How to convert contractors to employees in Thailand.

When contract workers transition to regular, full time employees in Thailand, it can offer several advantages for both the employer and the employee. However, it is a complex process that requires careful attention to Thai labour regulations. 

This article will provide a step-by-step guide on how to convert contract employees to full time employees in Thailand, both with and without an established legal entity. It will cover the regulatory requirements, processes, and benefits.

Converting contractors to employees with an established legal entity: eight steps

If a business has a legal entity already established in Thailand and wants to transition their international contractors to employees, the steps are as follows:

Step 1: Review the legal requirements

Before converting contractors to employees in Thailand, it is important to review the legal requirements to ensure compliance with Thai legislation. This includes the Labour Protection Act, Social Security Act, and other relevant regulations. It is also recommended to consult with legal experts to ensure that all requirements are met.

Step 2: Negotiate with contractors

Once the legal requirements have been reviewed, it is necessary to negotiate with the contractors on the terms of their full time, regular employment. This may include discussing changes to their job responsibilities, compensation, and benefits.

Step 3: Prepare the employment contracts

After negotiating with the contractors, the employment contracts must be prepared in compliance with Thai labour laws. These contracts should include the details of job responsibilities, compensation, working hours, leave entitlements, and other benefits.

Step 4: Transition contractors to employees

The next step is to transition the contractors to employees. This can be a complicated process, and it is critical to ensure that all employment contracts and benefits are correctly transferred. Companies may also need to train new staff to ensure they understand the company’s policies and processes.

Step 5: Register with the relevant authorities

Employers are required to register their employees with the relevant authorities in Thailand. This includes registering with the Ministry of Labour (MOL) and Ministry of Social Development and Human Security (MSDHS), and obtaining the necessary work permits for foreign employees.

Step 6: Set up payroll and social security contributions

Employers are required to set up payroll systems and ensure that social security contributions are made for all employees. This includes contributions to the social security fund, as well as withholding taxes and other statutory deductions.

Step 7: Establish HR policies and procedures

It is important to establish HR policies and procedures that comply with Thai labour laws. This includes policies on recruitment, compensation and benefits, employee leave, and other important HR matters.

Step 8: Provide employee benefits

Finally, employers must provide employee benefits such as health insurance, retirement plans, and other benefits as required by Thai law. In addition to complying with the labour laws, the promotion of employee benefits will help to attract and retain employees.

Converting contractors to employees without a legal entity: 5 steps

Companies without a legal entity in Thailand can still convert contractors to employees by working with a Professional Employer Organisation (PEO) that offers Employer of Record (EoR) services. In this arrangement, the EoR acts as the legal employer, taking responsibility for the employees’ payroll, benefits, and compliance functions.

Below is an outline of the EoR process. This link provides a more in-depth look at using an EoR in Thailand. :

Step 1: Choose a PEO with the capacity to act as an Employer of Record

The first step is to choose a reputable PEO that can help navigate the legal and regulatory requirements of employing workers in Thailand. The PEO should have a verifiable track record, experienced local staff, and a deep understanding of Thai labour laws and regulations.

Step 2: Provide the PEO with the contractors’ information

It is essential to provide the PEO with information about the contractors transitioning to employees, such as their names, addresses, social security numbers, and job titles.

Step 3: Notify the contractors

The employees must be fully informed about the reasons behind their transfer and how it will affect their employment. Additionally, employers should highlight the advantages of the transition, like greater job security, access to health insurance, and other benefits.

Step 4: Convert employees

The PEO will convert the contractors to employees and manage the paperwork and legalities involved in converting the contractors to employees.

Step 5: Monitor progress

The PEO will provide visibility on the progress of the employees’ transition, and it is important to communicate regularly with them to ensure everything is running smoothly.

How Acclime can help

Converting contractors to employees in Thailand can offer multiple benefits for both the employer and the employee, but it can be a daunting task given the country’s strict labour laws and the authorities’ sometimes discretionary decision making.

As mentioned above, one way to streamline this process is to work with a PEO such as Acclime. Acclime can act as the legal employer of your workforce, mitigating the risks associated with employee relations while allowing you to focus on your core business operations. Working with a reputable PEO like Acclime can enhance your credibility with employees, customers, suppliers, and investors, as it demonstrates your commitment to compliance and ethical business practices. Contact the Acclime team in Thailand to learn more about how we can help with your business needs.

The Acclime group is the premier professional services and advisory firm in the Asia-Pacific region, with over 1,200 experts serving 13,000 clients across 15 countries, each with unique cultural and regulatory challenges. Global client service centres are provided in the UK, US, EU, and UAE.