Over the past five years, Thailand has faced a range of challenges—from the outbreak of COVID-19, to the advancement of artificial intelligence technologies, and the slowdown of the economy—all of which have had a direct impact on business operations and internal management. Under such demanding circumstances, the ability of businesses to withstand shocks, adapt quickly, and maintain performance amid uncertainty—commonly described as organizational resilience—has become a decisive factor for long-term survival. One of the key processes in restructuring organizations to build such resilience, after reconfiguring structures, redefining roles, and streamlining processes to enhance efficiency, often includes workforce downsizing, particularly in organizations undergoing digital transformation.
This article will go on to discuss Thailand’s labour protection laws in cases of termination of employment, or potential termination, within these challenging contexts—namely, the economic crisis triggered by the COVID-19 pandemic, organizational restructuring due to digital transformation, and the latest developments concerning changes in employment models.
Economic Crisis from the COVID-19 Pandemic
The outbreak of COVID-19 in early 2020 severely impacted businesses worldwide, including in Thailand. In Thailand, the government issued preventive measures prohibiting airlines from operating passenger flights in most areas. As a result, airlines were unable to provide services, and the public was urged to avoid or suspend travel. This forced many airlines to temporarily cease operations, which in turn affected their employees, as airlines had to request staff to take unpaid leave, reduce salaries, or in some cases, proceed with terminations in order to sustain their businesses.
At the time, Thai Airways has already been facing accumulated losses, and the pandemic further exacerbated its financial distress, accelerating the need for organizational restructuring through business rehabilitation proceedings. This restructuring required reforms across multiple areas—including workforce, investment, and strategic business operations—to cut costs and strengthen competitiveness in the aviation market. It then in 2021 announced the termination of 1,362 employees. This figure does not include the earlier layoffs in 2020, when its subsidiary providing aviation-related labour services for domestic airline operations terminated more than 2,600 employees.
Under Thailand’s Labour Protection Act B.E. 2541 (1998), Section 118 requires employers to pay severance pay to employees who are terminated, calculated according to their length of service as follows:
| Length of Service | Severance Pay Entitlement |
| 120 days but less than 1 year | 30 days’ wages |
| 1 year but less than 3 years | 90 days’ wages |
| 3 years but less than 6 years | 180 days’ wages |
| 6 years but less than 10 years | 240 days’ wages |
| 10 years but less than 20 years | 300 days’ wages |
| 20 years or more | 400 days’ wages |
In addition, there is another form of compensation that may arise when an employee files a claim with the Labour Court alleging unfair dismissal. The Court may order the employer to pay what is known as “compensation for unfair dismissal” under Section 49 of the Establishment of Labor Courts and Labour Court Procedure Act B.E. 2522 (1979). If the Labour Court finds that the termination was unfair to the employee, it may order the employer to reinstate the employee at the wage rate received at the time of dismissal. However, if the Court determines that the employee and the employer cannot reasonably continue working together, it may instead order the employer to pay the employee compensation for unfair dismissal. In determining the amount of such compensation, the Court will take into account the employee’s age, length of service, hardship suffered as a result of dismissal, the grounds for dismissal, and the statutory severance pay to which the employee is entitled.
Thus, it can be seen that the law on protecting employees against unfair dismissal functions as an equitable framework that preserves the discretion of the courts—both in determining whether a termination constitutes unfair dismissal and in assessing the amount of damages to be awarded—thereby allowing for flexibility. At the same time, however, this discretion also creates legal uncertainty as to which circumstances will be deemed “unfair dismissal” and, in such cases, what amount of compensation the employer will be ordered to pay. This uncertainty has led to a large number of employee claims being brought before the Labour Court.
A recent example involved four flight attendants of one of domestic airlines who were dismissed in 2020 and subsequently filed a lawsuit with the Labour Court. In late 2024, the Supreme Court rendered a judgment holding that the dismissals in this case did not constitute unfair dismissal, and that the employer was not held liable to pay compensation for unfair dismissal to the four employees. What makes this case particularly notable is that the Labour Court of First Instance had not awarded unfair dismissal compensation, but the Court of Appeals reversed and ordered the employer to pay such damages. Ultimately, however, the Supreme Court overturned the appellate ruling and held that the employer was not required to pay such compensation. In its judgment, the Supreme Court included an observation of particular interest, stating that:
The first defendant (the employer) operates an airline business. However, the first defendant was required to suspend its flight operations in March 2020 due to the outbreak of COVID-19, which made both domestic and international commercial flights impossible. This caused the first defendant to face severe business difficulties. The first defendant therefore had the managerial authority to reorganize its business in order to continue operations insofar as such measures were not contrary to the law; otherwise, the first defendant might have had to cease operations or gone bankrupt. Reducing the number of employees was one of the measures adopted by the first defendant to sustain its business until it could resume operations.
Furthermore, before dismissing the four plaintiffs (the employees), the first defendant reached an agreement with them whereby the plaintiffs consented to allow the first defendant to determine the level of wages as it deemed appropriate. Thereafter, the first defendant announced salary reductions based on salary scales, demonstrating that the first defendant had attempted to cut expenses by reducing wages, but was still unable to sustain its business. Moreover, it was uncertain when the pandemic would end. Accordingly, the first defendant exercised its managerial authority by dismissing some employees. In doing so, the first defendant applied selection criteria based on workload, headcount, and the amount of severance pay to be paid. The first defendant dismissed not only the four plaintiffs, but also hundreds of other employees. There was no indication that the four plaintiffs were targeted or dismissed maliciously. Therefore, the first defendant had sufficient necessity and justification to dismiss the four plaintiffs.
As for the fact that the four plaintiffs were dismissed five days before the expiration of their fixed-term employment contracts (three-year contracts), the plaintiffs were already entitled to statutory severance pay after completing 120 days of service under the Labour Protection Act, and they received the full severance pay corresponding to their wages from the first defendant. This shows that the first defendant did not deprive the plaintiffs of their lawful rights to severance pay. The dismissal of the four plaintiffs was therefore not regarded as unfair dismissal.
It can therefore be seen that Thai labour law grants the courts discretion to strike a balance between protecting employees from unfair dismissal and allowing employers sufficient flexibility to adapt in response to business necessity. The recent Supreme Court judgment discussed above illustrates how the courts interpret the law in order to preserve this balance, and its guidance is not limited to the aviation industry alone but is applicable across a wide range of sectors.
Organizational Restructuring due to Digital Transformation
The rapid advancement of artificial intelligence (AI) is profoundly affecting workforces worldwide, creating both opportunities and challenges simultaneously. Over the past decade, extensive studies have been conducted on the potential impact of AI on labour markets, showing that different regions of the world are affected in varying ways depending on the nature of jobs and occupations.
Developed countries are investing in preparing their workforces for the future by integrating AI into knowledge-based industries. In contrast, developing countries face the risk that AI may increase unemployment rates and prevent a large number of workers from acquiring new skills. In Asia, the International Labour Organization (ILO) has revealed that as many as 56 percent of jobs in developing countries are at high risk of being affected, particularly in such labour-intensive industries as textiles, electronics, and agriculture. Similarly, the McKinsey Global Institute has, since 2017, studied and forecast that by 2030, as many as 800 million jobs worldwide could disappear due to automation, while approximately 375 million workers would need to be reskilled or transition into new occupations.
Turning to Thailand, Deloitte Thailand reported in 2025 that the industries leading the adoption of generative AI (GenAI) include information technology, media and telecommunications (TMT), and financial services. Within companies, the departments making the most use of GenAI are IT and cybersecurity, followed by marketing, sales, and customer service. These findings align with a recent Bangkok Post article on a commercial bank that announced an early retirement program for employees aged 45 and above. Employees approved under the scheme would be treated as resigning prior to retirement. It is possible that this initiative is linked to the bank’s adoption of GenAI beginning in late 2024.
For other businesses that may not have the capacity to implement similar voluntary programs but wish to dismiss employees due to technological substitution within the organization, certain legal requirements must be considered. Specifically, Sections 121 and 122 of the Labour Protection Act stipulate that where an employer terminates employees as a result of restructuring operations, production processes, distribution, or services caused by the introduction or change of machinery or technology—resulting in a reduction of the workforce—the employer must not only pay severance pay under Section 118, as noted earlier, but also comply with additional legal obligations, including:
- Notification to the Labour Inspector – The employer must notify the Labour Inspector in advance, no less than 60 days prior to termination, of the date of termination, the reasons for termination, and the names of the employees to be dismissed.
- Notification to Employees – The employer must also notify the affected employees of the aforementioned particulars at least 60 days prior to termination. If the employer fails to provide such notice, or so provides less than the required period, the employer is obligated to pay special compensation in lieu of advance notice equal to 60 days’ wages.
- Special Compensation for Long-Tenured Employees – For employees who have worked continuously for six years or more, the employer must pay special compensation, on top of the statutory severance pay under Section 118, at a rate not less than 15 days’ wages at the employee’s most recent pay rate for each full year of service. However, the total amount of this special compensation shall not exceed 360 days’ wages. A period of service less than one full year, but exceeding 180 days, shall be counted as one full year.
Recent Developments in Changing Employment Models
Finally, in its report on Thailand’s social conditions for the second quarter of 2025, the National Economic and Social Development Council (NESDC) identified significant developments signalling a shift in employment practices. Businesses are reducing their reliance on permanent full-time employees and moving toward the use of permanent part-time staff, as well as contract or temporary part-time workers. The report further noted that these changes may undermine job security, reduce income levels, and affect employees’ statutory rights, reflecting the heightened economic uncertainty that continues to prevail.
From the perspective of labour protection law, there is an issue that often creates confusion for employers. Section 118, paragraph 3 of the Labour Protection Act provides that “An employer is not required to pay severance pay to an employee who is terminated where the employment is for a fixed period.” However, this does not mean that all employees referred to as ‘contract employees’ are automatically excluded from receiving severance pay when their fixed-term contracts end. The same Section further clarifies that “employment for a fixed period under paragraph three shall be permissible only in the case of employment for a specific project that is not part of the employer’s normal business or trade, with definite commencement and completion dates; or for work of a temporary nature with a defined end date or completion milestone; or for seasonal work, where employment is made during the relevant season. Such employment must be completed within a period not exceeding two years, and the employer and the employee must have entered into a written contract at the commencement of employment.”
Labour outsourcing is another alternative form of employment, and it is specifically addressed under Thai law. This is where Section 11/1 of the Labour Protection Act provides that, “in the case where an entrepreneur assigns any person to procure workers to perform work that does not constitute a recruitment business, and such work forms part of the production process or business under the responsibility of the entrepreneur, whether or not that person supervises the work or is responsible for paying wages to the workers, it shall be deemed that the entrepreneur is the employer of those workers. The entrepreneur shall treat the outsourced workers as employees under a direct employment contract, entitling them to fair rights, benefits, and welfare without discrimination.”
Therefore, while employers may be able to reduce labour costs by changing employment models, they must nonetheless carefully consider issues relating to severance pay as well as other legal obligations. Any company seeking to restructure its workforce in such a manner should be fully aware of the rights, duties, and potential legal risks involved.
Thai Labour Law Specialist
Early engagement with Thai legal counsel is therefore essential. Experienced specialist lawyers can assist in advising on restructuring programmes that are both commercially effective and legally compliant, thereby reducing the risk of litigation that consumes management time and resources.
At ES Counsel, this capability is exemplified by the credentials of our partners from diverse background. Our Executive Partner, Kreangkrai Jiamboonsri is widely recognised as one of Thailand’s most seasoned labour law practitioners, with over four decades of experience, including senior positions in international law firms. His ability to combine legal precision with practical workforce management strategies is especially valuable at a time when redundancy programmes are being adopted. Our Senior Partner, Worathep Chuesunthonsophon, on the other hand, offers a complementary perspective, having served both as a practitioner and as a judge in the Central Labour Court and the Supreme Court. His insights into judicial reasoning at the highest levels enable him to advise clients with exceptional clarity on how courts are likely to view restructuring decisions. He is also a recognized authority on Thailand’s Personal Data Protection Act (PDPA), guiding employers on integrating data privacy compliance into workplace policies and employee data management. In addition, our Managing Partner, Ekawat Piriyawarasakul, is frequently engaged by both international and domestic companies to assist in drafting employment agreements and related policies, negotiating with employees and trade unions, and representing clients in complex labour disputes. His practice also extends to advising on directors’ and officers’ liability insurance, negotiation commercial contracts, and handling civil and criminal litigation, including white-collar crime matters.
Together, our team can provide clients with a powerful combination of legal expertise, strategic foresight, and practical problem-solving—qualities that are particularly well suited to the challenges of today’s business environment.
Disclaimer: The content of this article is provided for informational use only and does not constitute or replace professional legal advice.