Labor Compliance for New Business in Cambodia (Nov 2021)

INTRODUCTION

The Cambodian Labor Law, promulgated in 1997, and its amendments in 2007, 2018, and 2021 (“the Labor Law”) apply to all employer-employee relationships where the work is performed within the Kingdom of Cambodia, regardless of the nationality of either employee or employer and the place of the execution of the employment contract.

This newsletter provides a brief overview of the labor compliance for new businesses in Cambodia, as follows:

1. HIRING EMPLOYEES

Preference must be given to Cambodian nationals when hiring. A quota system is in place, generally limiting the number of non-Cambodian nationals to 10% of the total workforce within each enterprise. Work permit and employment cards are required for foreign workers working in Cambodia, while Cambodian workers are only required to have an employment card.

The minimum age for general employment is 15 years old. Any form of child labor or forced labor is strictly prohibited under the Labor Law.

All employees, both Cambodian and foreign, are required to have a medical examination, performed by the Department of Occupational Safety and Health of the Ministry of Labor and Vocational Training, prior to employment. The cost of the examination is the responsibility of the employer.

It is important to note that an apprenticeship under the Labor Law is different from a traineeship or an internship. Employers, employing more than 60 workers, are required to have apprentices for 10% of the total number of workers within the enterprise. If it is not possible to have apprentices as required, the employer must pay an apprenticeship tax as defined in the Prakas of the Ministry of Labor and Vocational Training.

2. EMPLOYMENT CONTRACT

Under the Labor Law, two types of employment contract can be formed. A contract for work to be performed is defined as a fixed duration contract (FDC) if:

• the contract is written,
• the contract contains precise commencement and termination dates, and
• the initial contract duration does not exceed two years, and it can be renewed several times as long as the renewal duration does not exceed two years.

The contract is defined as an unspecified duration contract (UDC) if any of the above requirements are not met.

An employer may enter a probationary contract to evaluate his/her prospect employee’s skill. The maximum probationary period depends on the type of employee. The probationary period shall not be considered as part of the employment contract for either an FDC or a UDC.

3. WAGE PAYMENT

In accordance with the Law on Minimum Wage 2018, the wage must be at least equal to the guaranteed minimum wage which is determined annually by the Prakas of the Ministry of Labor and Vocational Training. However, the current minimum wage only applies to workers in Textile, Garment, Footwear and Travel Goods and Bags sectors. This minimum wage can be served as a floor wage for other business sectors that are relatively unrestricted.

Following the Amendment to the Labor Law in 2018, in addition to the wage payment, the workers under a UDC are entitled to receive a seniority indemnity payment twice a year.

Wages must be paid directly to the employee, unless agreed otherwise. Workers must be paid at least twice per month, and their paydays must not be more than 16 days apart. Deduction of wage is strictly prohibited.

Employers have a duty to inform employees about their wage rate before work begins, and before any change in wage. Each payday, the employee should be provided with a pay slip explaining how the pay was calculated, and sign the payroll ledger proving receipt of the payment.

4. WORKING HOURS AND OVERTIME

The Amendment to the Labor Law in 2021 expressly stipulates that each enterprise can operate with a morning shift, an afternoon shift and a night shift, while the employees can work for a maximum of 8 hours per days, and 48 hours per week. Employees must be given one full day off, meaning 24 consecutive hours, per week. Unless the enterprise’s operations require otherwise, the weekly day off should be taken on Sunday.

In accordance with the Amendment to the Labor Law in 2007, night work is considered to be from 10 pm to 5 am and it shall be paid at a rate of 130% of the day time wage.

Overtime must be compensated at 150% of the employee’s wages, if the overtime is completed before 10 pm. If the overtime is scheduled between 10 pm to 5 am, on Sunday, or a public holiday, then the employer must pay 200% of the employee’s wages. In any event, overtime is generally limited to 2 hours not exceeding 10 hour per day. Overtime is prohibited for young workers.

5. OCCUPATIONAL HEALTH AND SAFETY

New mothers are entitled to take one hour per day, for the first year following the child’s birth, to breast-feed during work hours. Any enterprise that employs more than 100 women must provide a nursing room and a daycare center for all children over 18 months of age. If an enterprise is unable to establish a daycare center on site, then it must pay for the cost of private daycare.

Enterprises employing at least fifty workers shall have a permanent infirmary on the premises of the establishment, workshop, or work site.

6. HOLIDAY, LEAVES AND BENEFITS

Each year, the Ministry of Labor and Vocational Training issues a Prakas determining the number and dates of paid public holidays. The Amendment to the Labor Law in 2021 introduces a new change, whereby there is no longer a substitute holiday to the following Monday if the public holiday falls on Sunday. During the holiday period, the employer must pay their employees their normal wages.

Employers are required to give their employees paid annual leave of 1.5 days per month, for a total of 18 days per year. For every 3 years of continuous service, employees are entitled to an additional day of leave per year.

Employees have the right to request up to seven days of “special leave” for personal and family matters.
The Labor Law is generally silent on the matter of sick leave, other than requiring an employer to suspend a contract for up to six months in case of illness. In other words, the employer is required to hold a sick employee’s position, without pay, for at least six months.

Expectant mothers are entitled to 90 days of maternity leave after one year of continuous service. There is no restriction on whether the leave must start before or after the birth. During the maternity leave period, the organization must pay 50% of the employee’s average wage earned during the preceding 12 months.

7. SUSPENSION, TERMINATION AND DISMISSAL

Employers can discipline employees only if they have evidence of misconduct. All disciplinary action must be proportional to the misconduct. In case of serious misconduct warranting immediate dismissal, the employer has seven days to dismiss the employee after learning of the misconduct. If it is not done within seven days, the right to dismiss is waived.

An employment contract may be suspended for a variety of reasons. During the suspension, the employee is not required to work, and the employer is not required to pay wages. Such suspension cannot exceed two months, and must be approved by the Labor Inspector.

Generally, an FDC terminates at the end of the term specified in the agreement. An FDC can be terminated prematurely only if:

• both parties are in agreement, made in writing and signed in the presence of the Labor Inspector,
• there has been serious misconduct by either party, or
• an Act of God makes performance of the contract impossible.

If an employer wants an employee to stop working at the end of an FDC, the employer must tell the employee in advance according to the table below:

At the expiration of the contract, employees on FDCs are entitled to a severance of at least 5% of the wages paid during the contract period.

An employer can terminate an UDC for any reason relating to the employee’s aptitude or behavior, or based on the requirements of the enterprise. A downturn in the enterprise’s finances constitutes a valid reason for termination. Whereas, an employee can terminate an UDC for any reason. An employer or an employee who wishes to terminate a UDC must give written notice. The notice period is based on the length of employment as set out in the table below: