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Severance Entitlement Scope — What Counts as 'Wages' for Section 118 Calculation
Terminated Employee (Plaintiff) v Employer (Defendant)
Composite summary — not a single reported case. This entry distils a settled line of Thai Supreme Court (Dika / ฎีกา) authority for legal education. It is not a transcript of one reported judgment, and the heading is not a citable case number. Do not cite it as specific case law — consult a Thai-qualified lawyer for the authoritative Dika number and current application.
Facts
An employer terminated a long-serving employee — typical fact patterns involved managers, sales executives, and skilled professionals with substantial non-base remuneration. The employer calculated statutory severance under Section 118 based only on the employee's base salary, excluding regular monthly housing allowances, position allowances, fixed monthly transport allowances, and (in some cases) regular guaranteed bonuses. The employee sued for additional severance calculated on a 'true wages' base including the recurring allowances, plus payment in lieu of unused annual leave under Section 67 LPA.
Legal Issue
Which components of an employee's monthly remuneration count as 'wages' (ค่าจ้าง) for the purpose of severance under Section 118, and which are excluded as 'welfare' or 'discretionary bonus'.
Holding
The Supreme Court (Labour Division) has consistently held that 'wages' under Section 5 of the Labour Protection Act means remuneration paid to the employee in exchange for work performed in normal working hours of a working day. A payment will be counted as wages — and therefore included in the severance base under Section 118 — where it is (i) paid regularly (e.g. monthly), (ii) in a fixed or readily-calculable amount, (iii) not contingent on a separate performance condition, and (iv) intended as consideration for ordinary services rather than reimbursement of actual expenses. Regular fixed monthly allowances (housing, position, fixed transport) typically qualify; reimbursement of actual receipted expenses, discretionary bonuses, and per-trip travel reimbursements typically do not. Unused annual leave under Section 67 is separately payable on termination by the employer (subject to limits where the employee was dismissed for serious misconduct).
Reasoning
Section 5 LPA defines 'wages' broadly to cover remuneration for work, regardless of label. Courts apply a substance-over-form analysis: regular fixed payments tied to the employment relationship are economically indistinguishable from base salary and would otherwise allow employers to label down base pay and label up 'allowances' to suppress severance. Reimbursement of actual expenses, by contrast, is not consideration for work and falls outside the definition.
Significance
The single most expensive mis-calculation in routine Thai termination practice. For senior employees the inclusion of fixed allowances can increase severance by 20–50%. Distinct from gross-misconduct termination under Section 119 where no severance is payable at all.
Practical Takeaway
When calculating severance, start from the employee's *total* monthly remuneration and ask of each line whether it is fixed, regular, and consideration for work. Where in doubt, include it; the cost of getting it wrong is litigation plus 15% statutory interest plus possible damages under Section 49. Structure new contracts to clearly separate genuine reimbursements (with receipts) from fixed allowances (which are wages).
Cited Statutes
- Labour Protection Act B.E. 2541 (1998), Sections 5 (definitions), 67, 118, 119
- Establishment of and Procedure for Labour Court Act B.E. 2522 (1979), Section 49
This entry summarises a representative line of authority from the Thai Supreme Court (ฎีกา). It is intended for general legal education only and is not a substitute for advice from a Thai-qualified lawyer. Individual Dika case numbers are being verified against primary sources; until then these entries are presented as composite doctrinal summaries.
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