Labour & Employment Bangkok Client Alert June 2015 www.bakermckenzie.com Bangkok 5th Floor and 21st-25th Floors 990 Abdulrahim Place Rama IV Road, Silom, Bangrak Bangkok 10500 Thailand © 2015 Baker & McKenzie. All rights reserved. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. Better Savings through Provident Fund: Recent Amendments to the Provident Fund Act B.E. 2530 On 14 May 2015, the National Legislative Assembly ("NLA") made a final approval of the draft amendment to the Provident Fund Act B.E. 2530 (1987) (the "Act"). The main purposes of the draft amendments are to support and promote long-term savings by employees through the use of provident fund. The provident fund is a form of voluntary pension fund. An employer is not required by law to set up a provident fund as it is voluntary. However, if an employer wishes to set up a fund, the fund must be registered with the Securities and Exchange Commission and follow requirements prescribed under the Act. Both the employer and the employees are required to make regular contributions to the fund at the rate they deem appropriate so long as they are not lower than 2% and do not exceed 15% of the employee’s wage. Currently, the employer is required to contribute to the fund at the same rate as the employee's contribution. Main revisions to the Act under the draft amendment are as follows: Amendment Current The employer and employees shall agree to contribute to a provident fund at rates between 2% and 15% of the employee's wages. However, employees can elect to contribute to a provident fund at a higher rate than the employer's - so long as such rate is between 2% and 15% of the employee's wage and the provident fund regulation has been amended to allow this. The employer and employees shall agree to contribute to a provident fund at rates between 2% and 15% of wages. Employers are required to match employee's contributions. The employer or employees may temporarily halt or postpone the remittance of contributions to the provident fund for up to 1 year per instance in a case where there is a financial crisis, public disaster, or situation affecting financial situation on a large scale - subject to terms and conditions as will be announced by the Finance Minister. No such provision exists. Thus in the case of a financial crisis or disaster affecting the employer or employees financially, the employees may have to resign from the provident fund, or the employer may have to dissolve the fund altogether. Employees whose age is 55 years or more and whose employment ceases can choose to receive the money from the provident fund in Only retiring employees are eligible to receive the money from the provident fund in installments. Employees whose employment ceases and Client Alert © 2015 Baker & McKenzie. All rights reserved. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. For further information please contact Suriyong Tungsuwan +66 2636 2000 ext. 4112 firstname.lastname@example.org Nam-Ake Lekfuangfu +66 2636 2000 ext. 4112 email@example.com Theeranit Pongpanarat +66 2636 2000 ext. 4112 firstname.lastname@example.org installments similar to the retiring employees. whose age is at least 55 years but less than the retirement age will only get the money from the provident fund in a one-time lump-sum amount. Employees whose membership ceases on grounds other than resignation from the fund (e.g. their employment ends, the fund is dissolved) are eligible to request all of the money within the fund they are entitled to be transferred to a Retirement Mutual Fund (RMF) or other funds which have the objective of being a security in cases of employment cessation or old age. No such provision exists. Thus in a case where the employees' membership ceases, the employees will have to receive the money from the provident fund in a one-time lump-sum amount only. As the NLA has already made a final approval of the draft amendment, it is now being presented for a royal endorsement before being published in the Royal Gazette. Once it is published in the Royal Gazette, it is expected to come into force after 90 days from the publication date in order to allow employers and employees, as well as fund managers, to prepare for a smooth implementation of the changes.