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Employee is considered one of the most important resources of the company. Not only does the company have to outlay the salary and bonus as a compensation to these employees devoted for the company, but also it is required to pay legal severance payment upon their retirement under the Thai Labor Protection Act of 1998. Additionally, some companies award certain amount of gold to their employees upon their completion of 10 years of service, for example.
These cases of post-employment and long-term benefits are all considered the hidden costs of hiring an employee. The company must be aware of this hidden cost, otherwise it may not have enough cash to pay when due.
PROVISION UNDER ACCOUNTING STANDARDS TAS19 / IAS19
Both Thai and International Accounting Standards require the companies to recognize an employee benefit liability for post-employment or long-term benefits in order to properly reflect this hidden cost into their balance sheets. This will help companies prevent liquidity problem or potential bankruptcy arising from employee benefit obligations.
WHY ARE ACTUARIES NEEDED FOR THE VALUATION?
The valuation of an employee benefit liability for post-employment or long-term benefits requires a complicated calculation and has a long-term e ect on the company’s financial position; hence the actuaries are required for their expertise in assessing future uncertainties and outcomes using the combination of data, statistics, and their professional experiences.