1. INTRODUCTION
The National Social Security Fund (“NSSF”) has long been established to provide security for employees in Cambodia. Whilst initially focusing on health insurance, in recent years it has expanded into also providing pension provisions. Sub-Decree No. 32 on the Social Security Scheme on Pension for Persons Defined by the Provisions of the Labour Law, promulgated on 04 March 2019 initiated this shift, and its provisions have been clarified in further Sub-Decrees and Prakas. This newsletter will explore the requirements of employers, the benefits of employees and the implementation of the law.
2. REGISTRATION OF THE NSSF
All employers with one (01) or more worker is required to register with the NSSF. The process for registration with the NSSF was set out in Prakas No 168/22 on the Formalities and Procedures for Registration of Company, Employee and Contribution Payment for Persons Defined Under Provisions of the Labour Law, enacted on 05 July 2022.
An employer is required to register within 30 days of commencing activities. Any new employees must also be registered by the employer within three (03) days of beginning employment.
Non-registration with and failing to pay the contributions to the NSSF can lead to a fine of 30 times the base daily wage rate, which was increased to US$ 20.00 with the implementation of Inter-Ministerial Prakas No. 326 on Base Daily Wage dated 25 November 2022. Therefore, lack of registration and failing to pay the contributions can result in a fine of up to approximately US$ 600.00. The fines shall be calculated according to the number of workers whose contributions are deducted by employers and in violation of the provisions of this law.
3. CONTRIBUTIONS OF THE PENSION SCHEME
In general, contributions are made by the employer on a monthly basis. The contributions required for the first five (05) years of employment are set at 4% of an employee’s wage. The contribution shall be borne as follows:
- 2% from the employer; and
- 2% from the employee.
Contributions can be made directly through a partnering bank, such as the Advanced Bank of Asia (ABA), or directly at the office of the NSSF.
4. PENSION ENTITLEMENTS OF EMPLOYEES
Employees are entitled to either an old age pension, an old age allowance, or an invalidity pension. In addition, a survivor’s pension is available to the family members of those who were entitled to one of the pensions listed.
A) Old Age Pension
Employees are entitled to the old age pension under the following conditions:
- They are registered with the pension scheme;
- Are at least sixty (60) years of age; and
- Have made contributions to the pension scheme for at least twelve (12) months.
The pension provided is calculated as follows:
OAP = PR x AW
- OAP is the old age pension to which the person is entitled.
- PR is the pension rate to be entitled to as stipulated in Annex 1 of Sub-decree No. 32.
- AW is the average wages that the person has paid as contributions.
B) Old Age Allowance
Should an employee fail to fulfil the entitlement criteria, whilst they will not receive the pension, they are still entitled to an old age allowance.
The old age allowance is calculated as follows:
OAA = SC (1+OCPI)
- OAA is the old age allowance to which the person is entitled.
- OCPI is the official commodity price index.
- SC is the sum of the contributions that have been paid for the pension scheme.
C) Invalidity Pension
Should an employee become unable to work due to invalidity, they may still be entitled to claim through the pension scheme. The following conditions must be met for an employee to be entitled to the invalidity pension:
- Be registered with the pension scheme; and
- Having paid the contributions for the pension scheme for at least 60 (sixty) months prior to the date that the employee has become invalid.
The invalidity pension is calculated as follows:
IP = PR x AW
- IP is the invalidity pension to which the person is entitled.
- PR is the pension rate to be entitled to as stipulated in Annex 1 to Sub-decree No. 32.
- AW is the average wages that the person has paid as contributions.
D) Survivor’s Pension
Beneficiaries, either the spouse or children, of an employee that was entitled to receive either an old age pension or an invalidity pension shall be entitled to the survivor’s pension. This is only applicable where the employee has paid contributions to the pension scheme for at least 60 (sixty) months.
The survivor’s pension is calculated as follows:
SP = 45% x OP or 45% x IP
- SP is the survivor’s pension to which the beneficiary is entitled.
- OP is the old age pension.
- IP is the invalidity pension.
5. FOREIGN EMPLOYEES
The pension schemes shall apply to persons defined by the provisions of the Labour Law including persons who have 2 (two) or more jobs. Based on Article 3 of Sub-Decree No. 32, employee refers to all kinds of employees and all nationalities of the formal sector including persons defined by the provisions of the Labour Law. Therefore, the foreign employees are obliged to pay the contribution and are entitled to pension benefits.
6. CONCLUSION
The pension schemes shall apply to persons defined by the provisions of the Labour Law including persons who have 2 (two) or more jobs. Based on Article 3 of Sub-Decree No. 32, employee refers to all kinds of employees and all nationalities of the formal sector including persons defined by the provisions of the Labour Law. Therefore, the foreign employees are obliged to pay the contribution and are entitled to pension benefits.
- The director or owner of an enterprise defined by Labour Law should register their enterprise and employees in accordance with the existing laws and regulations and pay the contribution into the pension fund in compliance with Sub-Decree No. 32 to avoid any possible fines and for the benefits of their employees.
- Whilst all enterprises are required to pay contributions to a pension fund, providing these benefits to employees through NSSF rather than a private insurance company can reduce expenditure.
The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations. For more details or any question related to the The Cambodian Pension Scheme, please contact our professionals via [email protected].
TABLE OF CONTENTS
| 1. | Introduction |
| 2. | Registration of the NSSF |
| 3. | Contributions |
| 4. | Entitlements of Employees |
| 5. | Foreign Employees |
| 6. | Conclusion |
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