Employee Benefit Obligation

Is an Entity Required to Provide for an Employee Benefit Obligation? Yes. TFRS for NPAEs requires an entity to recognise its obligation for employee benefits, using the “best estimate method” of calculating the provision required to settle the present obligation as at the end of the reporting period.

Keywords: Mazars, Thailand, Accounting, Employee Benefits, Severance, TFRS, NPAEs, Obligation

02 May 2013

The significant employment benefit in Thailand is the compensation payable to employees on their retirement or termination of employment (Legal Severance Pay), according to the Thai labour law, with the progressive rates as follows:

Years of service

Amount of LSP

>120 days but < 1 year

1 month’s salary

1 year to 3 years

3 month’s salary

3 years to 6 years

6 month’s salary

6 years to 10 years

8 month’s salary

10 years and above

10 month’s salary


Under the “best estimate method’, an entity estimates the probable date for retirement for all current employees (generally grouped together in age bands), to calculate its obligation. The obligation can be calculated using the current salaries without any discount to present value or estimated future salaries which have been discounted. There is no requirement to appoint an actuary to calculate such obligation, although actuarial calculations are permitted.