Redundancy, Business Relocation & Mutual Agreement Termination in Thailand: A Situation-Specific Guide [Series Part 4]

Key Takeaways

Redundancy requires 60 days’ advance notice in addition to statutory severance; employees with 6+ years of service receive additional special compensation

When a business relocates, employees who refuse to follow must receive a special separation allowance of at least 50% of their statutory severance

Mutual agreement termination minimises legal risk, but whether it protects or creates future disputes depends entirely on what the separation agreement says

Introduction

Workforce reductions driven by business decisions, operational downsizing, factory relocations, or negotiated separations with individual employees — these situations are governed by rules that differ from both ordinary and disciplinary dismissal. Part 4 covers three scenarios: (1) redundancy, (2) business relocation, and (3) mutual agreement termination.

1. Redundancy (Downsizing, Mechanisation, Business Closure)

What Constitutes Redundancy

Section 121 of the Labour Protection Act covers dismissal arising from employer-side circumstances, including:

Reduction of business scale
Mechanisation or automation resulting in workforce reductions
Elimination of a production line or department
Partial or total closure of operations

These dismissals require, in addition to standard severance pay (Section 118), specific procedures and additional compensation.

Mandatory 60 Days’ Advance Notice

In a redundancy situation, the employer must give written notice at least 60 days before the intended dismissal date to both:

The affected employees
The Labour Inspector

(Section 121)

If 60 days’ notice cannot be given: Where advance notice of 60 days or more is not possible, the employer must pay special compensation equal to the wages that would have been earned during the shortfall period. For example, if only 40 days’ notice was given, special compensation of 20 days’ wages must be paid in addition to standard severance.

Special Separation Pay for Employees with 6+ Years of Service

Under an amendment introduced in B.E. 2544 (2001), employees dismissed by reason of redundancy who have 6 or more years of service are entitled to additional special separation pay equivalent to at least 15 days’ wages per year of service, on top of the standard severance pay under Section 118 (please verify the precise amount with a professional as the details may vary).

flowchart TD
    A["Decision to make<br/>redundancies"] --> B["Issue written notice<br/>at least 60 days in advance<br/>(to employees & Labour Inspector)"]
    B --> C{60 days available?}
    C -- Yes --> D["Calculate standard<br/>severance (Sec. 118)"]
    C -- No --> E["Standard severance<br/>+<br/>Special compensation<br/>(shortfall days)"]
    D --> F{6+ years' service?}
    E --> F
    F -- Yes --> G["Add special<br/>separation pay<br/>(15 days/year of service)"]
    F -- No --> H[Make payment]
    G --> H

Summary: Redundancy Compensation

Item	Amount
Standard severance pay	30–400 days’ wages depending on service (Sec. 118)
Special compensation for late notice	Wages for the shortfall period
Special separation pay (6+ years)	At least 15 days per year of service (please verify)
Unused annual leave payout	Unused days × daily wage

2. Special Separation Pay on Business Relocation

Compensation for Employees Who Refuse to Relocate

Section 120 of the Labour Protection Act requires employers who intend to relocate a business to another location to notify employees in writing at least 30 days before the relocation date.

If a notified employee refuses to work at the new location, that employee is deemed to have terminated employment as of the relocation date, and the employer must pay a special separation allowance.

The special separation allowance is at least 50% of the standard statutory severance pay under Section 118 (please verify; amounts may vary depending on the specific circumstances).

Practical notes:

“Relocation” may include a move to a different building within the same city (please verify)
Cases where the change significantly increases commuting distance or reduces accessibility are most clearly covered
Additional changes to working conditions accompanying the relocation (e.g., shift changes) may increase exposure

3. Mutual Agreement Termination

What Is Mutual Agreement Termination?

Mutual agreement termination is a method of ending an employment relationship by the consent of both the employer and the employee. Since it is not a statutory dismissal, there is theoretically no legal obligation to pay severance. In practice, however, it is almost always necessary to offer some form of monetary separation package to secure the employee’s agreement. The amount may be less than the statutory severance entitlement, provided the employee genuinely agrees.

Advantages of Mutual Agreement Termination

Advantage	Details
Reduced litigation risk	Separation agreement can include a full waiver of all claims
No need for grounds	Can be used even where no justifiable cause exists
Flexible timing	Departure date and handover period can be agreed upon
Confidentiality	Terms and reasons for departure can be kept confidential

What Must Go in the Separation Agreement

For a mutual agreement termination to be effective, the content of the separation agreement is critical. The following provisions should always be included.

Essential terms:

Termination date: A specific date clearly stated
Payment amount and breakdown: Separation payment, accrued wages, unused leave payout — itemised separately
Payment method and deadline: Bank transfer or cash; by what date
Waiver of claims: “Each party waives all claims against the other beyond what is set out in this agreement”
Confidentiality: No disclosure of agreement terms or reasons for departure to third parties
Return of company property: Confirmation of return of company-issued items and confidential documents
Non-compete and non-solicitation: If required, include limited duration and geographic scope (validity under Thai law — please verify)
Governing law and dispute resolution: Thai law; Thai courts

Language of agreement: Even where a Japanese or English version is also prepared, it is strongly recommended to treat the Thai-language version as the authoritative text. Thai-language contracts carry the most evidentiary weight in Thai courts.

4. Conducting a Voluntary Separation Discussion: The Thai “Face” Factor

Why “Face” (เกียรติ) Matters

In Thai culture, the concept of “face” — personal dignity and social standing — is extremely important. Public criticism or reprimand in front of others can cause deep loss of face, escalate conflict, and make a straightforward negotiation far more difficult. Cultural sensitivity is not optional; it is an essential element of effective HR management in Thailand.

Best Practice for Voluntary Separation Discussions

flowchart TD
    A["Prepare:<br/>Decide terms<br/>and package"] --> B["Private one-on-one meeting<br/>(only a trusted HR<br/>representative present)"]
    B --> C["Frame positively:<br/>Present as a proposal<br/>in the employee's interest"]
    C --> D["Put terms in writing<br/>(do not rely on<br/>verbal discussion alone)"]
    D --> E["Set a response deadline<br/>(allow 1–2 weeks)"]
    E --> F{Agreement?}
    F -- Yes --> G["Execute separation<br/>agreement"]
    F -- No --> H["Reconsider terms or<br/>switch to ordinary dismissal"]

Practical tips:

Frame the conversation around “business circumstances,” not the employee’s shortcomings
Never conduct the discussion where colleagues or subordinates can observe
Do not demand an immediate answer — allow time for the employee to consider
Always put the offer in writing; do not leave it as a verbal agreement
Be honest about the alternative scenario (e.g., the possibility of ordinary dismissal) if agreement is not reached

Summary

Scenario	Key Rule	Additional Cost
Redundancy	60-day advance notice mandatory	Special compensation for late notice / additional pay for 6+ years’ service
Business relocation	30-day advance notice mandatory	Special allowance (≥50% of standard severance) for employees who refuse to relocate
Mutual agreement	Genuine mutual consent required	No statutory obligation (but a separation payment is almost always expected in practice)

Redundancy, business relocation, and mutual agreement termination each operate under rules that differ from ordinary and disciplinary dismissal. In particular, the 60-day notice requirement for redundancy is frequently overlooked — early engagement with a professional and advance planning are essential.

Next (and Final): Part 5 — “Preventing Dismissal Disputes: Work Rules, Evidence Management, and Preventive Legal Practice”

For advice on redundancy planning or mutual agreement negotiations, please feel free to contact us.

This article is for general informational purposes about Thailand’s legal system and does not constitute legal advice under Thai law. For specific matters, please consult a Thai-qualified legal professional. Our firm works in collaboration with JTJB International Lawyers’ Thai-qualified attorneys.