How to Hire and Fire: A Global Guide 2021 – Cambodia

1 GENERAL PRINCIPLES

Forums For Adjudicating Employment Disputes

Depending on its nature, a labour dispute in Cambodia may be resolved by conciliation, arbitration or the courts. The appropriateness of a dispute resolution forum will depend on whether a dispute is individual or collective in nature.

For individual labour disputes (i.e. disputes between one employer and one or more employees as individuals), the competent authorities for dispute settlements include labour conciliators and the court. Labour conciliation by the Ministry of Labour and Vocational Training (MLVT) is an optional dispute resolution mechanism for individual labour disputes before going to court. However, if one party opts for labour conciliation, the other party must participate. If the conciliation is unsuccessful, either party fails to comply with the conciliation agreement, or if no party initiates the conciliation process, an individual dispute may be resolved by the courts.

For collective labour disputes (i.e. disputes between one employer and a group of employees or a labour union), labour conciliation is compulsory unless parties have agreed otherwise in a Collective Bargaining Agreement (CBA). If the labour conciliation fails, the dispute must be referred to the Arbitration Council if the parties have not previously agreed upon any other dispute mechanisms. The Arbitration Council is a national labour dispute arbitration body established and empowered by law to decide on disputes concerning the interpretation and enforcement of Cambodian labour laws. After the Arbitration Council makes a final decision in an arbitral award, parties have the right to appeal the award within eight (8) calendar days from the receipt of the award; otherwise, the award must be implemented immediately following this eight (8) day grace period.

The Main Sources Of Employment Law

The main sources of employment law in Cambodia are the:

• Labour Law (initially introduced on March 13, 1997, and subsequently amended on July 20, 2007 and June 26, 2018);
• Law on Social Security (initially introduced on September 25, 2002 and entirely replaced by the new Law on Social Security, adopted on November 2, 2019);
• Sub-decree on Social Security Scheme Pension for Persons Defined by Provisions of Labour Law (adopted on March 4, 2021);
• Law on Trade Unions (initially introduced on May 17, 2016 and amended on January 3, 2020);
• Law on Minimum Wage (dated July 6, 2018);
• Civil Code (dated December 8, 2007);
• regulations issued by the Royal Government of Cambodia (e.g. sub-decrees and decisions); and
• regulations issued by the MLVT (e.g. Prakas, circulars, decisions, notifications, guidelines and announcements).

In addition to these laws and regulations, also to be considered in employment dispute matters are any internal regulations a company that may have been registered with the MLTV, any CBAs into which either party may have entered, and individual employment contracts.

National Law And Employees Working For Foreign Companies

Cambodian labour laws apply to an employee-employer relationship under an employment contract if the work under the employment contract is to be performed in Cambodia. The location where the employment contract is concluded or signed, and the nationalities and residences of either the employer or the employee are irrelevant.

National Law And Employees Of National Companies Working In Another Jurisdiction

If the work under the employment contract is not performed in Cambodia by an employee who is physically present in the country, then Cambodian labour laws may not apply.

Data privacy

Cambodia does not have any dedicated statute on data protection or data privacy. Therefore, laws of general application apply to the extent that they implicate data protection and data privacy issues. The relevant laws include the Constitution dated September 21, 1993, as subsequently amended; Civil Code dated December 8, 2007, as subsequently amended; Penal Code dated November 30, 2009, as subsequently amended; Law on Electronic Commerce dated November 2, 2019; and Law on Telecommunications dated December 17, 2015.

These laws generally apply to all local entities (i.e. those that have an establishment in Cambodia, and protect individuals located both inside and outside of Cambodia that deal with the local entities).

Although Cambodia does not have any dedicated law on data protection, the right to privacy is protected broadly under the Constitution and is considered as a personal right under the Civil Code. Therefore, processing personal data must be contractual and requires consent from “data subjects”. Although consent can be either express or implied, it is strongly recommended that consent be express and in writing. There remain legal uncertainties for implied consent, while express consent in writing can serve as stronger evidence for satisfying the consent requirement. Therefore, to the extent that an employer will use an employee’s data, express consent in writing should be received from the employee. Therefore, all data privacy related matters fall under the scope of general law of application as mentioned above.

2 HIRING THE EMPLOYEE

Legal Requirements As To The Form Of Agreement

An employment agreement generally can be either verbal or in writing, but the form may affect whether an employment contract is deemed a Fixed Duration Contract (FDC) or a Undetermined Duration Contract (UDC).

An FDC must be in writing and signed by both parties, and it must state the explicit starting and expiration dates. The initial duration period stated in an FDC must not exceed two years, otherwise it will be regarded a UDC. A UDC, on the other hand, can be either verbal or in writing, although a UDC is typically in writing and signed by both parties. The written contract will indicate whether it is a UDC (or rather, it will be implied that the contract is a UDC if no end date is explicitly stated).

Mandatory Requirements

• Trial Period

There is no compulsory obligation to provide trial periods, otherwise known as ‘probation periods’, when engaging new employees, but it is customary to do so. Generally, the probation periods must not be longer than the amount of time required for the employer to assess the employee or for the employee to understand the working conditions. Specifically, a probation period must not exceed three months for regular employees, two months for specialised workers, and one month for nonspecialised workers. The law does not define the terms ‘regular’, ‘specialised’, and ‘nonspecialised’. Whether an employee is a specialised worker or otherwise must be decided on a case-by-case basis depending on the level of professional skills required by the job in question.

• Hours Of Work

Regular working hours cannot exceed eight (8) hours per day or 48 hours per week. Normally, a daily work schedule can be split into two shifts (one in the morning and another in the afternoon). Employers may allow employees to work overtime, which should not be more than two (2) hours a day, for exceptional and urgent work. However, overtime work must be voluntary, and Cambodian labour laws require payment for overtime work. Night shift work hours span from 23h00 to 05h00 the following day. Overtime work during daylight hours is paid at a rate of 150% the hourly wage, while work during night shift hours and on weekends and public holidays is paid at a rate of 200% the hourly wage. For office workers, there are ways to create a more flexible structure for overtime work and pay.

• Special Rules For Part-time Work

Cambodia labour law does not clearly define or distinguish between “part-time work” and “full-time work”. Labour Law, however, provides that in all establishments, the number of working hours must not exceed eight (8) hours per day and 48 hours per week. That said, normally, an eight (8) hour work day is considered as “full-time work” in Cambodia.

Additionally, according to the International Labour Organisation Part Time Work Convention, the term “part-time worker” is defined as the person whose normal hours of work are less than those of comparable full-time workers. In Cambodia, any person whose working hours are less than eight (8) hours per day would likely be considered as a part-time worker.

The Cambodian Labour Law does distinguish between regular employees and casual employees. The Labour Law further stipulates that casual workers are subject to the same rules and obligations and enjoy the same rights as regular workers. Therefore, if a part-time employee is deemed to be either a regular employee or a casual employee, the part-time employee will enjoy the same rights and have the same obligations as a full-time employee. Part-time employees are entitled to leave, bonuses, and other benefits in proportion to their work time.

• Earnings

In principle, Cambodian Labour Law requires wages to be at least equal to the minimum wage declared by the Government, which helps ensure employees attain a decent standard of living compatible with human dignity. Any agreement that provides employees benefits below the minimum wage rate must be null and void. By Cambodian Labour Law, the MLVT is the competent authority to determine minimum wages for any given industry; however, as of yet, Cambodia has only set a guaranteed minimum wage for people working in the garment, textile, and footwear production industry. The amount is revised annually. In 2020, the minimum wage has been set at USD 190 per month. There is no set minimum wage for any other industries.

• Holidays/Rest Periods

There is a requirement that employees must take a rest period of a minimum of 24 consecutive hours per week. This weekly time off must be on Sunday, unless having all employees off on Sunday would negatively impact the public or the employer’s business operation. The Ministry of Labour has set detailed criteria and procedures for businesses, such as restaurants and hotels, to have flexible working schedules for carrying on their operations through the weekend.

Employees are entitled to 1.5 days of paid annual leave per month (which amounts to 18 annual leave days per year). One additional day per year must be provided for every three years of service. In addition, employees are also entitled to paid public holidays, which are determined annually by the MLVT. In 2020, public holidays in Cambodia have been reduced to 22 days. If any public holiday falls on a Sunday, it must be carried forward to the next working day. Moreover, if an employee has no annual leave days left, he or she may request paid special leave up to seven days a year for any event affecting the employee’s immediate family (e.g. marriage, childbirth, illness and death etc.). Maternity and sick leave are also available for employees as described below.

• Minimum/Maximum Age

Generally, the minimum age for employment is 15. However, for a number of hazardous jobs (e.g. mining or being exposed to harmful chemicals etc.), employees must be at least 18. In some exceptional cases, children between 12 and 15 may be employed to perform light work if they can still attend school. There is no mandatory retirement age.

• Illness/Disability

Employees are entitled to sick leave and employers must not fire employees on leave due to their illness/disability for at least six (6) months. The law is silent on payments during sick leave, but employers should set payment rules during sick leave in keeping with the MLVT’s recommendations.

Employees who are sick or disabled may enjoy various benefits under the occupational risk insurance and the health insurance provided by Cambodia’s National Social Security Fund (NSSF). Employers are currently responsible for paying capped monthly contributions to the NSSF to ensure their employees receive NSSF insurance coverage.

• Location Of Work/Mobility

The location of the workplace and the possibility of mobility are generally agreed upon in the employment contracts. Where a job requires employees to travel, it is common that the employer will cover all reasonable travel expenses.

• Pension Plans

Cambodia recently introduced a new law on social security and Sub-decree on Social Security Scheme Pension for Persons Defined by Provisions of the Labour Law that require both employers and employees to pay contributions to the NSSF for employees’ pensions.

• Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)

Employees must not terminate female employees because they are pregnant or because they are on/will soon take maternity leave. Female employees are entitled to take 90 days of maternity leave. Two (2) months (or 60 days) after returning from maternity leave, they may only perform light work. Female employees who have performed at least one (1) year of service prior to their maternity leave are entitled to be paid half of their average wages and fringe benefits (e.g. additional allowances that may have been provided to the employee) earned for the past 12 months. The law does not provide paternity leave, but a male employee may request special leave for that reason.

• Compulsory Terms

The Labour Law does not explicitly layout compulsory terms for an employment contract. The Civil Code, however, requires an employment contract to include at least the wages, working hours and other working conditions (e.g. weekly time-off, leave and other benefits etc.).

• Non-Compulsory Terms

Employers and employees are free to agree on any other terms in addition to compulsory provisions, provided that these additional provisions are in keeping with statutory requirements are not contrary to the law or social morals.

Types Of Agreement

Under Cambodian labour laws, there are two types of employment contracts: (1) Fixed Duration Contract (FDC) and (2) Undetermined Duration Contract (UDC). An FDC must be in writing and must have clear starting and expiration dates; its duration may also not exceed two (2) years. If the contract duration exceeds two (2) years, it will be considered a UDC. After an FDC reaches its original expiration date, it can be renewed one (1) or more times, as long as the sum of the renewals does not exceed another two (2) years. The entire length of a given employee’s FDC may therefore run the length of the initial FDC term (which may not exceed two (2) years) plus an additional two (2) years of FDC renewals.

Secrecy/Confidentiality

Breaching an employer’s confidentiality is considered serious misconduct under Cambodian Labour Law, which entitle the employer to terminate the offending employee without compensation. Certain legal provisions also suggest employees bear an obligation of confidentiality when they are employed. It is also common in practice that an employment contract contains clauses on confidentiality during and after employment. However, Cambodian labour laws provide that any agreement that imposes an obligation on employees after employment is null and void.

Ownership of Inventions/Other Intellectual Property (IP) Rights

Cambodia’s labour laws are silent on the ownership of inventions and other intellectual property rights, and thus parties are free to decide on these matters in their employment contracts or through other agreements. Under Cambodia’s copyright law, employers must respect the moral rights of employees, and they therefore have basic rights as creators of new work. However, in practice, there are ways in which employers may affirm their rights to the IP created by employees.

Pre-Employment Considerations

The Labour Law sets out provisions that ensure Cambodian employees are given priority over foreign employees in the recruitment process. However, if an employer is not able to find any Cambodian employees to perform specific jobs, the employer may choose foreign employees who are specialists, technicians or experts to perform such work.

Generally, the MLVT allows the use of foreign employees. However, the number of foreign employees hired by any given company should not be greater than 10%. This rate is divided into three kinds of employees; however, in practice, the 10% cap generally applies to the total number of employees, including 3% for office employees, 6% for specialised employees, and 1% for non-specialised employees.

The Labour Law prohibits employers from taking into consideration the following characteristics as the basis for making decisions regarding hiring, defining and assigning work, vocational training, advancement, promotion, remuneration, granting of social benefits or discipline or termination of employment contract:

i.race;

ii.colour;

iii.sex;

iV.religion;

v.political opinion;

vi.ancestry;

vii.social origin; and

viiiunion membership or union activities.

However, hiring or rejecting employees based on qualifications required for a specific job will not be considered as discrimination.

Hiring Non-Nationals

All foreign nationals working in Cambodia must have a work permit. Employers are required to provide support and submit application documents for foreign work permits every year. In order to apply for foreign work permits, employers must also request an annual foreign work quota for their companies in advance. The normal foreign work quota is one foreigner for every ten local employees. However, employers typically can request for a foreign work quota higher than the standard one by explaining why it is necessary. As employers cannot hire more foreign employees than allowed by this pre-approved quota, employers should plan ahead on hiring foreigners. Foreign employees must also have legally entered Cambodia, have valid passports and visas, and be both physically and mentally fit for their jobs without any contagious diseases.

Hiring Specified Categories Of Individuals

Employers are prohibited from engaging children under 18 years old for a number of hazardous jobs (predetermined by the MLVT) or for night work (between 23h00 and 05h00). Women should only perform light work for two (2) months following their maternity leave.

Outsourcing And/Or Sub-Contracting/Temporary Agency Work

A company may hire a labour contractor (i.e. a sub-contractor that employs necessary people to perform a particular task or provide a service to the company for a fee). In this case, the labour contractor is not considered an employee of the company. Instead, the people working for the labour contractor are the employees of the labour contractor, and the labour contractor owes all responsibilities as an employer towards them. However, if a labour contractor is insolvent or fails to perform its obligations as an employer, the company that has hired the labour contractor can be held liable to the contractor’s employees.

An agreement with a labour contractor must be in writing and must show that the labour contractor is not under the management and control of the company. The company must keep a list of its contractors and notify the MLVT after signing an agreement with any labour contractor.

3 MAINTAINING THE EMPLOYEE RELATIONSHIP

Changes To The Contract

Cambodia’s labour laws are silent on changes to employment contracts. However, as employment contracts must be agreed upon by both parties and, in most cases, must be in writing, any changes made to an employment contract must respect the same rules.

Change In Ownership Of The Business

If there is any change in the legal status of the employer, including after a merger, sale, succession, or transfer of funds, all employment contracts must continue and be binding between the employees and the new employer. In general, all rights and benefits of the employees must be protected and remain the same. If, in the aftermath of such a change, it is necessary to lay off employees, the former employer and new employer must agree on which party is responsible for compensating the laid off employees.

Social Security Contributions

At present, the obligation to pay social contributions to the NSSF for employees rests solely on their employers. There are only two (2) social security plans in Cambodia: (i) the occupational risk insurance plan and (ii) the health insurance plan. The monthly contributions for both plans together are currently capped at a total of KHR 40,800 (approximately USD 10.20) per employee. Following the recent enactment of the new law on social security and the new Sub-decree on Social Security Scheme Pension, both employers and employees are required to pay contributions to the NSSF for the employees’ pension scheme. For the first five (5) years, this contribution rate is 4% of the contributory wage, with 2% each borne by employee and employer: The contributory wage as stipulated above must be determined by a separate Sub-decree.

Accidents At Work

Generally, an employer must ensure that the workplace meets safety, hygiene and sanitary standards. The MLVT has issued detailed regulations on the work place standards employers must maintain, which include:

i.minimum amounts of airflow;

ii.comfortable working temperatures; and

iii.adequate lighting and seating.

Moreover, Cambodian labour laws require work equipment and machines to be installed, maintained, and used under the best possible safety conditions. Employees are also required to comply with occupational safety and hygiene regulations, as well as any internal labour rules established by employers.

Employers are legally required to take all appropriate measures to prevent work-related accidents. Work-related accidents refer to accidents that happen to an employee during working hours or while the employee is working, regardless of what caused the accident or whether the employee is at fault. Illnesses contracted and accidents that occur during the employee’s direct commute between home and workplace are also considered work-related accidents. If a work-related accident occurs, employers are required to meet a number of post-accident obligations, including providing first-aid, preserving the accident scene, notifying the MLVT, and preventing further accidents of the same nature. Employees who suffer from work-related accidents are entitled to benefits during their sick leave, including benefits provided by the NSSF’s occupational risk insurance plan.

Discipline And Grievance

An employer may discipline an employee that commits any misconduct within 15 days of the employer’s learning of the misconduct. However, the disciplinary measures must be proportional to the misconduct and must comply with Cambodia’s labour laws, the company’s internal rules, and CBA.

If the misconduct is serious, the employer may terminate the employee without any compensation within seven (7) days of the employer learning about the serious misconduct. A few examples of serious misconduct as outlined by Cambodian Labour Law is fraud, theft or embezzlement, and breach of professional confidentiality.

The labour inspector, the MLVT, or the court may determine if a disciplinary sanction fits the misconduct, or if the misconduct reaches the level of seriousness for a lawful termination.

Harassment/Discrimination/Equal pay

All forms of sexual harassment are strictly prohibited under Cambodia’s labour laws. Generally, employers and managers are prohibited from exhibiting conduct that degrades female employees’ dignity and honour, and must treat child employees with respect.

Cambodian Labour Law prohibits employer discrimination on the basis of an employee’s race, gender, beliefs, religion, political ideology, ancestry, social class, or union membership. Employers may not rely on any of these factors in making decisions about employees’ hiring, work assignments, training, advancements or promotions, wages, social benefits, disciplinary measures, or terminations.

In addition to this general anti-discrimination principle, Cambodian labour laws also uphold the principle of equal pay for equal work, regardless of age, gender, or origins.

Compulsory Training Obligations

In general, there are no compulsory obligations imposed on employers regarding employees’ training. However, in some instances, as when an employer has hired minors between the ages of 15 and 18 for hazardous work, the employer must provide employees with adequate training.

Offsetting Earnings

With some exceptions, an employer is generally not allowed to offset an employee’s salary or wages. For example, an employer may not deduct from an employee’s salary in order to fine an employee for misconduct. However, the employer may make such a deduction as compensation for an incurred loss if, for instance, the employee does not return equipment that was provided by the employer to the employee for work purposes.

Payments For Maternity And Disability Leave

Female employees are entitled to maternity leave for 90 days. If a woman has worked for the employer for at least one (1) year, she must be paid half of her wage during her maternity leave, with her wage being calculated at a rate equal to half of her average salary over the past 12 months. All female employees on maternity leave still enjoy the other benefits in kind associated with their employment, regardless of seniority. Any agreement that provides less favourable benefits must be voided. During maternity leave, employees receive daily allowances from the NSSF’s social security plans, to which employers are required to contribute.

An employee may take up to six (6) months’ worth of sick leave before the employee may be lawfully terminated by his or her employer. However, Cambodian labour laws do not explicitly require employers to pay their employees during this sick leave. That said, the MLVT usually advises employers to indicate a payment plan for sick leave in their internal rules before being registered with the MLVT. It is generally recommended that employees be paid in full during their first month of sick leave, be paid 60% of their wages during the second and third months, and either be paid 30% of their wages or be unpaid during the last three (3) months. NSSF’s social security plans, to which employers are required to contribute, provide various medical benefits, such as free medical services and daily allowances to an employee during sick or disability leave.

Compulsory Insurance

All employers are obligated to pay contributions for their employees to the NSSF for two (2) social security insurance plans: the occupational risk insurance plan and the health insurance plan. Additionally, both employers and employees are required to pay contributions to the NSSF for the employees’ pension scheme.

There is no obligation imposed on employers to acquire any private health insurance for their employees, although it is relatively common to do so within some industries.

Absence For Military Or Public Service Duties

Serving mandatory military duties and joining mandatory military training are grounds for the suspension of employment contracts under Cambodian labour laws.

Works Councils or Trade Unions

A trade union is a professional organisation that represents and protects the employment interests of its members. After registration, a trade union has its own legal personality and may represent its members to negotiate, conclude and sign a CBA or to seek proper implementation of any agreed upon employment terms or conditions.

The trade union system in Cambodia consists of three (3) types of unions: (i) a local union (established by at least ten employees in one company), (ii) a union federation (established by at least seven registered local unions), and (iii) a union confederation (established by at least five (5) registered union federations). In general, an employee working in Cambodia has the right to join or form any local union of their own choosing without any barriers or pressures from his or her employer, and participate in the activities of the local union in accordance with Cambodian laws.

Employees’ Right To Strike

A strike is defined under Cambodian labour laws as the cessation of work by employees as a tool to make demands of their employer in exchange for returning to work. Employees may exercise their right to strike only when all peaceful dispute resolution mechanisms have been exhausted. Statutory procedures for organising strikes must be followed: Strikes must be approved by a secret ballot, and prior notice of a planned strike must be given to both the employer and the MLVT.

A strike is prohibited and thus unlawful when (i) it is used to force an employer to revise a CBA that is still in effect, (ii) when both parties have accepted an arbitral award, (iii) when it is violent, and (iv) when it does not comply with the procedures outlined in law or union statutes.

Employees On Strike

Employment contracts of the employees participating in a strike are considered suspended. Employers are not required to pay salaries or provide any allowance to employees on strike. However, employers must not impose any sanctions on employees because of their participation in strikes, nor can they hire replacements for striking employees. The employees must be reinstated when the strike ends.

Employers’ Responsibility For Actions Of Their Employees

Employers are generally liable for damages caused by their employees in the performance of assigned work.

4 FIRING THE EMPLOYEE

Procedures For Terminating the Agreement

There must be proper legal grounds for termination of an employee, and different legal grounds may lead to different severance packages. Before any lawful termination, an employer is generally obligated to provide notice to the employee, unless the employer is willing to pay compensation in lieu of such required notice. In practice, an employer may require an employee to acknowledge the receipt of this notice by signature.

The employer must pay a terminated employee his or her final salary and severance package within 48 hours of the employee’s termination date.

If the employee requests it, the employer must provide an employment certification upon the employee’s termination. An employment certification must include the employee’s start and end dates, type of employment or position, and, if applicable, previous positions and duration of employment in each position.

Instant Dismissal

Under Cambodian labour laws, an employer may dismiss an employee who commits an act of serious misconduct. However, the employer must do so within seven days of learning about the misconduct.

Employee’s Resignation

If an employee resigns, an employer does not need to pay any compensation (e.g., damages for termination and payment in lieu of notice) except for benefits already incurred during employment (e.g., unpaid wages and compensation of remaining unused annual leave). However, if the resignation is caused by the employer’s malicious action or fault, such as mistreatment of the employee or repeated infringement of the employment contract, the employer must pay damages to the employee in accordance with damages owed due to wrongful termination.

Termination On Notice

As a rule, an employer may not unilaterally terminate an FDC before its expiration date. The termination of an FDC must be predicated on a mutual agreement, an act of God, or some serious misconduct committed by the employee. If an employer unilaterally terminates an employee before the contract’s expiration date, the employer must pay the employee damages at least equal to the wages he or she would have received had the contract been fulfilled in full.

If the employer does not want to renew an FDC after its expiration date, the employer must give an employee notice 10 or 15 days in advance if the FDC had a duration of more than six (6) or 12 months, respectively. Failure to give a non-renewal notice within the appropriate timeframe renders the FDC automatically renewed as another FDC with the same terms and duration (or as a UDC, if it exceeds the maximum length of an FDC).

An employer may terminate a UDC for any reason if the employer has provided the employee proper prior notice, which must be given between seven (7) days to three (3) months in advance of the termination, depending on the employee’s seniority. However, the employer must pay a severance package to the employee. Moreover, if the reason for termination is not valid, the employer may be required to pay damages to the employee. Similar notice obligations apply to employees. However, it is common that employers allow employees to resign at any time without requiring employees to pay damages for cutting their contracts short, so long as they provide reasonable prior notice.

Termination By Reason Of The Employee’s Age

Cambodian labour laws are silent on termination of an employee due to his or her age. The termination must, however, be predicated on legal grounds. For instance, an FDC can only be prematurely terminated due to mutual agreement, force majeure, or serious misconduct. For a UDC, on the other hand, an employer must respect the notice requirement and pay the severance package. The ambiguity is in whether an employee’s age may be considered as a valid reason for terminating a UDC without having to pay damages on top of the regular severance package.

Automatic Termination In Cases Of Force Majeure

Force majeure is one of the grounds for employment contract suspension or termination. Where, as a result of a natural disaster, flood, earthquake, war, or other “acts of God” that make the continuity of work impossible, employers and employees alike are entitled to suspend employee contracts for a maximum of three (3) months.

What is deemed an “act of God” is different for employers and employees. For employers, an event of force majeure occurs when there is a natural disaster (e.g. flooding, earthquakes, or wars), or when the public authorities order the employer’s businesses to be closed. In light of these events, employers may exercise their right to suspend or terminate employment contracts. However, when the business is closed due to bankruptcy or judicial liquidation it is not considered an event of force majeure. Cambodian Labour Law, on the other hand, views an employee’s chronic illness, disability, mental illness, or imprisonment as an event of force majeure on which the employee may predicate the suspension or termination of his or her own contract.

In the event of force majeure, an FDC may be prematurely terminated without the employer being required to pay any damages. Similarly, terminating a UDC in a case of force majeure does not trigger the prior notice requirement or require any damages to be paid.

Collective Dismissals

The Labour Law allows a mass layoff or collective dismissal resulting from a reduction in an establishment’s activity or an internal reorganisation that is foreseen by the employer. An employer seeking to carry out a mass layoff of employees must: i) establish the order of the layoffs in light of professional qualifications, seniority within the establishment, and family burdens of the workers; ii) inform the workers’ representatives in writing in order to solicit their suggestions on the measures for a prior announcement of the reduction in staff and the measures taken to minimise the effects of the reduction on the affected workers; and iii) lay off employees with the least professional ability first, followed by employees with the least seniority. Seniority must be increased by one year for a married employee and by an additional year for each dependent child.

Dismissed employees have priority to be re-hired for the same position for two (2) years. Employees who have priority for re-hire are required to inform their employer of any change in address during this layoff period. If there is a vacancy, the employer must inform the concerned employee by sending a registered letter to his last address. The employee must appear at the establishment within one (1) week after receiving the letter.

Termination By Parties’ Agreement

Parties are free to mutually agree to terminate employment contracts, including FDCs and UDCs. Agreements to terminate employment contracts should be in writing and signed by both parties.

Directors Or Other Senior Officers

Directors or other senior officers of a company are generally considered employees of the company and therefore enjoy all the rights and benefits of employees under Cambodian Labour Law. They may also be subject to Cambodian corporate laws, such as the Law on Commercial Enterprises dated 19 June 2005, to other corporate governance regulations, or to the company’s articles of incorporation.

Special Rules For Categories Of Employee

Cambodian Labour Law provides additional protections to specific categories of employees, including minors (i.e. children under 18), female employees, and employees working in certain industries.

For instance, minors cannot sign their employment contracts without the consent of their parents or guardians unless they are emancipated. Minors cannot perform any work considered hazardous. Minors also cannot work more than eight (8) hours a day, and they must be given 13 hours of rest period between shifts.

Women are entitled to paid maternity leave of 90 days and should only perform light work for two (2) months after returning from maternity leave. Moreover, one (1) year after child delivery, mothers may spend up to a total of one (1) hour of their working hours each day breast-feeding their children. An employer who employs more than 100 women must have a nursing room and a day-care centre for their children. If the employer is not able to have a day-care centre in its workplace, it must cover the expenses of the private day-care centres used by the female employees.

In addition to these general provisions, Cambodian labour laws also contain special provisions for agricultural employees, such as those employed on plantations, on farms (e.g. engaged in the growing of crops and the raising of animals), in forestry, and at fisheries.

The garment, textile and footwear production industry in Cambodia is a major part of Cambodia’s workforce and employees in this industry may be considered some of the most vulnerable in the country. Therefore, the MLVT is active in protecting their rights and benefits, and numerous regulations have been enacted that are applicable only to employees working in this industry. For example, these employees are entitled to expedited seniority back payments, while seniority back payments for employees in other industries have been suspended until December 2021.

Specific Rules For Companies in Financial Difficulties

Cambodia lacks comprehensive rules for companies facing financial difficulties. Cambodian Labour Law specifies that bankruptcy and judicial liquidation are not “acts of God” that would trigger a force majeure clause. Thus, employers facing either of these situations remain obligated to respect their employees’ rights and benefits protected under the law.

The recent amendment to the Labour Law provides that an employer is not required to pay its employees any damages or compensation in lieu of prior notice if the employer terminates the employees due to the necessary closure of the business, as outlined in the MLVT’s regulations. However, the MLVT has not issued such regulations as indicated in the amendment, and therefore which instances where a company is closed without having damages remain ambiguous.

Restricting Future Activities

Cambodian labour law explicitly provides that any contractual provision between an employer and an employee that prohibits the employee from engaging in any activity after employment is null and void. Nevertheless, it is still common in practice for employment contracts to contain “non-complete,” “unfair competition,” or “survival provisions” clauses.

Whistleblower Laws

Cambodia does not have a dedicated whistle-blower law, and still in the process of drafting it.

Special Rules For Garden Leave

The concept of garden leave is not addressed in Cambodia. The term “garden leave” generally refers to the period during which an employee stays away from the workplace or works remotely during the notice period. The employee remains on the payroll and is in the process of terminating their employment but is permitted neither to go to work nor to commence any other employment during the garden leave. Assuming that an employer provides an employee notice of termination in a manner consistent with the Labour Law, placing an employee on garden leave would not contravene the Labour Law.

The only time that employees are allowed to be away from work under the Labour Law is during the notice period of a UDC. An employee is entitled to receive full wages and benefits and is entitled to two days’ paid leave per week to look for new employment.

Severance Payments

Employers are obligated to pay severance to employees after an FDC ends or is terminated. The severance for FDCs must be 5% of all wages the employee received during the FDC, unless the parties agree to a higher amount.

Cambodian labour laws were amended recently to require employers to pay severance to employees under UDC once every six (6) months in accordance with the new ‘seniority payment’ plan. The total amount of seniority payments to be made to each employee on an annual basis is equal to 15 days of an employee’s average daily salary (wages and other fringe benefits). When a UDC employee is terminated, the employee is entitled to a severance package that includes this final seniority payment, any seniority back payment owed for seniority periods before the amendment, and any compensation that may be required to be paid in lieu of notice. At present, however, as a result of the COVID-19 outbreak and its impact on business, the Cambodian government has postponed the obligation to make seniority back payments or ongoing seniority payments until 2022, except for employers in the garment and footwear sector.

In addition, at the end of the employment relationship, regardless of the type of employment contract, the severance package may also include the employee’s final salary, compensation for remaining unused annual leave, damages, and any other benefits agreed between the parties. The severance package may be more limited depending on the reason for the employee’s termination.

Additionally, both employers and employees are required to pay monthly contributions to the NSSF for the employees’ pension scheme. Employers have an obligation to collect and pay their and their employees’ contributions for the pension scheme at any partner bank no later than the 15th day of the following month.

In case the employer is unable to pay for annual contributions, a request must be made to the NSSF. This annual contribution payment must be made in the month following a request for a contribution payment. The contribution payment must be made every year, and employers must pay the contribution as per the calendar year. The NSSF may adjust the contribution amount at the beginning of the following year.

Special Tax Provisions And Severance Payments

Employees’ salaries are taxed at a progressive rate capped at 20% of their income, while their fringe benefits are taxed at a fixed rate of 20%. Employers are obligated to withhold these taxes from employees and to pay tax authorities on a monthly basis. However, there are some exemptions to these taxes.

Allowances Payable To Employees After Termination

Cambodian Labour Law does not require employers to pay employees any allowance after an employee’s termination, unless an allowance has otherwise been agreed upon by the parties. The law requires solely that all severance owed to the employee is fully paid.

Time Limits For Claims Following Termination

The statute of limitations on all claims to outstanding compensation owed to employees, including wages, fringe benefits, damages, or otherwise, is three (3) years from when the compensation was originally due.

5 GENERAL

Specific Matters Which Are Important Or Unique To This Jurisdiction

Cambodian law also provides additional benefits to persons employed in the agricultural, garment, textile and footwear industries.

Agricultural Employees

Labour Law contains special provisions for agricultural employees, such as those employed on plantations, on farms (e.g. engaged in the growing of crops and the raising of animals), in forestry and at fisheries. Specialised benefits include a daily rice allocation for the employee and his/her family, and free housing or a housing allowance.

Garment, Textile and Footwear Industry Employees

Person’s employed in Cambodia’s garment, textile, and footwear production industry comprise a major part of Cambodia’s workforce, and employees in this industry may be considered some of the most vulnerable in the country. Therefore, the MLVT is active in protecting their rights and benefits, and numerous regulations have been enacted that are applicable only to employees working in this industry, including certain meal allowances and salary supplements for layoffs resulting from the COVID-19 pandemic.

By Tilleke & Gibbins, Cambodia, a Transatlantic Law International Affiliated Firm.

For more information on this topic, please contact cambodia@transatlanticlaw.com  

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