How to run international payroll for employees in Thailand [2024]
When you’re first running payroll for remote employees based in Thailand, you want to hit the ground running. However, if you miss a critical step, you could rack up unexpected penalties or even risk legal action if you violate Thai law.
Never fear: We have your detailed, step-by-step guide to running payroll in Thailand, with information on everything from payroll software to taxes…and beyond.
Step #1: Decide whether or not to create your own entity in Thailand or use an employer of record (EOR)
Before hiring and paying Thai employees, you must establish a foreign business entity in Thailand. There are two ways to do this: create your own local entity or use an employer of record (EOR).
EORs simplify the process by allowing you to pay and hire employees through their entity. The EOR also handles the calculation and withholding of taxes (more on that to follow) and pays your tax contributions to Thailand’s Revenue Department.
When, why, and how do companies use an EOR?
As companies expand their operations globally, they often use EORs like Deel, Papaya Global, and Rippling to run payroll, administer benefits, and handle international compliance issues.
Setting up your own EOR can take up to six months, depending on how you apply. Most small companies don’t have the time or resources for this significant administrative load. For many companies, using an EOR is simply an easier way to stay compliant and get business started in a new part of the world.
When, why, and how do companies create their own entity?
You may choose to start by using an EOR service and then, later, create your own entity. This would replace the EOR as the legal hiring and payroll entity. Companies might consider creating their own entity if the costs of an EOR are greater than that of establishing an entity.
Here are the steps to set up your own entity:
- Step #1: Choose and register your company name with the Department of Business Development. You may do this online. Note that the company name must be registered in Thai, not English or another language
- Step #2: File a memorandum of association, which gives information about the company, its founders, and the scope of activities. You’ll also choose a company type. A Thai Limited Company is one of the most common legal forms for operating in the country. Other options include private limited companies, public limited companies, and limited partnerships.
- Step #3: Register your entity with the Ministry of Commerce. This can be done online.
- Step #4: Register with the Thai Revenue Department to get a company registration certificate and income tax number. You’ll also apply for a tax ID number and, if applicable, a VAT (value-added tax) number.
- Step #5: If you’re not a Thai citizen but you’ll have a physical presence in Thailand, you must apply for an alien business license.
- Step #6: Set up a Thai bank account, which is required to operate in the country.
Step #2: Pick a global payroll software solution
There are two types of international payroll services, known as global payroll processors and global payroll aggregators. Check out our comprehensive guide for more information. Here’s a quick summary:
- Global payroll processors use their own software to process your payroll, transmit funds, calculate taxes, and file taxes in every country in which you operate. This lets you pay your international employees just as easily as your local employees: together in a single pay run.
- Global payroll aggregators aggregate local payroll providers in various countries and manually transmit your payroll files to those providers.
Step #3: Determine your workers’ employment status
Before onboarding any workers, determine whether they’re considered employees or contractors per Thai labor law. While Thai employees have statutory entitlements—such as annual leave, sick leave, and public holidays off—contractors do not require these benefits. You also are not responsible for withholding taxes from contractors’ paychecks. There can be benefits to using contractors; however, if you misclassify an employee as a contractor, you could be fined.
- Work independently to achieve specific goals.
- Freely determine the place of work, their working days and times, and how they accomplish their work.
- Are paid for the result of their work, with no minimum guaranteed income.
- Take on their own liability for their work.
- Work with their own tools and equipment.
- Bear any expenses incurred for performing their work.
- Can subcontract their work.
- Freely determine their clients.
On the other hand, employees:
- Agree with their employer on what constitutes their normal working day or normal working schedule.
- Receive a fixed salary or wage.
- Perform work on an ongoing basis, with the employer managing how work is conducted.
- Are jointly liable with their employer for damages.
- Work with tools and equipment from their employer.
- Have limitations to their working hours. They can’t work for more than 8 hours/day or 48 hours/week.
- Have expenses reimbursed by their employer.
- Can’t subcontract their work.
- Work exclusively for their employer.
If you misclassify an employee as an independent contractor, that worker could file a claim to demand employment entitlements. Failing to register an employee per social security regulations could result in a six-month imprisonment and/or a fine of THB 20,000. There are also daily fines for violations. Failing to submit social security contributions may result in a penalty of 2% of the unpaid contributions per month. In certain cases, penalties can also extend to the employee’s manager.
Classify your workers now using Rippling’s Worker Classification Analyzer.
Independent contractor relationships are governed by the Thai Civil and Commercial Code. In Thailand, contractors:
Step #4: Capture your new hires’ Thai payroll information
Once you’ve established your own entity or decided to use an EOR, selected a payroll solution, and correctly classified your employees, you must collect specific information to run payroll. This includes:
- Name (matching the account where you’ll deposit their pay).
- Date of birth and date of hire.
- Contact information, including their mailing address in Thailand.
- Taxpayer ID number (TIN).
- Bank account information.
- Amount to be paid in THB (including any bonuses).
Much of this information can be collected during the employment contract process. You’ll also want to register any new employees with the Social Security Office and Workmen’s Compensation Fund.
Step #5: Choose to pay in your local currency or in Thai baht (THB)
You must pay Thailand-based employees in Thai baht (THB) unless you’ve specifically obtained their written permission to pay them in another currency.
Yes, there are challenges for foreign companies looking to pay Thai-based employees in THB. For example, the exchange rate between your preferred currency and THB can vary. When rates are unfavorable, you’ll end up paying more in USD (or your local currency) to cover your employees’ wages. You might have to account for exchange rate fluctuations when calculating your financial statements. This may create accounting complexities.
Step #6: Run payroll
Now that you’ve followed the previous steps, it’s time to run payroll.
Here’s a preview of how Rippling’s global payroll system works:
Note: Employers are required to send their employees payslips. These may be sent electronically.
Step #7: File your taxes in Thailand
Pay periods for Thai employees are monthly. Employers must deduct income taxes from payroll. Here are the income tax rates for individuals:
Income
Tax rate
Up to ฿150,000
0% (tax exempt)
฿150,001 to ฿300,000
5%
฿300,001 to ฿500,000
10%
฿500,001 to ฿750,000
15%
฿750,001 to ฿1,000,000
20%
฿1,000,001 to ฿2,000,000
25%
฿2,000,001 to ฿5,000,000
30%
฿5,000,001+
35%
Taxes must be withheld from an employee’s salary and submitted to the Thai Revenue Department monthly as part of the regular payroll process. Payroll tax returns are also completed and submitted at this time. Late payment of these withholdings could result in fines.
Each year, employers must file an annual statement declaring how much income was withheld. This is due by the end of February each year.
Social security contributions. Employers and employees must both contribute to the Social Security Fund, with each party paying 5% (capped at THB 875/month). Employers deduct the employee’s share from their monthly paychecks and submit the withheld funds along with their own share and a social security declaration detailing how much was deducted.
Social security covers employees for unemployment, maternity leave and paternity leave, illness, injury, disability, death, and retirement. However, employers may choose to pay into additional pension funds as an employee benefit.
Workmen’s Compensation Fund. This is only required if you have more than one Thai employee. Employers contribute to this fund once per year, with the amount ranging from .02-1% of the employee’s earnings, depending on the risk associated with their business/industry.
Frequently asked questions about running payroll in Thailand
What are the employer costs for full-time employees in Thailand?
Employers are responsible for deducting the following from their full-time employees’ paychecks:
Deduction
Amount
Social security
5% (capped at ฿750/month)
Workers' Compensation
.02-1% (depending on industry and only if you have more than one Thai employee)
What is the average salary for employees in Thailand?
The average annual salary for a Thai employee is around THB 1,160,900, which amounts to nearly $34,000 per year. However, pay ranges vary depending on the industry, occupation, and level of experience.
What are the minimum wages in Thailand?
The minimum wage in Thailand varies across Thailand's 77 provinces. The range is from THB 330 to THB 370 per day, or 9,900 to 11,000 baht per month. The capital of Bangkok and the three most industrialized provinces (Chonburi, Rayong, and Phuket) are at the top of that range. This minimum wage is considered high compared to other parts of Southeast Asia.
What information is needed from employees to run payroll in Thailand?
Here’s the information you need from salaried employees to process their payroll:
- Name (matching the account where you’ll deposit their pay).
- Date of birth and date of hire.
- Contact information, including their mailing address in Thailand.
- Taxpayer ID number (TIN).
- Bank account information.
- Amount to be paid in THB (including any bonuses).
How much does it cost to run payroll in Thailand?
It depends! Most payroll software is priced per pay run or on a per-employee basis. The pricing may also vary according to:
- Payroll frequency.
- The number of employees on your payroll.
- The number of provinces where you employ Thai workers.
- How often you add and remove payees.
- Any additional services you need, such as year-end processing or mailing out payslips.
Can I manually run payroll for workers in Thailand?
Some small business owners try to cut costs by running payroll themselves. In that case, you may choose to use a payroll calculator and make direct deposits into employee accounts. However, it’s advisable to outsource payroll unless you have prior experience. Not only is running payroll a time-consuming process but there are some associated risks:
- Compliance: Running payroll manually in Thailand without native global payroll software puts you at risk of manual errors and omissions. If you use Rippling, we handle your compliance work—enforcing Thai minimum wages and overtime rules, which can save you from labor violations and penalties.
- Security: Processing payroll manually can be a security risk if you use spreadsheets or paper records. This increases the risk of sensitive employee information being lost, stolen, or misused.
Rippling syncs all your business’ HR data with payroll—you never have to use a calculator or manually enter data, such as hours and payroll deductions. What’s more, Rippling handles your tax and compliance work.
What are payroll taxes in Thailand?
Employers must deduct income tax and social security from their full-time employees’ paychecks—see our employer cost tables for more info.
Rippling can automatically sync tax deductions to payroll, plus Rippling can handle your tax and compliance work.
What are the late tax filing penalties in Thailand?
Failure to file taxes may mean paying a hefty penalty. Fines typically range from 1,000 to 200,000 THB, depending on the violation.
Late payment: You’ll owe 2,000 baht. Plus, you may face an interest rate of 1.5% per month for every month overdue.
How do you pay contractors in Thailand?
- Check that you’re correctly classifying your workers as a contractor (use Rippling’s free Worker Classification Analyzer).
- Agree on the payment terms, including the hourly or project rate, payment cadence, and payment method.
- Collect their payroll information, including their name, date of birth, contact information, bank account information, and tax ID number.
- Use your chosen payroll software to pay the contractor in THB. With Rippling, you can pay contractors in a single pay run…no waiting for transfers or conversion.
Note: When hiring Thai contractors, you’re not responsible for deducting taxes from their paychecks. Instead, the contractor must take responsibility for their own tax remittance. Regardless, keep an accurate record of employment and payroll information for each contractor.
Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
