Resignation vs. Retirement

Under Thai labour law, there are five main ways to end an employment relationship between the employer and employee, as follows:

• (i) Expiration of the fixed or definite term employment contract;
• (ii) The employer and employee have mutually agreed to end the employment relationship (Supreme Court decision no. 10339/2558);
• (iii) Termination of employment by the employer;
• (iv) Death of the employee;
• (v) Resignation by the employee; and
• (vi) Retirement.

Even though both ‘resignation’ and ‘retirement’ are considered as grounds to cease an employment relationship initiated by the employee, it is important to note that they are totally separate issues in the eyes of Thai labour law.

Resignation

In respect of resignation by the employee, it is a unilateral act of the employee to notify the employer of his/her intention to discontinue the employment. When the employee serves notice to the employer, the resignation will be effective in accordance with the resignation notice. The employer does not have to approve such resignation and consent is not required by the employer (Supreme Court judgement no. 6020/2545). In this regard, resignation must be made on a voluntary basis. In the event that the employer gives an order to the employee to resign or the resignation notice is not made under the employee’s free will (i.e. obtained by fraud or under duress), it will be considered as ‘forced resignation’ and the court or competent labour inspector will treat the case as ‘termination of employment’ accordingly (Supreme Court’s decision no. 4052/2548).

With regard to voluntary resignation entitlements, the employee will be entitled to receive the following rights and benefits once he/she has voluntarily resigned from the company:

• (i) Normal wages until the effective date of the voluntary resignation
• (ii) A certificate of employment pursuant to Section 585 of the Civil and Commercial Code (the “CCC”)
• (iii) Cost of return journey (if any) pursuant to Section 586 of the CCC; and
• (iv) Wages in lieu of accumulated annual holidays pursuant to Section 67, paragraph 2 of the Labour Protection Act, B.E. 2541 (1998) (the “LPA”) in the case where the employee is allowed to carry forward unused annual holidays from previous year(s). However, the employee will not be entitled to wages in lieu of unused annual holidays for the year in which he/she voluntarily resigns.

Based on the aforementioned, it can be seen that voluntary resignation is not considered as ‘termination of employment’ and therefore will not trigger severance pay and other termination liabilities (Supreme Court decision no. 10161/2551).

Retirement

As opposed to voluntary resignation, retirement is considered as ‘termination of employment’ pursuant to Section 118/1, paragraph 1 of the LPA, which states as follows:

“A retirement agreed upon between the employer and employee, or as prescribed by the employer, shall be regarded as a termination of employment under Section 118, paragraph 2 of the LPA.”

In this respect, Thai labour law does not determine the statutory retirement age for the employee. However, the employee may exercise his/her right to declare his/her intention to retire at any time after reaching 60 years of age by notifying such intention to the employer not less than 30 days in advance, pursuant to Section 118/1, paragraph 2 of the LPA. The said legal provision applies when either there is no agreement on retirement age between the employer and employee; or there is an agreement on the retirement age being over 60 years old between the employer and employee.

With regard to retirement entitlements, the employee will be entitled to receive the following rights and benefits once he/she has retired from the company:

• (i) Severance pay;
• (ii) Normal wages until the effective date of the retirement;
• (iii) A certificate of employment pursuant to Section 585 of the CCC;
• (iv) Cost of return journey (if any) pursuant to Section 586 of the CCC; and
• (v) Wages in lieu of unused annual holidays for the year in which he/she retires, as well as unused accumulated annual holidays in the event that the employee is allowed to carry forward unused annual holidays from previous year(s), pursuant to Section 67 of the LPA.

In light of the aforementioned, it can be seen that one of the main differences between ‘resignation’ and ‘retirement’ is the severance entitlement: the employee who resigns will not be entitled to severance pay; while the employee who retires will be entitled to severance pay. As such, the retired employee will be entitled to severance pay pursuant to Section 118, paragraph 1 of the LPA, based on the number of years of service and the employee’s last rate of wages; commencing from the date upon which he/she entered into an employment contract with the employer until the date upon which he/she retires, as summarised below:

Due to the different legal consequences arising from resignation and retirement, the employer should ensure that it fully understands as to whether the employee is exercising his/her right to resign or retire from the company, and use said two legal terms correctly for the avoidance of any confusion and misunderstanding of its obligations and an employee’s entitlements under the eyes of Thai labour law.

This is intended merely to provide a regulatory overview and not to be comprehensive; it is NOT a provision of legal advice. Should you have any questions on this or on other areas of law, please do not hesitate to contact the following: 

Chanakarn Boonyasith
Partner

Pattaranun Hanwongpaiboon
Associate

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