Thailand is an excellent destination for companies looking to employ experienced and professional workers. The number of freelance workers and independent contractors has grown quickly in recent years, making it a great time to hire independent contractors in Thailand. Here, we will outline the steps to recruit and pay contractors in Thailand, along with the essential payroll considerations that you should always remember.
What is an Independent Contractor in Thailand?
Operating as a freelancer or self-employed worker is a popular option in Thailand. These roles are usually remote work-based, providing individuals with more flexibility compared to full-time employment.
According to Thai labor law, an independent contractor is an external entity, company, or individual that provides services based on a pre-arranged contract. The key aspect of this relationship is that the contractor should operate with a significant amount of independence and autonomy.
The independent contractor should also be classified as self-employed and be able to take on more than one client. The nature of their role should entail some level of risk. This indicates they are operating as an external entity, not an employee.
As a result of the recent growth of the gig economy in Thailand, more attention is being turned to the rights they have as workers. In 2022, for example, a protest by drivers for the delivery company Grab saw 800 drivers in the streets to protest the way Grab and others treat and pay contractors in Thailand.
As a result, some within Thailand’s political circles are calling for the unionization of gig workers. This would potentially mean more scrutiny of working relationships and the methods used to manage and pay contractors in Thailand.
The Risk and Dangers of Hiring Independent Contractors in Thailand
When it comes to hiring an independent contractor in Thailand, understanding local labor laws and regulations is the best way to avoid disaster. In Thailand, as elsewhere, full-time employees benefit from additional protections and benefits. This helps protect employees while adding a variety of responsibilities for the employer.
The Thai government closely monitors how businesses classify their workers to ensure compliance. This may include checks on how you communicate with contractors, whether they work directly with your employees, and how you pay contractors in Thailand. These checks are to prevent intentional misclassification that may lead to withholding benefits from employees or avoiding their tax duties.
Should a business or company be found to be misclassifying their employees, they can be charged with hefty fines or penalties. In some cases, they may even be subject to criminal charges or jail time.
Potential penalties for companies that treat contractors in Thailand as employees include the following:
- The payment of all withheld or underpaid taxes plus a surcharge of 1.5% for each month taxes went unpaid, plus a THB 2,000 fine for the incorrect filing of tax forms.
- Retroactive payment of all social security contributions and other financial benefits (including paid leave) owed to the employee since the beginning of their contract.
- An additional 2% per month on all outstanding social security payments, plus a THB 2,000 fine for the incorrect filing of social security forms, plus potential criminal charges, which could result in up to 6 months in prison plus fines of up to THB 20,000.
- If the employee’s contract is terminated without paying the proper amount of severance, the employer would then have to compensate the employee with all unpaid severance (plus 15% per year it has been unpaid) and be liable for fines of up to THB 100,000 and 6 months in prison.
How to Find Contractors as Remote Workers in Thailand
Finding independent contractors in Thailand can come with many challenges, especially if you don’t have local experience or networks. While various platforms and online marketplaces help businesses discover talent, they are not always the most reliable option.
However, partnering with a global Employer of Record (EOR) can help you simplify the entire process. EORs have global and local experience that can help you recruit and manage contractors from all around the world. This approach is the most effective and secure way to find, manage, and pay contractors in Thailand.
EOR services extend beyond the recruitment phase and help manage contractors and contractor payments. From payroll processing to contract management, these essential services take care of essential but complex administrative tasks, allowing you to focus on growing your business.
The process of hiring an independent contractor in Thailand starts with a written independent contractor agreement made by both parties. This agreement should clearly indicate the services required and the necessary arrangements made to pay contractors in Thailand. In some cases, the contract may also include an invoice for the services being rendered.
The best part about working with independent contractors in Thailand is that you don’t have to handle their payroll and taxes.
Payroll and Taxes in Thailand
Independent contractors don’t enjoy the same benefits and protections as full-time employees in Thailand. Additionally, they are entirely responsible for fulfilling their tax obligations and social security contributions.
When classified as an independent contractor, this does not exclude workers from receiving social security protections and benefits in Thailand. The only difference is that each worker is fully responsible for making all deductions and contributions to remain compliant.
Since these contractors operate as external entities, they handle their taxes based on their net earnings. They also file annual tax returns, providing a summary of their income, deductions, and profits.
In some cases, independent contractors might register as legal businesses, making it even easier for them to manage their finances and deduct business expenses.
As an employer working with independent contractors in Thailand, you won’t need to manage social security deductions and contributions. However, when you pay contractors in Thailand it’s best to be aware of the responsibilities you have to your contractors to stay compliant.
However, companies in some countries like the US may have additional paperwork to take care of. Seeking legal expertise before you start to pay contractors in Thailand will help you avoid any unwanted penalties or fines down the road.
The Most Effective Ways to Pay Contractors in Thailand in 2024
The way to pay contractors in Thailand is different from paying full-time employees. This is because independent contractors are not paid a fixed salary. Instead, you should pay contractors the agreed-upon amount as outlined by the contract.
In Thailand, you can compensate contractors based on an hourly, weekly, monthly, or per-project basis. The specific payment arrangement should be outlined in the contract or agreement.
As for the payment methods, there are various ways that you can process the payment to contractors.
1. Digital Wallets
Digital wallets are an incredibly effective method of making payments online. The setup process is simple and allows you to transfer funds within just a few seconds.
However, it’s important to note that these wallets all come with fees that can add up quickly for larger payments. Additionally, these wallets are not as secure as traditional banks, especially when sending money across borders.
In Thailand, 56% of consumers prefer TrueMoney Wallet for instant payments. This wallet lets you send money instantly while also allowing people in Thailand to withdraw funds at local stores.
2. Direct Bank Transfer
Direct bank transfers are one of the most reliable ways to make payments in Thailand. This method is incredibly secure and allows you to send money internationally. When funds are sent, they appear directly in a recipient’s bank account, avoiding many fees in the process.
However, when it comes to international transfers, the process may take significantly longer compared to local payments. Additional factors to consider are fees and foreign exchange rates, which could lead to a delay of up to a week for the transfer to be completed. There may also be enhanced scrutiny of your working relationship if you are already using this method to pay your employees.
All this should be taken into account if you are thinking about using direct transfers to pay contractors in Thailand.
3. Partner with an Employer of Record Service (EOR)
Managing your own payroll internationally or opening a local company to pay contractors in Thailand is incredibly difficult and complex. This is why many leading companies opt to let a professional Employer of Record (EOR) in Thailand take care of the complications.
This comprehensive service seamlessly integrates the hiring, management, and payroll aspects, helping you manage all of your payments to contractors. By handing over the payment process to a global EOR, you ensure secure and localized payments to contractors, all while having payroll processing, administrative tasks, and compliance managed for you.
This empowers you to focus on running your business in the most efficient way possible.