Amendments to the Labor Protection Act

The Cabinet has approved the proposal of the Ministry of Labor in January 2017 to amend the Labor Protection Act.  It is expected that the draft amendment to the Labor Protection Act (the “amended Act”) may be enforceable by May 2017.  The key amendments include: 

 

1)  Determination of the minimum wage based on a specific group of employees, to add the determination factors to the existing criteria which based on type of business, work or occupation, or the locality to be based on a specific group of employees, e.g. minors, senior citizens or disabled employees.

 

2) Release of employer’s requirement on submission of Work Rules, the employers having 10 or more employees will no longer be required to submit a copy of the Work Rules to the Department of Labor Protection and Welfare and it will only be required to prepare, announce and post the Work Rules openly at their workplaces at all times.

 

3) Employment termination due to retirement: Specific provisions on retirement issues are proposed to be added to the Labor Protection Act:

3.1) Retirement to be treated as employment termination: Under the amended Act, the retirement shall be treated as a case of the employment termination which an employer shall pay a severance pay to a retiring employee.

3.2) Retirement age: The amended Act prescribes the statutory retirement age at 60 in the case where the employers do not stipulate the retirement age of employees in their employment contracts, Work Rules and internal policies.  After the retiring employee has received severance pay according to Thai labor law, the employer and the employee may enter into a new employment contract which is different from their previous employment contract.

3.3) Penalty of employer: The amended Act prescribes a penalty on an employer who fails to give a severance pay to a retiring employee, i.e. a maximum of six-month imprisonment, or a maximum fine of Baht 100,000, or both.

 

 

Foreign Business

To operate hire-purchase, leasing, and sale by installment payment

Q: A foreign company registered in Thailand has received permission for business of 1) manufacturing and distribution of motorcycles, engines, and golf carts, 2)  retail and wholesale business of lubricants, components and parts of motorcycle, outboard motors, and golf carts, and 3) installation, maintenance, and advice services for outboard motors, wave runners, big bikes, golf carts, and parts.

The company would like to operate additional businesses regarding 1) hire purchasing, leasing and sales by installment payments of above mentioned products, and 2) renting an unmanned aviation vehicle (UAV) and providing service of for spraying chemical, liquid organic substance and pesticide by UAV. The company understands that operating such businesses need to obtain the Foreign Business License which is correct or not?

 A: 1) Hire purchasing and leasing motorcycles, engines, and golf carts and 2) Renting UAV and providing service to spray chemical, liquid organic substance and pesticide by UAV are considered as operating the other service businesses under List three (21) of the Foreign Business Act B.E. 2542 and such businesses are required to obtain the Foreign Business License.

In case of sales by installment payments for outboard motors, wave runners and golf carts is considered as operating the retail business under List three (14) or wholesale business under List three (15) of the Foreign Business Act B.E. 2542 because the ownership of the products normally transfers to a buyer when the purchase agreement is completed while the install payments is only a condition of sale or credit of trade between buyer and seller. The company must receive approval of the Foreign Business License prior to retail or wholesale operation.

However, to operate the businesses without having to obtain the Foreign Business License, the foreigner has to have the minimum registered and fully paid-up capital of Baht 100 million for each business which the aforementioned minimum capital shall not include minimum capital as required by other laws. Each capital of Baht 100 million for retail business can own 5 shops and 1 shop for wholesale business.

Coordinating logistic service for affiliated company

Q: A foreign company has been granted Foreign Business License to provide the management and advice service to an affiliated company in area of marketing, finance, HR, training, internal inspection, procurement of office supplies or manufacturing materials, and information technology. The company would like to operate a service to coordinate with the logistic company in order to manage the schedule of import or export to the affiliated company. The company will charge to the affiliated company an addition of 1% on top of the amount of service fee proposed by the logistic company. The company understands that the granted Foreign Business License has included the aforementioned service operation and such service is also not considered as doing domestic and international transportation business because the company does not deliver, reserve freight, receive or pack a product, pay a freight billing, and provide a custom clearance which those activities are regarded as doing transportation business. The company’s understanding is correct or not?

A: 1) The permitted service on management and advice on the aspects of administration and management does not include the service to coordinate the schedule with the logistic company, it is to provide the management and advices to the affiliated company only.

2) In case of charging coordination service fee of 1% on top of the transportation service fee, the foreign company is considered as operating the transportation business. To operate the domestic transportation business under List two, Group 1 (2) of the Foreign Business Act B.E. 2542, the foreigner must receive approval from Minister of Commerce prior to operation. However, the foreigner is allowed to operate the international transportation without having to obtain the approval because such business is not under the Foreign Business Act B.E. 2542.