DOWNSIZING AS A RESULT OF THE COVID-19 CRISIS - YOUR LIABILITIES

Posted on 14/05/2020

As a result of COVID-19 pandemic crisis, many businesses are reviewing costs and one of the measures under consideration may include reduction of the workforce.  In accordance with Thai Labour Laws, making staff redundant owing to financial reasons or as a result of the recession is considered to be “termination without cause” and therefore subject to severance payments as follows: -

 

Years of Service

Severance pay due

More than 120 days but less than 1 year

30 days at current pay rate

More than 1 year but less than 3 years

90 days at current pay rate

More than 3 years but less than 6 years

180 days at current pay rate

More than 6 years but less than 10 years

240 days at current pay rate

More than 10 years

300 days at current pay rate

 

The following legal claims may arise from making staff redundant: -

 

1. Termination of employment without proper advance notice

An employer is required to inform their staff that they are to be terminated at or before the current pay date in order for the termination to be effective for the following pay date i.e. if the current pay date is 29th May 2020, notice of termination should be given on or before 29 May 2020 for this to be effective from the date of the payment of the June 2020 salary.  In the event that an employee is terminated with immediate effect, a payment in lieu of the one month notice period is required.

Longer notice periods may be required in the event that this is specified in an employee’s contracts, e.g. if the employee is subject to three months’ notice, this must be given on or before 29 May 2020 if he/she is to be terminated effective from the pay date for 28 August 2020, otherwise a payment in lieu of three months’ notice may be required.


2. Termination of a fixed term employment agreement prior to the maturity date

In this event, the employer may be liable to pay out the remaining period of the contract.  However, the employer will not be subject to the payment if the agreement is for a fixed period of not more than two years and the employment was made for a specific project which is not deemed to be in the employer’s “normal course of business” or for seasonal work.

 

3. Unfair termination/dismissal

Even in instances where full severance payments have been made in accordance with the Labour Code, an employee who has been terminated may still file a claim for unfair termination with the Labour Court.  In the event that the Court rules in favour of the employee, the most common rulings are that: -

           - the employer is instructed to rehire the employee; or

- the employer is ordered to pay compensation to the employee.

In considering these cases, the Court may consider the following matters: -

- was any action taken by the employer to avoid the unnecessary termination of the employee; and

- were the termination and justifications given conducted in good faith?

It is noted that the Courts consider that the loss of business does not necessarily constitute an acceptable reason for the termination of an employee, but rather that this is a result of mis-management.

 

4. Suggested action prior to making redundancies

- Advance notice of the problems facing the business and the possibility of redundancies should be issued to the staff.

- Development of an action plan in respect of manpower issues and the rotation of work between different departments.

- Attempt to resolve the matter by alternative means, such as shortening of working weeks/hours, cessation of overtime, a freeze on new employment and early retirement schemes.

- Consultation with your Legal advisor prior to proceeding with redundancies or other cost cutting measures such as shortening the hours of work.

- Employment of an “outplacement service” provider to mitigate the effects of redundancy on the workforce.

 

Outplacement/Career Transition Services 

As outlined above, laying off of employees can often be harmful and costly to both the employee and the employer.  From the employee’s point of view, losing one’s job is ranked third amongst life’s most stressful situations and whilst redundancy money (severance) can assist the ex-employee during their search for a new role, a well designed and implemented outplacement program can make the transition to a new job both more acceptable, successful and very often more rapid.  Perhaps most importantly, a well presented and implemented outplacement program is far more likely to result in acceptance of his/her situation by the employee who has just been made redundant.

 

Key Benefits

Avoids legal problems:  Employees are far less likely to sue for unfair dismissal if they are provided with a quality career transition program.

Maintains a positive public image:  Providing outplacement services to terminated employees reduces the likelihood of ‘bad mouthing’ to the media or amongst an ex employee’s circle of  friends.

Maintains good relations with terminated employees.  Since ex-employees very often remain in the same industry keeping on good terms with them for future business dealings can prove invaluable.

Improves employee morale and productivity.  A company that demonstrates that it cares about its past employees will always be perceived well by the surviving employees who  continue to work with the company.

 

Outplacement Programs

Most outplacement services focus on four keys stages in a terminated employee’s transition to a new job:

1. Acceptance:  Coming to terms with being out of work.  Every year thousands of people are made redundant but most go on to find more challenging, rewarding and better paid jobs.  The key to this phase of the program is convincing the individual that it is his/her job that has become redundant, not them personally.

2. Counseling: Assisting the employee in understanding/confirming their key strengths and specific talents in relation to their chosen career.  A number of assessment tools are employed at this stage to help an individual indentify what roles best match their personality and strengths. The goal is to help the individual identify his/her core skills so that they can better focus their job search efforts. 

3. Preparation: Developing a quality resume, cover letter and advising on self presentation skills are key to this stage of a program.  Individuals are advised how to best present themselves ‘on paper’ so as to maximize their chances of securing a job interview and are then advised as to how to make the best impression once in front of a prospective employer. 

4. Job search:  A good outplacement company will be able to advise on the available vacancies in the market and in many cases will be able to refer candidates to companies before a vacancy is announced.  For the duration of the outplacement program candidates are assigned a consultant to provide advice and manage the job search process.

 RSM Thailand’s recently launched outplacement program adopts some of the key elements of a standard career transition product, but is more focused on the ultimate goal of finding new jobs for recently laid off employees.  Utilizing the core strengths of RSM Thailand’s current services, namely it’s market leading recruitment company RSM Recruitment (Thailand) Limited and its Corporate Legal Division,  RSM Thailand is uniquely placed to both advise ex-employees on available positions in the market and employers on the legal requirements associated with downsizing their staff levels.

If you would like to receive consultation on recruiting new staff, the legal implications on terminating staff via redundancies or alternatively RSM Thailand’s outplacement program, please contact us either on telephone 02-670-9002 or askus@rsmthailand.com