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LAW ON OUTSOURCING IN HOTEL BUSINESS

Rungsun Rungruangkoswang

ABSTRACT

According to the expansion of tourism industry in Thailand that amount of tourists is

increasing every year. A hotel business is an important mechanism in tourism industry. It

plays significant role to provide gracious hospitality, accommodation and related services to

tourists. The services provided in a hotel business cannot be delivered or replaced by

machines as it needs human touch service more than any other services which mean human

resources in direct or indirect way including outsourcing workers is very important to a hotel

business. Therefore, outsourcing workers is the key of such important of a hotel business.

Outsourcing company and outsourcing worker in Thailand is governed by section 11/1

of the Labor Protection Act B.E. 2541 which is developed from the concept of additional

protection to outsourcing worker that usually being taken advantage of by hotel operator.

Therefore, section 11/1 of the Labor Protection Act B.E. 2541 determines that hotel operator is

an employer of outsourcing worker, not the outsourcing company who entered into

employment contract with outsourcing worker. Moreover, in B.E. 2555, Supreme Court had a

decision based on such provision which causes more problems, obligations and liabilities to

the defendant (manufacturer) in providing benefits and welfare to outsourcing workers as same

as direct employees, and outsourcing companies who supply outsourcing worker did not have

to liable such benefits and welfare at all.

From the labor law research of legal status between outsourcing company and

outsourcing worker in International Labor Organization, Indonesian labor law, Singapore labor

law and English labor law, the findings is that the International Labor Organization, Indonesian

labor law and Singapore labor law have clear definition of outsourcing service and also legal

status between outsourcing company and outsourcing worker. Furthermore, Indonesian labor

law and Singapore labor law set up standard measure to control outsourcing company such as

licensing system and employment contract registration system with government authorities.

In conclusion, section 11/1 of the Labor Protection Act B.E. 2541 should be amended

to set the specific legal status between outsourcing company and outsourcing worker, licensing

system and employment contract registration system in the future. It would establish clarity in

legal relation between hotel operator, outsourcing company and outsourcing worker, and to

protect hotel operator and outsourcing worker efficiently.

This article is a part of Independent Study of Graduate School of Law on the topic, “Law on Outsourcing in

Hotel Business”, Graduate School of Law Assumption University, 2017.

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Keywords: outsourcing, outsourcing company, hotel business, outsourcing labor,

tourism industry

บทคดัย่อ จากการท่ีมีการขยายตวัในอุตสาหกรรมการท่องเท่ียวของประเทศไทย อนัเน่ืองมาจากจ านวนนกัท่องเท่ียวท่ีเพ่ิมข้ึนในแต่ละปีนั้น ธุรกิจโรงแรมจึงเป็นหน่ึงในกลไกส าคญัหน่ึงของอุตสาหกรรมท่องเท่ียวท่ีมีบทบาทส าคญัในการส่งมอบซ่ึงการบริการ ท่ีพกัอาศยั และการบริการอ่ืนๆ ท่ีเช่ือมโยงกนัแก่นกัท่องเท่ียวท่ีมาเยือนประเทศไทย ซ่ึงการให้บริการในธุรกิจโรงแรมเป็นรูปแบบการให้บริการท่ีตอ้งมีการปฏิสัมพนัธ์กนัระหว่างบุคคล (human

touch) มากกว่าการให้บริการในรูปแบบอ่ืนๆ ดงันั้นการให้บริการในลกัษณะน้ีจึงไม่สามารถด าเนินการ หรือทดแทนดว้ยเคร่ืองจกัรไดเ้ลย ซ่ึงหมายความไดว้่าทรัพยากรบุคคลไม่ว่าจะโดยทางตรง ทางออ้ม รวมถึงการจา้งเหมาแรงงานเพ่ือท าหนา้ท่ีบริหารในธุรกิจโรงแรมนั้นมีความส าคญัต่อธุรกิจโรงแรมเป็นอย่างมาก ดงันั้น การจา้งเหมาแรงงานจึงเป็นกญุแจดอกส าคญัต่อธุรกิจโรงแรมอยา่งแทจ้ริง

บริษทัใหบ้ริการเหมาแรงงาน และแรงงานจา้งเหมาในประเทศไทย ซ่ึงในปัจจุบนัมีบทบัญญติัท่ีใชบ้งัคบัอยู่ตามพระราชบญัญติัคุม้ครองแรงงาน พ.ศ. 2541 ซ่ึงเป็นบทบญัญติัท่ีถูกพฒันาข้ึนมาเพ่ือเพ่ิมเติมความคุม้ครองให้แก่แรงงานจา้งเหมาท่ีมกัจะถูกเอารัดเอาเปรียบจากผูป้ระกอบธุรกิจโรงแรมอยู่เสมอ ดงันั้นแลว้ มาตรา 11/1

ของพระราชบญัญติัคุม้ครองแรงงาน พ.ศ. 2541 ไดก้ าหนดให้ผูป้ระกอบธุรกิจโรงแรมมีฐานะเป็นนายจา้งของแรงงานจา้งเหมาดว้ย แต่ไม่ไดมี้การก าหนดใหบ้ริษทัใหบ้ริการเหมาแรงงานตอ้งเป็นนายจา้งของแรงงานจา้งเหมาแต่อย่างใด แมว้่าบริษทัใหบ้ริการเหมาแรงงานจะท าสัญญาจา้งแรงงานกบัแรงงานจา้งเหมาก็ตาม ยิ่งไปกว่านั้น ผลของค าพิพากษาฎีกาในปี พ.ศ. 2555 เก่ียวกบัมาตราน้ีไดก่้อให้เกิดปัญหา หนา้ท่ี และความรับผิดชอบต่อจ าเลย (ผูผ้ลิต) ในคดีดงักล่าวเป็นอย่างมาก รวมถึงสิทธิประโยชน์ และสวสัดิการท่ีตอ้งจดัให้แก่แรงงานจา้งเหมาเฉกเช่นเดียวกนักบัลูกจา้งโดยตรงของจ าเลย และบริษทัให้บริการเหมาแรงงานในคดีดงักล่าว ไม่ตอ้งรับผิดชอบต่อแรงงานจา้งเหมาซ่ึงสิทธิประโยชนแ์ละสวสัดิการท่ีแรงงานจา้งเหมาพึงไดรั้บจากบริษทัใหบ้ริการเหมาแรงงานเลย

จากการศึกษาคน้ควา้กฎหมายแรงงานในเร่ืองสถานะทางกฎหมายระหว่างบริษทัใหบ้ริการเหมาแรงงาน และแรงงานจ้างเหมาขององค์กรแรงงานระหว่างประเทศ (ILO) กฎหมายแรงงานของประเทศอินโดนิเซีย กฎหมายแรงงานของประเทศสิงคโปร์ และกฎหมายแรงงานของประเทศองักฤษ จึงพบไดว้่ากฎหมายทั้งในระดบัระหว่างประเทศ และกฎหมายภายในของประเทศต่างๆ ไดก้ าหนดบทนิยามท่ีชัดเจนของการจา้งเหมาแรงงาน รวมถึงสถานะทางกฎหมายระหว่างบริษทัใหบ้ริการเหมาแรงงานและแรงงานจา้งเหมาดว้ย นอกจากนั้น กฎหมายแรงงานของประเทศอินโดนิเซีย และกฎหมายแรงงานของประเทศสิงคโปร์ไดส้ร้างมาตรการท่ีมีมาตรฐานเพ่ือใช้ในการควบคุมบริษทัใหบ้ริการเหมาแรงงาน เช่น ระบบการขอใบอนุญาต ระบบการจดทะเบียนสัญญาจา้งแรงงานต่อหน่วยงานของรัฐ เป็นตน้

กล่าวโดยสรุป คือ มาตรา 11/1 ของพระราชบญัญติัคุม้ครองแรงงาน พ.ศ. 2541 ควรแกไ้ขโดยการก าหนดสถานะทางกฎหมายระหวา่งบริษทัใหบ้ริการเหมาแรงงานกบัแรงงานจา้งเหมา ก าหนดระบบการขอใบอนุญาต และระบบการจดทะเบียนสัญญาจา้งเหมาแรงงานของการจา้งเหมาแรงงาน อนัจะเป็นการก่อใหเ้กิดความชดัเจนในนิติสัมพนัธ์ระหว่างผูป้ระกอบกิจการโรงแรม บริษทัให้บริการเหมาแรงงาน และแรงงานจ้างเหมา และเพ่ือเป็นคุม้ครองผูป้ระกอบกิจการโรงแรมและแรงงานจา้งเหมาไดอ้ยา่งมีประสิทธิภาพมากยิ่งข้ึนในอนาคต

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ค ำส ำคัญ: การจา้งเหมาแรงงาน, บริษทัให้บริการเหมาแรงงาน, ธุรกิจโรงแรม, แรงงานรับเหมา, อุตสาหกรรมท่องเท่ียว

Background and General Statement of the Problems in Outsourcing to

Hotel Business

Outsourcing is the act of one company contracting with another company to provide

services that might otherwise be performed by in-house employees, often the tasks that are

outsourced could be performed by the company itself, but in many cases there are financial

advantages that come from outsourcing. Outsourcing is evident in the hospitality industry.

Many hotels, catering outlets and restaurants outsource some of their services. Outsourcing in

the hospitality industry is done in order to reduce costs; it also improves quality of service and

increase revenue. Outsourcing is defined as a subcontracting service to a third party for

strategic use of firm’s resource, to generate firm’s values and grow competitive edge.

Outsourcing is the process of transferring the responsibility for an exact business function

from an employee group to a non-employee group. Firms often integrate outsourcing as a

strategy in business planning. By embarking into outsourcing, firms can offer better client

service, product a better product, and do a better job. By doing that they are putting those

responsibilities in the hands of professionals. The nature of hotel operations signifies that

hotels are particularly suited to outsourcing activities. Particular characteristics predisposing

hotels to outsourcing include the broad range of activities undertaken, the high labor content

associated with hotel activities, and the volatile nature of demand for a hotels services.1

It is not easy to talk about outsourcing in the hospitality industry, as the hotel product

depends on factors that hoteliers cannot always control. Sometimes, the hotel cannot assume

the workload and they need to subcontract specialized companies that provide high-quality

services. Besides, a hotel has high fixed costs. Keeping a hotel running implies having to face

expenses no matter whether there are guests staying at the hotel or not. Staff must go to work

every day and, consequently, paid a salary. If the facilities do not belong to the hotelier, the

rent is another fixed cost; bills, providers, etc. In order to deal with these costs, hoteliers may

1 Mugassa, P. M., “An Analysis of Outsourcing Hotel Services in Tanzania” Tourism

Educators Association of Malaysia (TEAM) Journal of Hospitality and Tourism, Vol. 12,

Issue 1, (2015): pp.51-66.

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decide to contract out some activities so that fixed costs turn into variable costs.2

As a hotel business has to run twenty-four hours a day, seven days a week and three

hundred and sixty-five day a year with high-quality services in many functions of business

which labors are needed to operate such services. Hotels tend to outsource non-core services

such as laundry, security, cleaning. There are two main reasons for hotel business to outsource

i.e. suppliers’ expertise and brand name as well as to increase internal efficiency of hotel

business itself, but unfortunately, the Labor Protection Act B.E. 2541 Section 11/1 states that:

“Where an operator authorizes a person to provide personnel to work, which is not a

job placement business and such work is part of the production process or business under the

responsibility of the operator, and whether or not such person will supervise the performance

of work or be responsible for payment of wages to those who do such work, the operator shall

be deemed the employer of those engaged to do such work.

The operator shall arrange for an employee hired for wages who works in the same

manner as employees under a direct employment contract to, without discrimination, receive

fair rights, benefits and welfare.”

This provision determines the legal status of the operator to be an employer of workers

supplied by the outsourcing service provider even though the operator does not enter into any

contract with workers, conversely different from the outsourcing service provider that has no

any special provision to determine the legal status between itself and their workers. The vague

and unclear of such provision establish intensity in contracting with another company to

provide services to hotel operator as hotel operator has to aware of the risk that may occurs

from legal status determined by this provision and hotel operator may not claim any costs,

expenses or reimbursements from the outsourcing service provider as there is no any control

measure of outsourcing business.

Therefore this study illustrates that in international laws and foreign laws determine

control measure of outsourcing business, legal status between parties to outsourcing service

and also conceptual framework of outsourcing business which are able to control and conduct

outsourcing business more efficiency which the author hopes that this study will creates the

opportunity in leading the better way for Thai labor laws in controlling and conducting

outsourcing business onwards.

2 Caterina Jaume, Outsourcing in the Hospitality Industry: Advantages and Disadvantages,

http://www.winhotelsolution.com/en/blog/hotel-software-2/outsourcing-hospitality-industry-

advantages-disadvantages/ (last visited 29 May 2017).

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Definition and Types of Outsourcing Services

Outsourcing is a practice in which an individual or company performs tasks, provides

services or manufactures products for another company, functions that could have been or is

usually done in-house. Outsourcing is typically used by companies to save costs. Businesses

outsource for services that are seen as intrinsic to managing a business and serving internal

and external customers. Products, such as computer parts, and services, such as payroll and

bookkeeping, can be outsourced. In some cases, the entire information management of a

company is outsourced, including planning and business analysis.3

In another way, outsourcing is the way to operate a business with less management

and operation risk and within a time frame. It can increase the profitability within the

organization and can enhance the brand image in terms of better service and efficiency.

Because when firms prefer outsource rather than doing things by won they can get some more

option and more trust and less risk which can make their service more effective and

productive.4

There are two types of outsourcing which is implemented in the hotel industry. This

includes selective outsourcing and complete outsourcing. Selective outsourcing pertains to

certain functions which are chosen for outsourcing, which can be the database of customers or

accounts records of the hotel and etc. On the other hand, complete outsourcing refers to the

whole function which is outsourced. Though hotels are recognizing the importance of

outsourcing, this does not mean that this business strategy is applicable to all5.

The Importance of Thailand Tourism Industry and Hotel Business

Tourism industry is able to generate greatly revenue to Thailand, in 2015, there were

1,184 Billion tourists all over the world traveled internationally which climbed up by 4.4%

3

Tech Target, Outsourcing, at http://searchcio.techtarget.com/definition/outsourcing, (last

visited 3 June 2017). 4 Firas Hamdan, Outsourcing in the Hotel Industry Business Essay, at

https://www.ukessays.com/essays/business/outsourcing-in-the-hotel-industry-business-

essay.php (last visited 3 June 2017). 5 F i r a s H a m d a n , O u t s o u r c i n g i n t h e H o t e l I n d u s t r y B u s i n e s s E s s a y, a t

https://www.ukessays.com/essays/business/outsourcing-in-the-hotel-industry-business-

essay.php (last visited 3 June 2017).

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compare to 20146, and 29.88 million people traveled to Thailand went up by 20.44% compare

to 20147 that can generated revenue up to Baht 1,447.16 billion to Thailand which increased

in rate of 23.39% compare to 20148. This took inbound travelling of Thai people into account;

it shows the growth rate of tourism industry consecutively in every year.

In 2015, number of inbound tourist recorded at 145 million, representing a 5%

increased from 20149 which was only 138 million and have a tendency of growth in every

year together with the Thai Commercial Chamber stated there are 6 million of labors in

tourism business calculated in 13% – 14% of labors for the whole country. In consequence,

the tourism industry is looked upon as huge and important industry of Thailand10.

The number of inbound and international traveling, either foreigners or Thais,

illustrates the tourism industry is looked upon as huge and important industry of Thailand and

has potential growth in international and domestic. This is the reason why it is necessary

having sufficient and variety of the services to meet with demanding pursuant to growth of

tourism market; new attractions to contribute the new experience to tourists, quality tours,

health treatments e.g. spa; and one of the most important business in hospitality industry of

Thailand that has an unique identity in respect of service which is “Hotel Business”.

Hotel business means providing accommodations on daily or weekly not for monthly

basis. As rental in hotel business is in short-term other than accommodations, it includes

services such as food and beverage, laundry service, cleaning service, car park service,

security service, swimming pool, fitness, seminar, etc. It might include facilities for business

function as known as ‘business center’. As example mentioned latter, establishment and

maintenance of the services standard provided in hotel business obviously seen that it has

tremendous costs and expenses that the operator has to provide sufficiently and continually

investment fund and working capital in operational conduct.

In 2015, Thailand tourism indicator shown that the investment fund in hotel business

went up by 9.07%, rising from Baht 191,519 billion (in 2014) to Baht 208,888 billion (in

2015). As a consequence, such investment generated revenue to Thailand Baht 476,114.18

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Office of the Permanent Secretart, Ministry of Tourism and Sports , Tourism Economic

Review, 2nd issue (October 15 – December 15), p. 2. 7

Division of Statistic and Tourism Economic, Department of Tourism, Foreign Traveler

Attending into Thailand Report between year 2014 – 2015. 8 Office of the Permanent Secretart, Ministry of Tourism and Sports , Tourism Economic

Review, 2nd issue (October 15 – December 15), p. 2. 9

The Erawan Group Public Company Limited, Annual Report 2015, p. 23.

10 Chanin Donavanik, “The Crisis in Thai Labor Shortage” Thai Hotels & Travel, Vol. 6,

No. 36 (February 2016 – March 2016), p. 8.

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billion and Baht 384,805.97 billion in 2015 and 2014 respectively; proportion of investment

and revenue increased annually. Especially in accommodations according to internal tourism

expenditure, it was top 3 in service industry out of 1311. According to record of Department of

Business Development, Ministry of Commerce, number of hotels in Thailand also climbed up

from 6,085 hotels, as of 31st August 2014, to 7,246 hotels as of 30 th September 201512.

Therefore, all these numbers, statistics and evidences indicate that hotel business is one of key

resources in boosting up revenue significantly.

Form of Hotel Management and Five-Star Hotel Requirement

Nowadays there are many types of asset management structure in hotel operation:

- Hotel managed by the operator with its own brand;

- Hotels managed under the Hotel Management Agreement;

- Hotel managed under the Franchise Agreement;

- Hotel managed under Joint Venture Agreement;

- Residence project managed by the operator or under Management Agreement; and

- Residence project under the condition of Rental Pool Scheme.

These types of asset management structure, the operators have to set up the standard,

form for each type of hotel also take account of location and target customer which are

differences in each area for the investment and development properly such as:

- Luxury Hotel - Economy Hotel

- Luxury Resort & Spa - Airport Hotel

- Midscale Hotel - Budget Hotel

- Residential Hotel - Conference or Convention Hotel

- Sleep Box Hotel

Concurrently, the operators operate other business including retail space, management

of office building and health treatment to meet with their target customers traveling for

various purposes; leisure, business, MICE (Meetings – Incentives – Conventions –

Exhibitions) or transition.

11

Office of the Permanent Secretart, Ministry of Tourism and Sports , Tourism Economic

Review, 2nd issue (October 15 – December 15), p. 68. 12 Department of Business Development, Ministry of Commerce, Significant business report

of August 2014 and September 2015, at

http://www.dbd.go.th/index_answer.php?wcad=21&wtid=4017456&t=&filename=webboard,

(last visited 12 August 2016).

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Various types and businesses of the operators cause an intense competition in hotel

market by diversifying hotels and resorts portfolio to extend business channel into various

tourist destinations and business district areas according to variable behavior of tourists and

social context. Up until now the latest hotel segment named “Budget Hotel”; suitable for

traveling to destinations for days on end, as we known in “Wanderlust”. This hotel segment

attracts a new operator, PTT Public Company Limited the wel l-known in energy and

petrochemical business, into hotel market13; which shown that there will always have new

hotel operators involve in the hotel business as it is important economic mechanism of

Thailand.

All factor and concerned matter hereinafter set forth that the hotel operators have to

take into account, firstly, the growth of hotel business is slightly increases annually. The

government authorities, who are in main role to prescribe the regulations, conditions and

standards in hotel operation, announced the regulation about the hotel business in 2008:

1) type of accommodations shall not be deemed as hotel according to the Hotel Act

B.E. 2547;

2) categorize hotel into 4 types;

3) specification of criteria and conditions in each type of hotel such as the services,

facilities, security system, drainage system, air system, water waste treatment system and

electricity system; and

4) minimum standard requirement of size and room number in each type of hotel14.

Secondly, besides the minimum standard required by law, there is well-known system

to categorize the hotel by setting up minimum standard, which much higher than the law

requirements, for the hotel operator to provide and meet with the requirements of “Star Rating

System”15 to reflect the standard and grade of the services the tourists will be experienced

from the hotel they selected. Therefore, this paper will discuss business under the

responsibility of the hotel operators should take to gain rate of five-star hotel only. As of May

2014, Department of Tourism raised the criteria and indicators of five-star hotel standard

assessment from 402 issues up to 499 issues16 to be in line with international five-star hotel

13 M a n a g e r o n l i n e , P T T a n d b u d g e t h o t e l i n P T T g a s s t a t i o n , a t

www.manager.co.th/iBizChannel/ViewNews.aspx?NewsID=9590000062360 (last visited 12

February 2017). 14 Ministerial Regulation of Categories and Rules in Hotel Operating B.E. 2551. 15

Ibid., p. 316. 16

Anuparp Kaesornsuwan, Five-star hotel standard assessment, Book 1 (Department of

Tourism, 2014), p. 4, at thaihotels.org/wp-content/uploads/2012/08/มาตรฐานโรงแรม-เล่ม-1-ระดบั-5-

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standard, for example, location factor, construction factor, facilities factor e.g.

telecommunication system for both domestically and internationally, wireless internet,

parking management, hotel maintenance factor e.g. security system, cleaning system, drainage

system, air system, waste water management system, electricity system and also medical

service in the hotel, etc.

Finally, the hotel business has to concern about environmental preservation in ‘Green

Leaf Hotel’ to obtain the certificate from ‘Green Leaf Foundation’ which will be good for

reputation in brand and image perspective of the hotel operators and gain more trustworthy

from customers.

Nature of Outsourcing Service

In practically, the reason of hiring outsourcing service is the hotel operator has no

expertise of recruitment in auxiliary activities such as security service, cleaning service or

generator maintenance service etc., or even such activities are not core business of the hotel

operator that needs to be allocated to the outsourcing service company, to give the hotel

operator has more management flexibility i.e. in recruitment expenses, consistency in having

potential workers, reduce costs and expenses in training or even lighten the load of the hotel

operator in duties and obligations required by law, and help the business operator can stay on

course on core business instead of auxiliary activities. Therefore, the labor outsourcing service

is like a hybrid system between ‘Hire of Service’ and ‘Hire of Work’ which means:

1) There is no instruction from the hotel operator for the outsourcing labor to service

as they are expert whom have been trained by the outsourcing service company;

2) The qualification of the outsourcing labor is impliedly required by the

understanding in social context that the labor outsourcing service company has

expertise in specific activity; and

3) Most of the labor outsourcing service company already have their own tools,

equipment and materials to serve then the expertise and such equipment of the labor

outsourcing service company in each field is needed for the hotel operator.

Therefore, providing outsourcing labor by the outsourcing service company to the

hotel operator that its nature require for manpower to operate some part of business under

responsibility of the hotel operator which cannot be separated between direct employees and

ดาว-ฉบบัประกาศ-2557.pdf.

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outsourcing labor. Moreover, the outsourcing shall not be deemed as employment service as

defined in the Employment Service and Job-Seeker Protection Act B.E. 252817

Outsourcing Service in International Law Level (International Labor

Organization – ILO)

The international labor standards is reference principle in specification of fundamental

rights and obligations of employer and employee including purpose in policy perspective,

method of operation or direction of means and procedure in practical. Such standards were

created to encourage good condition and good work place for labors globally; in legal

perspective, the international labor standards will appears in form of conventions and ILO

recommendations.18

Fee-Charging Employment Agencies Convention (Revised), 1949 (“Fee-Charging

Convention”) was in place at the beginning in development of the international labor

standards, however, changing of social context shown that the Fee-Charging Convention was

not in line with private employment agencies anymore. Hence, UN developed the Private

Employment Agencies Convention, No. 181, 1997 (the “PEAC No. 181”) and proclaimed

since that time. The main purpose of the PEAC No. 181 is protecting outsourcing labor from

discrimination, inappropriate practices and creating necessary measure to ensure sufficient

protection from outsourcing labor accordingly.

Private employment agencies play an important role in the functioning of

contemporary labor markets. For the past three decades, the increasing need to provide

workers and services to a rapidly growing and flexible labor market has led to the spectacular

development of these agencies. Temporary work agencies are intermediaries in modern labor

markets that allow enterprises to have more flexibility to increase or decrease their

workforces, while ensuring for the workers sufficient security in terms of job opportunities

and employment standards, including pay, working time and training. While they have long

been recognized as complementing public employment services, they can also help to improve

working conditions. The PEAC No. 181 sets the general parameters for the regulation,

placement and employment for workers by these agencies. It also assists ILO member States

17 The Employment Service and Job-Seeker Protection Act B.E. 2528, Section 4. 18 Khemmanat Tongseekem, “Problems related to Labor Protection Law Focusing on Power

Outsourcing Services”, (LL.M. Independence Study, Graduate School, Assumption

University, 2013), p. 53.

11

to establish clear policies, legislation and implementing mechanism for effective registration

and licensing, thereby facilitating them playing a constructive role in a labor market free from

exploitative conditions.19

According to provision of the Private Employment Agencies Convention especially in

article 1(1) (b) related to the outsourcing labor directly that employment where the worker is

employed by the temporary work agency, and then hired out to perform his/her work at (and

under the supervision of) the user company. There is no employment relationship between the

temporary agency worker and the user company, although there could be legal obligations of

the user company towards the temporary agency worker, especially with respect to health and

safety. A labor contract may be of limited or unspecified duration with no guarantee of

continuation. The employment is often called “temporary work”, “temping” or “agency

work”. The hiring firm pays fees to the agency, and the agency pays the wages (even if hiring

company has not yet paid the agency). Flexibility for both worker and employer is a key

feature of agency work.20

Outsourcing Service in Foreign Laws

Indonesia Law

The differences in perception and knowledge are not the same tripartite in terms of

outsourcing lead to differences in implementation in the practice of outsourcing work system

which causes throwing responsibility among the outsourcing contractor and the outsourcing

service receiver, making the outsourcing worker feels increasingly uncomfortable at

workplace of the outsourcing service receiver. Therefore, in year 2003 the Government

enacted a new labor law namely the Act No. 13 of 2003 concerning Manpower which widely

spread in Indonesia since then. The Act tended to be pro-employer’s business interests, to

control and conduct the way to do business of employer, to protect needs of the employers

and the law seemed to be used as a means the only for consolidating profits and improving

19 International Labour Office, Sectoral Activities Programme, Private employment agencies,

temporary agency workers and their contribution to the labour marker: Issue paper for

discussion at the Workshop to promote ratification of the Private Employment Agencies

Convention, 1997 (No. 181), (Geneva: The International Labour Office, 2009), p. 7. 20 International Labour Office, Sectoral Activities Programme, Private employment agencies,

temporary agency workers and their contribution to the labour marker: Issue paper for

discussion at the Workshop to promote ratification of the Private Employment Agencies

Convention, 1997 (No. 181), (Geneva: The International Labour Office, 2009), p. 1.

12

margins of the employers by legalizing outsourcing system that could bring an negative effect

of reducing job security for the official workers. In order that, this Act No. 13 of 2003 is the

answer to uncertainty of outsourcing the work system in Indonesia especially for workers do

have more bargaining power in their work and job security.

Singapore Law

Under the Singapore law of employment relating to outsourcing relations which has

tripartite clearly defines that:

any person who wants the supply of labor in the course of or for the purpose of his

trade or business called “Principal”21;

any person who contracts with a principal to supply labor in the course of or for the

purpose of the principle’s trade or business called “Contractor”22; and

any person, skilled or unskilled, who has entered into a contract of service with an

employer in pursuance of which he engaged in manual labor, including any artisan

or apprentice, but excluding any seafarer or domestic worker called “Worker”23.

The legal status between contractor and workman is employer and employee according

to the Employment Act24. However, even principle has no legal status with workman but the

Employment Act stipulates the liability of principal and contractor for salary of workman to

jointly and severally liable with the employer to pay the workman as if the workman had been

immediately employed by employer25 not more than the salary earned in one month for work

done by the employer26.

English Law

The problem of outsourcing system in England is unclearness in status of outsourcing

labor which affect to rights under the labor law. The only restriction is in case of providing

work-seekers in industrial disputes: (i) to provides that an employment business may not

supply a temporary worker to a hirer to replace an individual taking part in an official strike

or any other official industrial dispute. In addition, an employment business must not

21 Employment Act (Chapter 91), revised edition 2009, article 2. 22 Employment Act (Chapter 91), revised edition 2009, article 2. 23 Employment Act (Chapter 91), revised edition 2009, article 2. 24 Employment Act (Chapter 91), revised edition 2009, article 66 (3). 25 Employment Act (Chapter 91), revised edition 2009, article 65 (1). 26 Employment Act (Chapter 91), revised edition 2009, article 65 (1A).

13

introduce or supply a work-seeker to work for someone who has been transferred by the hirer

to perform the duties of the person on strike or taking industrial action. An employment

business will have a legal defense to having acted in breach of this regulation if it does not

know, or has no reasonable grounds for knowing, that official strike action is in progress; and

(ii) to provide that is regulation applies to official strike action only. In other words it does not

apply to unofficial strike action27

. Therefore, it shows the outsourcing system has been

ignored up until now.

Moreover, the principle of equal treatment was opposed by Confederation of British

Industry (the “CBI”) and Trades Union Congress (the “TUC”) because the concept of

outsourcing is flexibility of employment in order to fully support the liberal system. The joint

declaration by the Government (the CBI and the TUC) on temporary agency workers that the

Government considers that this declaration provides the basis for the introduction of measures

to promote fairer treatment for agency workers while retaining the important flexibility that

agency work can offer both employers and workers. One of the key issues on which agreement

has been reached between the social partners is that there should be equal treatment of agency

workers after 12 weeks in a given job.28

Conclusion

Labor law is fundamental rights and obligations of parties to the employment agreement

i.e. legal status as employer and employee is based on reciprocal exchange and interdependence

of employer and employee. This fundamental concept of labor law is for employees being fairly

treated by employers.29

The origin of labor law started in the beginning of the 19th century in industrial

revolution; the movement of labor from agriculture to industry that employer brought in

machines into factory to maximize the production which labors flooded into the industry. In

27 Department of Trade and Industry (DTI), Guidance on the Conduct of Employment

Agencies and Employment Businesses Regulations 2003, Regulation 7. 28 Temporary Agency Workers – Joint Declaration by the Government, the CBI and the TUC,

Business, Enterprise and Regulatory Reform written statement – made on 22nd May 2008 at

https://www.theyworkforyou.com/wms/?id=2008-05-22b.31WS.3 (last visited 14 April

2017). 29 Warittee Suvarnkula, “Problems related to Rights and Obligations of Outsourcing Service

Provider under Thai Labor Law”, (LL.M. Independence Study, Graduate School,

Chulalongkorn University, 2014), p. 42.

14

such revolution, the employer took advantage of labors i.e. use of female or child labor to

perform the hazardous work or force labors to work overtime. The British government noticed

such problems then enacted the special law to protect the labors. After that, the Labor Union

Law B.C. 1871 came into force, subsequently, other counties in Europe and United States of

America adopted and promulgated the same law as British has done.

About theory of labor movement from the most influence six theorists in labor history

can be concluded that labor law mainly developed from problems of labor in factory industry.

For the role of the International Labor Organization to promote rights at work,

encourage decent employment opportunities, enhance social protection and strengthen

dialogue on work-related issues. It also has the Private Employment Agencies Convention,

No. 181, 1997 and the Private Employment Agencies Recommendation, No. 188, 1997

determine that legal status between outsourcing service providers and outsourcing labors shall

be employer-employee, instead of business operators. This principle was adopted by Indonesia

and Singapore but different in exceptions, outsourcing business cont rol measures and

responsible state agencies as determined by domestic laws.

When section 11/1 came into force in B.E. 255130

with determination of the

Government at that time to solve problem of outsourcing, conversely, the vogue of such

provision had brought another problem that employer-employee status under the Thai labor

laws shall be business operators and outsourcing labors. Outsourcing service providers has no

any duties and responsibilities under Thai labor laws, only duties and responsibilities under

hire of work with business operators and under the Civil and Commercial Code. Without

tracking system, registration system, license system and control measure, this problems

brought bad outsourcing service providers in outsourcing business that causes damage to

economic mechanism. Additionally the Supreme Court interpreted such provision literally

which affected to the operator and outsourcing service system.

Nevertheless, Indonesia and Singapore are able to set up system, measure and

mechanism to conduct and control outsource service and outsource company in the way of

efficiency and practically. Therefore, the author would like to have the recommendations that

may solve problems in outsource service and outsource company in Thailand.

30 The Labor Protection Act (2nd Amendment) B.E. 2551, section 6.