security obligations are recurring and are subject to penalties if there are errors. Employment contracts and terminations are also tricky. Poorly handled employment terminations in Thailand, which has labor protections for employees, can result in legal disputes and unnecessary severance payments. Employment of foreign nationals adds to the complexity. In order for a foreign national to work in Thailand, they must obtain a work permit. This can take some time and needs to be planned and cannot be treated as a formality.
Frequently Asked Questions
What are the costs to hire in Thailand? In addition to gross salary, there are social security contributions which are capped at 750 THB a month, and statutory employer obligations and benefits. The labor costs for a small sample benchmark of companies in Bangkok is estimated at 46,970 THB per month with a base salary of 35,000 THB, which is roughly 1,300 USD.
What is the best city for hiring? It is function dependent. For finance, enterprise sales, and operations at scale, Bangkok has the deepest pool of talent. For technical and dispersed teams, Chiang Mai is lower cost.
Should I go for direct hiring or an EOR? Direct hiring gives control, but you need a registered entity locally. However, an Employer of Record gives companies the option to hire quickly without setting up an entity, which is a good option for them to check the market before they invest further.
What costs do I need to budget for? The main costs you will need to plan for are: social security at 5% of wages (in Thailand capped at 750 TBH per month per employee), overtime (which is determined as time worked beyond the normal working day of 8 hours), leave of absence obligations per Thai labor law, and severance, if applicable, for employees when they have completed a number of years of service.