The employer calls or slides over a sheet of paper: "The company will give you this lump sum. Sign and we are done." Many employees want the money fast and do not want a case. But once you sign, you usually cannot claim anything more. So the question is not whether the lump sum is big or small. It is whether it covers everything you are entitled to, and what exactly you are giving up.
This guide takes the narrow angle of checking the settlement document before you sign. The general rules on severance are in the severance pay guide, your first-week rights and what not to sign are in the guide to employee dismissal rights, and the court steps are in the first-time Labour Court guide. HR teams drafting the agreement can use the same list to review their own draft.
The short answer
Do four things before signing: split the lump sum into items and compare them with your statutory entitlements; read the wording that sets the scope of the settlement; check the payment dates and what happens on default; and choose a form of agreement that can actually be enforced. A lump sum that looks large can fall below your total entitlement once itemised, and one line of text can wipe out rights nobody discussed.
The law. A compromise contract is one in which the parties settle a dispute by mutual concessions (Civil and Commercial Code Section 850). It needs written evidence signed by the party liable (Section 851), and it extinguishes the claims the parties gave up (Section 852). The employee's basic rights are in the Labour Protection Act B.E. 2541: payment of wages (Section 70), notice and pay in lieu of notice (Sections 17 and 17/1), severance (Section 118), guarantee money (Section 10), and interest and surcharge on money left unpaid (Section 9).
Our practical view. Do not accept the offer on the day you receive it. Ask for the draft and at least one or two working days to read it. That is a fair request and an employer acting in good faith rarely refuses it. A good settlement does not have to equal a full court award, because finishing early has value. But you should know how much you are discounting and what you receive in exchange.
Running hypothetical. Mali works in a warehouse in Khon Kaen and has been there seven years on 18,000 baht a month. The company announces that her section is closing and offers a lump sum of 150,000 baht, to be signed as "no further claims of any kind". Mali is not sure the amount is enough.
1. What is in the lump sum? Break it into items
An offer that gives only a total cannot be checked. Ask the employer to itemise it, then compare it with this table.
| Item | Legal basis | In the offer? |
|---|---|---|
| Unpaid wages | Labour Protection Act Section 70; interest and surcharge Section 9 | Check the last pay period and any deductions |
| Pay in lieu of notice | Sections 17 and 17/1 | If you were let go at once, it must be there, separate from severance |
| Severance | Section 118, by length of service and last rate of wage | Check the calculation base and the start date used |
| Accrued annual-leave pay | The leave chapter of the Labour Protection Act | Check the accumulated days under company rules |
| Overtime and holiday work pay | The overtime and holiday-work chapter | Check back-pay against time records |
| Contractual bonus | Employment contract or work rules | Is it a right or at the employer's discretion? |
| Provident fund | Fund rules and the contract with the fund manager | Usually paid by the fund, not out of this lump sum |
| Guarantee money | Labour Protection Act Section 10 | Must be returned when employment ends or the covered liability ends |
Mali has seven years of service, which falls in the six-to-ten-year band of Section 118: severance of 240 days of last-rate wages. At 600 baht a day (18,000 baht a month), that is 144,000 baht. If she was not given notice by a pay period, pay in lieu is about 18,000 baht more, a total of 162,000 baht, before counting accrued leave, overtime and any bonus she is owed. So the 150,000 baht offer already falls short of two basic items. These figures show the method only. Real figures depend on the wage base and the documents in each case.
If an item such as the provident fund is not in the offer, check whether the "no further claims" wording would reach it. See Section 3.
2. Waiving rights while employed versus settling after the employment ends
There are two layers.
- While you are still employed. The minimum statutory labour rights are protected, and a clause or signature sheet waiving them in advance is generally not given full effect by the courts, because the employee has no real bargaining power. Being asked to sign a resignation and a waiver together with a demotion is an example to be careful about. See the guide on resignation signed under pressure.
- After the employment has ended and a dispute has arisen. The parties negotiate who pays what. A written agreement with real mutual concessions extinguishes the claims put on the table (Section 852). The court still looks at whether the employee had the full information, acted freely, and received an amount that is not so far below the entitlement that it is plainly unfair.
An agreement after dismissal therefore carries more weight, but it is not valid whatever it says, and you should not sign counting on a court to undo it later. The outcome depends on the facts and the court.
3. How far does "no further claims" reach?
A typical clause says "the recipient confirms that he or she has no claim of any kind against the company, now or in the future". The drafter writes it broadly on purpose. Check:
- Scope of subject. Does it cover only the dismissal dispute and the named money, or every matter that ever arose, including matters you do not yet know about?
- Scope of time. "In the future" should come out, because rights that have not yet arisen should not be waived in advance.
- Who benefits. The company only, or also executives, group companies and successors?
- Money to carve out. Provident fund, Social Security, wages not yet due and rights protected by other laws should be stated as outside the agreement.
- What the payment is for. The agreement should say which items the lump sum pays. A dispute over an item that is not named is one the employer will argue falls within the broad words.
Where the wording is doubtful, Civil and Commercial Code Section 11 construes it in favour of the party who would bear the obligation, and Section 368 reads contracts in good faith with regard to ordinary usage. Do not rely on construction. Fix the wording before you sign.
4. Other wording that affects your rights
| Wording | What to check |
|---|---|
| Resignation or termination | State what happened. If the employer ended the employment, writing resignation can hurt a severance claim and the Social Security unemployment benefit, whose rate differs between dismissal and resignation. Check with the Social Security Office first. |
| Confidentiality | Only the amount and terms, or the whole dispute? Exceptions for your lawyer, accountant, family and public authorities. |
| Non-disparagement | Should bind both sides and not stop you giving information required by a court or authority. |
| Non-compete or non-solicitation | If newly added, look at duration, area and business. A term that is too wide is enforced only to a fair and reasonable extent under unfair-terms law. See the guide on non-compete clauses. |
| Reference letter | Require the company to issue a work certificate by a set date, with agreed wording. |
| Return of property | List the items and the date, with a signed receipt from the company, and no deduction from the agreed sum on a new allegation. |
| Set-off or deduction | No clause letting the company deduct from the lump sum alone. Deductions from wages are limited by Section 76. |
5. Payment schedule, default and acceleration
A sum paid late is riskier than a sum paid at signing. Check:
- One payment or instalments. If instalments, the first should be paid on signing, with a fixed date for each.
- What happens on default. A good agreement has an acceleration clause: if the company is late beyond a set number of days, the whole balance falls due at once, with default interest.
- Effect of default on the waiver. State that if the company does not pay, you can sue on the original claim, and that the waiver takes effect only once everything is paid.
- Payment channel. Bank transfer with proof, and you sign the acknowledgement of receipt when you have received the full amount, not before.
- Security. For a small or shaky company, ask for a guarantor or payment in one sum.
A contract may set a penalty (Civil and Commercial Code Sections 379 to 383), but the court may reduce a disproportionately high one (Section 383), and a creditor who accepts performance must reserve the penalty claim when accepting (Section 381, third paragraph).
6. Tax: who bears it and whether it is withheld
The agreement should say whether 150,000 baht is before or after withholding tax. Otherwise the amount that reaches your account may be lower than agreed. In general terms, severance paid under labour law may be exempt from tax under the conditions and cap set by the Revenue Department, while wages, overtime, bonus or amounts the employer pays beyond the statutory entitlement may be subject to withholding according to the type of income. Because the conditions and caps can change, check the latest on the Revenue Department website or with an accountant before signing.
Write into the agreement that the employer files and remits any withholding tax, issues the withholding certificate, and who bears any later assessment if the employer withheld too little.
7. Private agreement, Labour Court or labour inspector
| Form | Effect | Points to know |
|---|---|---|
| Private agreement | A contract (Sections 850 to 852) | On default you must sue to enforce before you can execute |
| Settlement before the Labour Court, adopted as a judgment | Has the effect of a judgment | On default you can seek enforcement, and in principle the same matter cannot be sued again. See the Labour Court guide |
| Settlement before a labour inspector | An agreement recorded with an official present | If a deal is reached, put it in writing and check what happens if the employer defaults. See labour inspector or court |
If a case is already in court, ask for the deal to be recorded before the court, since it is easier to enforce. If there is no case yet, a carefully drafted private agreement with a safe payment structure can work. For pre-suit mediation, see alternative dispute resolution.
8. Sample clauses you can adapt
Clause 3 Payment items
The Company agrees to pay the Employee a total of 150,000 baht, before withholding tax, made up of
(a) severance under Labour Protection Act Section 118 ........ baht
(b) pay in lieu of notice ........ baht
(c) accrued annual-leave pay ........ baht
(d) other items as specified ........ baht
Clause 4 Payment date
The Company will transfer the sum to the Employee's account by ........ . If the Company is
more than 7 days late, the whole balance falls due at once with default interest, and the
Employee may still sue on the original claims.
Clause 5 Scope of settlement
Once the Company has paid everything in Clause 3, the Employee agrees to make no further claim
for the items in Clause 3 only. This agreement does not affect provident fund money, Social
Security rights, or rights arising after the date of signing.
Clause 6 Reason employment ended
The parties record that the employment ended by the Company's termination on ........ .
Clause 7 Tax
The Company will withhold and remit any withholding tax and give the Employee the certificate
within ........ days.
This is only a skeleton. Adapt it to the facts and have someone qualified review it before use.
9. Checklist before you sign
Money and items
- Ask the employer to itemise the lump sum
- Calculate severance and pay in lieu yourself from service and last wage
- Check accrued leave pay, overtime, bonus and guarantee money not yet received
- Check that the provident fund is paid separately
Scope and wording
- The "no further claims" scope is limited to the items actually paid
- Waivers of future rights and rights protected by other laws are removed
- The reason employment ended matches the facts
- Confidentiality and non-disparagement bind both sides with necessary exceptions
- Any newly added non-compete has been checked
Payment and tax
- You know whether the figure is before or after tax
- Payment dates, the acceleration clause and the effect of default are clear
- You sign the receipt only once you have received the full amount
- You have decided between a private agreement, the Labour Court or a labour inspector
Further reading
- Severance pay on dismissal — how severance and the wage base are calculated
- Dismissed: what to do — what not to sign and the deadlines you cannot miss
- Your first Labour Court case — the mediation day and settling before the court
- Labour inspector or Labour Court — comparing the two routes
- Unpaid wages and overtime — checking the money still owed
- Resignation signed under pressure — when the deal comes with a resignation letter
- Non-compete after resignation — when the deal adds a new restriction
A lump sum is an offer, not a ruling. You can negotiate it, and you should sign only once you know what you are receiving and what you are giving up.
We review draft termination agreements, compare each money item with your entitlements, propose changes to wording that affects your rights, and negotiate or mediate with the employer for you. For an initial consultation, call +66 92 254 2045 or send us the details. See also alternative dispute resolution and labour law.
This guide is published by Suwanvara Law Firm — a Khon Kaen law firm established in 1986. General information only, not legal advice on a specific matter.
