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.
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