Employers deducting the value of annual holiday already taken when paying compensation to terminated employees

Keywords: Mazars, Thailand, Employee, Annual Leave, Compensation, Termination, LPA 

For example, an employee is normally entitled to six days of annual holiday. The employee has already worked for one year. The employee is terminated on 30 June 2023, so the proportional amount of annual holiday to which the employee would be entitled is three days. However, the employee already took all six days of annual holiday before being terminated. Therefore, the question arises as whether the employer can deduct the value of the three excess days of annual holiday taken when paying compensation to the terminated employee. Precedents set by various Supreme Court rulings provide guidance on this issue, as set out below:  

1. Section 30, paragraph one, of the LPA states, “An employee who has worked for an uninterrupted period of one year, is entitled to annual holidays of not less than six working days in one year…” The Supreme Court has interpreted this to mean that an employee may take all of his annual holiday from the beginning of the second year, as set out in Supreme Court Rulings Nos. 3629/2529, 6412-6413/2557. 

2. Section 67 of the LPA states, “Where an Employer terminates the employment of an employee for any reason other than those set out in Section 119, the employer shall pay compensation to the employee for annual holiday for the year of termination in proportion to the number of days of annual holiday to which the employee is entitled under Section 30”. As set out in Supreme Court Ruling No. 8324/2544, Section 67 imposes an obligation on the employer to pay compensation in proportion to the amount of annual holiday not used by an employee upon termination. Section 67 does not impose an obligation on the employee to pay back the employer for any annual holiday already taken in excess of what the employee would have been entitled to at the time of termination.  

3. The main focus of Section 30 of the LPA is on the employee’s right to take annual holiday, which is not the same as the right to receive compensation upon termination if the employee does not use annual holiday under Section 67 of the LPA. This means that Section 67 should not be interpreted in a way so as to determine the number of days of annual holiday that an employee can take during the year.  

4. As set out in Supreme Court Rulings Nos. 6412-6413/2557, if an employer approves annual holiday requested by an employee before termination, the employer cannot deduct the value of any annual holiday from the compensation to be provided to the employee upon termination, even if the number of days of annual holiday already taken exceeds that to which the employee would have been entitled at the time of termination. 

Therefore, an employer is not allowed to deduct the value of any excess annual holiday taken from the compensation to be provided to an employee upon termination.