An international (or expatriate) secondment arrangement involves an employee who remains employed by an overseas entity while being temporarily assigned to work for a host organisation in another country. 

In Thailand, these arrangements can give rise to unexpected, and potentially costly, employment risks. Although the employment contract may remain with an overseas entity, Thai courts may look beyond the contractual arrangements and consider the realities of the working relationship. If a Thai host organisation is found to have acted as an employer, it may be liable for severance pay, payment in lieu of notice, and compensation for unfair dismissal, even if it is not the contractual employer. 

In this update, we summarise the key factors considered under Thai labour law and relevant Supreme Court precedents, together with practical measures to minimise the risk of a Thai host organisation inadvertently acquiring employer status.   

Section 5 of the Thai Labour Protection Act B.E. 2541 (1998) (‘LPA’) defines an employer as a person who employs and pays wages to an employee. The definition also extends to persons acting on behalf of the employer, including authorised representatives of an organisation (where the employer is a legal entity) and those delegated to perform employer functions. 

When determining who the employer is, Thai courts focus on the actual working relationship rather than the wording of the contract alone. In particular, the courts will consider factors such as:  

• who controls and supervises the employee’s work;  

• who bears the employment costs;  

• which work regulations govern the employee; and  

• who benefits from the employee’s work. 

In applying these factors to the circumstances of each case, Thai courts may consider indicators such as whether the organisation directs the employee’s day-to-day activities, pays their wages, sets their working hours and workplace requirements, approves leave, enforces company policies, evaluates their performance, or has the authority to take disciplinary action. 

Additionally, the LPA contains a provision under which a business operator may be legally deemed as an employer in certain labour outsourcing arrangements. Specifically, s.11/1 of the LPA provides that where a business operator engages another person to supply workers (other than through a licensed employment agency) to perform work that forms part of the business operator’s business, the business operator is deemed to be the workers’ employer, regardless of who supervises them or pays their wages. Although this provision is not directly aimed at expatriate secondment arrangements, it reinforces the importance of considering the substance of the working relationship rather than its contractual label. 

In light of the above legal principles and the Thai Supreme Court’s interpretation, organisations should carefully structure and implement expatriate secondment arrangements to ensure that the overseas entity remains the sole intended employer, both in the relevant documentation and in practice. The following measures may help mitigate the risk of the Thai host organisation being regarded as an employer under Thai labour law. 

Dos  

• Document the arrangement properly: As a starting point, ensure that the secondment arrangement is properly documented and expressly states that the overseas entity remains the sole employer throughout the secondment period. The documentation should clearly delineate the respective roles and responsibilities of the overseas employer, the Thai host organisation, and the secondee. 

• Keep employment decision-making authority overseas: More importantly, ensure that key employment decisions, including performance reviews, remuneration adjustments, promotions, disciplinary actions, and termination, remain solely within the authority of the overseas employer. 

• Keep reporting lines overseas: Ensure that reporting lines clearly establish that the secondee remains accountable to, and is supervised solely by, the overseas employer rather than the Thai host organisation. 

• Keep pay and administration overseas: Ensure that the secondee’s salary, benefits, bonuses, and other employment-related costs are paid and administered by the overseas employer. Any payment arrangement should be carefully structured and documented so the Thai host organisation is not perceived as assuming the responsibilities of an employer. 

• Limit the host organisation’s role: Where the involvement of the Thai host organisation is necessary, limit its role to local support and administrative matters, such as work permit and visa arrangements, the provision of office facilities, and other logistical assistance. 

• Keep direction and control overseas: Finally, and most importantly from a practical perspective, ensure that both the contractual documentation and the actual working arrangements demonstrate that the secondee remains under the direction and control of the overseas employer and performs services primarily for its benefit. 

Don’ts 

• Most importantly, don’t allow the Thai host organisation to make independent decisions relating to the secondee’s employment or working conditions, including recruitment, performance evaluations, remuneration, promotions, disciplinary actions, or termination.  

• Likewise, don’t allow the Thai host organisation to exercise day-to-day managerial control or supervision over the secondee in a manner that suggests the existence of an employer-employee relationship. 

• Avoid arrangements under which the Thai host organisation appears to be the primary beneficiary of the secondee’s services. 

• Don’t allow the Thai host organisation to enter into, co-sign, or otherwise become a party to any employment agreement with the secondee. 

• Finally, don’t rely solely on disclaimer clauses in the secondment agreement. If the actual working arrangements suggest otherwise, Thai courts may still regard the Thai host organisation as an employer, a co-employer, or a person acting on behalf of the employer. 

The following Supreme Court case (no. 1856/2561 (2018)) highlights the factors Thai courts consider when determining whether a Thai host organisation should be regarded as an employer or a person acting on behalf of the employer. 

In its judgment, the Court concluded that the employee was employed by, and seconded from, a Singapore company. The following factors were key to this finding:  

• The employee acknowledged that the employment agreement had been entered into with the Singapore company and that the Thai company was not a party to the agreement.  

• The employee’s assignment to Thailand followed the Singapore company’s instructions, while the Thai company provided only local administrative support to facilitate the employee’s work in Thailand.  

• The Court confirmed that the two companies remained separate legal entities despite being part of the same corporate group.  

• Importantly, the Court held that administrative assistance, such as work permit arrangements, tax and social security filings, and other local support, was not sufficient to make the Thai company an employer or a person acting on behalf of the employer under the LPA. 

Accordingly, the Thai company was not liable for severance pay, payment in lieu of notice, or unfair dismissal compensation. 

Expatriate secondment arrangements are common in cross-border business operations. However, when employment disputes arise, Thai courts will look beyond the contractual documentation and focus on the realities of the working relationship when determining whether the overseas entity, the Thai host organisation, or both should be regarded as the employer under Thai labour law. 

Multinational organisations should therefore ensure that both their documentation and day-to-day practices consistently reflect the intended employer relationship to minimise the risk of unintended employer status and related employment claims against the Thai host organisation.