How to hire and pay independent contractors in Thailand

Looking to expand your team in Asia? Thailand's proximity to the Asian markets and low employment costs make it a hiring hotspot for businesses looking to grow internationally.

But hiring independent contractors in Thailand is no easy feat. Apart from complying with Thai labor laws and tax practices, you have to set up a payroll system to pay your contractors compliantly. Crucially, you also have to know how to classify your workers correctly, or risk facing fines and penalties.

You don’t have to stress, though, because we’re going to explain what you need to know before you hire contractors in Thailand. This helpful guide will cover Thai labor laws, tax practices, and how you can avoid misclassification.

Unique considerations of managing contractors in Thailand

There are a few specific considerations to keep in mind while hiring independent contractors in Thailand: 

• Permanent establishment. When you hire independent contractors, there’s a risk of triggering permanent establishment if you misclassify contractors as employees. This means that you may be double-taxed while conducting business in Thailand. 

• The expectation of non-taxable allowances. Many workers in Thailand expect specific non-taxable budgets, including equipment and supplies allowances. Even if you’re hiring an independent contractor, the worker may expect additional payment to cover these items.

• Limitations on jobs for non-nationals: There are certain jobs in Thailand that are reserved for Thai nationals only. This Thai labor law applies whether you’re hiring independent contractors or employees. 

How do I pay an independent contractor in Thailand?

When you’re paying contractors globally, you have to find a way to pay them safely and on time, in their local currency. There are a few options you can use to pay contractors in Thailand, such as:

• Bank transfer

• International money order

• Online money transfer service (PayPal or Wise)

• Global payroll service

If you’re looking for a reliable, secure payment solution for contractors in Thailand, Remote’s global payroll service can also help. Remote handles currency conversions and automates payments for you, saving you the time and hassle of multiple contractor payments.

For more guidance on paying contractors in Thailand, read our helpful article on how to hire and pay remote workers in Thailand.

What are the risks of misclassifying Thai independent contractors as employees?

Thailand has two main types of employment: “contract for work,” which is essentially an independent contractor relationship, and “contract of services,” which is the standard employment relationship. 

The employer and the contractor mutually agree on working arrangements under the “contract for work” agreement. The contractor has the freedom to decide their working hours, schedule, and pay.

On the other hand, the employer has more control over the duties, schedule, working hours, and performance of the employee under the “contract for services” agreement. The employer must also provide the employee with other entitlements such as minimum wages, paid personal leave, sick leave, and other benefits. 

Choosing the right employment type for your worker is crucial because there are penalties for misclassification. The purpose of Thailand’s employment classification laws is to protect workers and ensure businesses are paying appropriate taxes. 

If you’ve misclassified an employee as a contractor, you’ll likely need to pay fines to the government alongside back taxes and back pay to the worker who has not received appropriate benefits. Meanwhile, if you misclassify a contractor as an employee, you’ll be losing money by paying additional taxes and benefits that you’re not required to offer. 

Furthermore, if your worker classification is challenged, you can also face intellectual property (IP) protection issues. Ownership of IP and invention rights is typically defined in the employment contract. If your contractor’s classification is challenged, you can lose ownership of your IP and face expensive legal proceedings.

There is an alternative to trying to classify your employees yourself. A global contractor management platform like Remote can handle the work of classifying workers and manage the legal considerations for you. Using Remote is a practical and secure way to minimize the risk of misclassification. 

What are the labor laws in Thailand?

Like most countries, Thailand has some important labor laws that will impact hiring, paying, and managing contractors. Here are the essential rules you’ll need to consider while hiring anyone in Thailand.

No “at-will” employment

Thailand requires all employees and independent contractors to receive a verbal or written contract detailing their terms of employment. Furthermore, these contracts can’t be immediately terminated without a specific reason. To terminate an employee, a just cause must be established, and you must give them notice of at least one full payment cycle (30 days).

Income taxes

Businesses with employees in Thailand must withhold and pay income taxes on behalf of their employees. You do not need to withhold income taxes for independent contractors, as they are responsible for paying their own taxes. 

Daily and weekly time limits

In Thailand, employees may only be required to work eight hours a day and 48 hours a week before receiving overtime. However, independent contractors are not held to these limits because they are not protected under these labor laws.

Tax and compliance practices for hiring independent contractors from Thailand

If you’re hiring independent contractors in Thailand, you don’t need to withhold taxes from their payment, as contractors are responsible for filing their own tax returns. 

If you’re a US-based company, you’ll be required to submit certain tax forms as required by the Internal Revenue Service (IRS). These forms include:

• W-8 BEN Form: Explains the foreign status of non-resident aliens hired by US companies.

• 1096 Form: Reports all payments you’ve made to contractors domestically and abroad.

• 1042-S Form: Reports the payments you’ve made to international contractors.

This can be a lot to manage, but you don’t have to do it alone. Remote can simplify contractor management and help you get all the correct forms filled out and submitted on time. By working with Remote, you can ensure that your contractors are paid quickly and compliantly. For more information, read our helpful article on how Remote makes tax compliance for US companies easier.

How do I convert an independent contractor in Thailand to an employee?

You might be thinking about converting your Thai contractors to employees at some point. There are some benefits to doing so. Here are some signs that you should consider converting your contractors to employees:

• You want to retain and engage your workers by offering benefits.

• You want to save money in the long term.

• You want your contractors to play a bigger role in your company.

• You want to protect your IP and invention rights.

• You’d like to have more control over the responsibilities and schedule of your workers.

• You want to avoid the risks of misclassification and non-compliance.

If you've decided to convert your Thai contractors to employees, there are two ways to do it:

• Establish your own local entity in Thailand

• Use an employer of record (EOR) service

For more information, read our helpful article about how an EOR service can help you hire global talent. 

The best way to hire independent contractors in Thailand

There's a lot of hard work (and stress) involved when you're hiring globally. Hiring independent contractors in Thailand could be the right move for your business, but you’ll have to ensure that you:

• Comply with Thailand’s labor laws and tax regulations

• Set up a reliable payroll system to pay your contractors securely

• Avoid the risks of worker misclassification

But there’s no need to worry because Remote can make contractor management a simple process. Our services can help you hire, onboard, and pay contractors quickly with a few clicks — saving you the time and hassle of handling it all yourself. With Remote, you can: 

• Onboard contractors in minutes with customizable contracts

• Manage contractor payments globally

• Automate the invoicing and payment process

• Stay compliant with local tax and labor laws

• Manage all your contractors in one place.

Hiring international contractors has never been easier. Ready to onboard Thai contractors with Remote? Sign up for our contractor management services and get started right away!