Who Is the Employer of Contract Workers?

Nowadays, outsourcing labor to business operators has become a common practice in the labor market. Some operators require a group of workers to perform specific tasks but prefer not to bear the burden of directly contracting with those workers. This includes payroll management, social security contributions, and the provision of benefits such as group insurance and health coverage. All of these are human resource responsibilities that many operators wish to avoid. As a result, labor outsourcing services have emerged to shift these burdens and better control costs—for example, hiring security guards, warehouse or retail staff, or IT personnel to manage information systems.

However, using labor outsourcing services does not entirely relieve the operator of legal responsibilities as an employer. Let’s explore which types of labor arrangements or obligations the operator may still bear toward contract workers provided by outsourcing agencies.

Relieving Employer Responsibilities

The first issue to address is whether outsourcing labor truly exempts the operator from being considered an employer. The relevant legal provision is Section 11/1 of the Labor Protection Act, which states: If a business operator assigns any person to procure workers to perform tasks that are part of the production process or business under the operator’s responsibility—and such procurement is not considered a formal employment agency under the Employment and Job Seeker Protection Act—the operator shall be deemed the employer of those contract workers. 

This provision is a conclusive presumption. If the work assigned to contract workers is part of the operator’s core business or production process, the law considers the operator to be an employer in addition to the outsourcing agency.

Example 1:
Operator A runs a retail business and hires security guards from Company B to protect its warehouse. Since security work is not part of A’s retail business, A is not considered the employer of the contract workers provided by Company B.

Example 2:
On he contrary, Operator A hires contract workers from Company B to work directly in its retail stores. Since retail operations are part of A’s core business, the law presumes A to be the employer of those contract workers under Section 11/1.

Since the law deems Operator A as the employer. if Company B fails to pay wages, overtime, notice pay, or severance, Operator A may be held jointly liable.

The phrase “not a formal employment agency” refers to businesses governed by the Employment and Job Seeker Protection Act. These agencies merely match workers with employers, and the employer signs the employment contract directly with the worker. In such cases, the agency has no legal relationship as an employer, and the operator is the direct employer.

Benefits and Welfare for Contract Workers vs. Direct Employees

If an operator hires employees directly and also uses outsourced labor for the same roles, the benefits and welfare provided to contract workers must be equivalent to those given to direct employees in similar positions. This ensures fairness and compliance with labor protection laws.

Social Security Obligations

Even if the operator does not directly employ the workers, certain conditions may still trigger employer obligations under the Social Security Act.

Section 35 of the Social Security Act states: If a business operator hires labor through a wage contract or assigns someone to procure workers (not as a formal employment agency), and the work is part of the production process or business conducted at the operator’s premises using equipment provided by the operator, then the operator is deemed the employer and must comply with this Act.

In short, if the contract workers perform tasks that are part of the operator’s business or production process at the operator’s location, and use the operator’s equipment, the operator may be liable for social security obligations—even if the outsourcing agency fails to fulfill them.

Rukphon Sungsianawatara
(Attorney at laws)
Email: rukphons@gmail.com
Tel: +66-95-390-8245