The long-awaited mandatory provident fund is set to be enforced in 2018, and the matching step-up contribution rate will start from 3% to 10% from the 10th year.
The fund is an attempt to strengthen the retirement safety net and ease the government burden in face of an ageing population.
The mandatory provident fund is among a series of measures for senior care approved by the cabinet this week.
Under the law, employers and employees will each be required to contribute 3% of the employee's salary for the first three years to the fund before increasing to 5% during the fourth to the sixth years, 7% between the seventh and the ninth years and 10% from the 10th year onwards, with a cap of 60,000 baht per month, deputy director general of the Fiscal Policy Office (FPO) Warotai Kosolpisitkul said.
Those aged between 15 and 60 hired by privately owned companies, state enterprises and public organisations are required to contribute to the mandatory provident fund. Temporary employees of the state will also be obliged by law to contribute.
Employers of workers who earn below 10,000 baht a month will be the sole contributor to the fund.
The law requires companies with 100 employees or more to match employees' contributions to the fund within the first four years of its enforcement.
Companies with at least 10 employees will have to offer compulsory retirement savings from the fourth year of implementation, and those with only one employee must contribute from the seventh year.
For companies offering provident funds but making a lower contribution rate than the mandatory provident fund's requirement, they must raise the contribution to comply.
The FPO estimates that retirees will have monthly retirement income at a half of the cap at 60,000 baht with the pension benefit from the Social Security Fund (SSF) and the mandatory provident fund.
Ratio of senior citizens aged 60 and older is projected to increase to 20% of total population in 2015 from 14% last year.
The government's contribution to the SSF, the National Savings Fund and the Government Pension is expected to grow to 698 billion baht in fiscal 2024 from 290 billion in fiscal 2016.
FPO deputy director Pornchai Thiraveja said a tax break for companies hiring the elderly, building "senior complex" projects and reserve mortgages also won the cabinet's approval.
Companies hiring people at aged 60 or above will be granted a double tax deduction on wages paid to elderly employees who earn up to 15,000 baht a month.