Employee benefits obligation

Thailand’s National Legislative Assembly (NLA) passed a new act on 13 December 2018 which, when published in the Government Gazette, will amend the current Labour Protection Act (LPA). The new law will become effective 30 days after publication, which is expected to take place in early 2019.

Keywords: Mazars, Thailand, NLA, LPA, FAP, TFRS, NPAEs

14 February 2019

The key amendment to the LPA is that the law includes a new and higher severance entitlement of 400 days wages for employees with over 20 years’ service. Please refer to the summary below.

Length of Employment	Severance Pay Entitlement
More than 120 days and less than 1 year	30 days salary/wages
At least 1 year and less than 3 years	90 days salary/wages
At least 3 years and less than 6 years	180 days salary/wages
At least 6 years and less than 10 years	240 days salary/wages
At least 10 years	300 days salary/wages
At least 20 years	400 days salary/wages*

*Proposed in the new LPA

On 7 February 2019, the Federation of Accounting Professions (FAP) issued the following statement providing the following options for recognizing an employee benefits obligation for entities applying TFRS and TFRS for NPAEs.

FAP Statement on changes to LPA

1. Public entity applying TFRS and entity applying TAS 19, ‘Employee benefits’

The entity must recognize past service costs as an expense in full in statements of income in 2018 or 2019 based on the information available to the entity and its judgement on when the plan will be amended or curtailment occurs.

2. Non-public entities

The entity must recognize this obligation as an expense in full in statements of income in the period when the company has a present legal, constructive obligation to provide employee benefits, and it is probable that an outflow of economic benefits will be required to settle the obligation, using the ‘best estimate’ method to determine the provision required to settle the obligation.

In summary, the required accounting treatment will remain consistent with current financial reporting standards, however, entities should consider the specific impact of this change to the LPA in respect of post-employments retirement benefits recorded in their financial statements.

For more information, please visit the FAP website.