Navigating Cambodia's Labour Laws: A Guide for Employers

Cambodia’s labour laws have developed with the government pushing the Kingdom towards a conducive environment for both workers and employers. As a result, opportunities in the country are popping up for many entrepreneurs and across several industries. 

In this guide, we’ll offer a brief overview of Cambodian labour laws covering the types of employment, working hours, wages, taxes, and other important aspects of employment in the Kingdom.

Cambodian and foreign employees are protected primarily by the Constitution, International Labour Standard of ILO, 1997 Labour Law, and other governmental regulations.

We would always suggest seeking the advice of professional legal firms in the Kingdom for specific legal matters.

This article will cover the following topisc:

1. Contracts and Types of Employment

2. Foreign Work Quotas

3. Working Hours

4. Probation

5. Leave

6. Termination

7. Wages, Payment Schedule, and Statutory Benefits

8. Salary Taxation

Before going into the details of the outline above, there are general rules that employers must keep in mind when employing in Cambodia:

• The Cambodian Labour Law, and related laws and regulations, apply to all relationships between employers and their employees who work within Cambodia.

• The country of origin of the organisation or individual that is involved in a contract doesn't matter. The location where the agreement is written is irrelevant, too. The pertinent Cambodian labour legislation will apply to the job if it is conducted in the Kingdom.

• It goes without saying that as a matter of public policy, no rights under the Cambodian labour law may be repealed or denied by any contract or other agreement between an employer and an employee.

• Employment contracts can either be written or verbal.

• The employer-employee relationship in the Kingdom of Cambodia is governed by a number of legal instruments such as the Cambodian Constitution, the Civil Code, the Labour Law, the Law on Minimum Wages, the Law on Social Security Schemes, and the Law on Trade Unions.

• International treaties signed and ratified by the Royal Government of Cambodia are also observed in these relationships.

• Labour lawyers can additionally look up rulings of the Arbitration Council (AC) for the prevailing jurisprudence in the Kingdom.

Contracts and Types of Employment

The purpose of employment contracts is to legally establish employment relationships. It goes without saying that employers are prohibited from unilaterally modifying any part of the employment contract; otherwise, employees have the right to immediately terminate the employment contract. 

Specifics in an employment contract often include vital information such as:

• Type Of Employment (Discussed In The Succeeding Subsections)

• Passport Information

• Start Date

• End Date (If It Is A Fixed Duration Contract)

• Position

• Job Description

• Working Hours

• Night Work

• Weekly Time Off

• Paid Holidays

• Paid Annual Leave

• Special Leave (If Applicable)

• Salary

• Other Benefits

Insider Tip: Cambodia’s labour laws will apply by default on matters that may arise and are not covered in the employment contract.

In Cambodia, there are two different kinds of employment: a fixed duration contract (FDC) and an unfixed duration contract (UDC).

Fixed Duration Contracts (FDC)

As the name suggests, this form of employment contract suggests that the employment itself has a fixed duration but can be renewed albeit a limited number of times.

• An FDC can have a maximum duration of 2 years and must contain a specific date.

• An FDC can be renewed for an additional (maximum) 2 years. Totalling 4.

• FDCs must clearly specify the start and expiry dates of this employment.

• FCDs are required to be in writing.

According to a majority interpretation by the Arbitration Court (Arbitral Award 10/03 Jacqsintex Garment Co., Ltd, dated 23 July 2003.) FDCs that go beyond two (2) years, regardless of whether it is renewed or not, will automatically convert to an unfixed duration contract.

Unfixed Duration Contracts (UDC)

UDCs are typical employment contracts where it only ends with either party terminating the agreement. There are two ways UDCs can come about:

• A party's deliberate creation while entering into a contract without specifying expiry dates.

• An inadvertent modification resulting in an FDC becoming a UDC either at the time of contracting or later.

While this contract isn’t required to be in writing, it is highly advised that both employers and employees insist it should be if not already. Additionally, it is mandatory for UDCs to meet the minimum standards under the Labour Law for it to be enforceable (see bullet points immediately below: Contracts and Types of Employment).

Foreign Work Quotas In Cambodia

Cambodian businesses employing foreign employees in Cambodia are required to apply for a foreign employee quota from the Ministry of Labour and Vocational Training (MLVT). 

A maximum of 10% of an employer’s total local workforce may be foreign nationals but the MLVT issued Prakas 277/20 concerning Special Conditions on the Employment of Foreign Nationals (“Prakas 277/20”) issues in August 2020 permit the hiring of foreign nationals in excess of the above foreign employee quota cap, subject to MLVT approval.

The standard annual process is to apply for the foreign quota in November each year and to process individual work permits for each foreign national employee by March of the following year.

The Foreign Workers Centralised Management System (FWCMS) is a web-based online management system managed by the Ministry of Labour and Vocational Training, and offers online tools to manage the foreign worker quota, foreign work permit and other one-stop window services.

SEE OUR GUIDE ON RELEVANT WORK VISAS AND WORK PERMITS IN CAMBODIA.

Working Hours

When it comes to working hours, Cambodian labour law is straightforward and specifies:

• Employees can work for a maximum of eight (8) hours per day, 48 hours per week

• Employees are entitled to a daily unpaid meal break of at least one (1) hour

• Staff must be given one full day off, meaning 24 consecutive hours, per week

• Unless the organisation’s operations require otherwise, the day off  should be taken on Sunday

Overtime in Cambodia

Any additional time worked by the employee past the regular working hours will be considered overtime, even if the number of hours worked is less than 48 hours in a week. Employers can ask their employers to work overtime, especially if the nature of their work or business demands it. However, overtime work can not exceed two (2) hours per shift.

It is important to note that overtime work should be voluntary and employees cannot be penalised for refusing to do overtime work.

Compensation for overtime work is as follows:

• At 150% of the employee’s wages, if the overtime is completed before 10 pm

• At 200%of the employee’s wages, if the overtime is scheduled after 10 pm, on Sunday, or on a public holiday

• In any event, overtime is generally limited to 2 hours per shift.

Night Work

The Cambodian labour market is no stranger to allowing work around the clock as many of the core economic sectors involve manufacturing, tourism, agriculture etc. As such, provisions have been made to cover work extending well into the night. Night-time means a period of 11 consecutive hours that includes the seven hours between 10pm and 5am.

According to Prakas No. 80 on Overtime Work Besides Regular Working Hours, dated 1 March 1999, Clause 6:

• The wage for night work is 130 per cent of the employee’s daytime rate

• Employees are entitled to an increased rate of 100 per cent of the normal rate of pay for overtime work between 10pm and 5am of the following day

• Employers must also provide night-time employees with an adequate place to rest or sleep after working or safe and secure transport to their residences after their night-time shift

Probation

Employers may have a new employee undergo a probationary period in order to evaluate their skills, however, this is not mandatory. 

There is a set maximum probationary period depending on the type of employee onboarded:

• Regular employee: 3 months probation

• Specialised worker: 2 months probation

• Non-specialised worker: 1-month probation

Employment contracts can be terminated provided that the termination is within the specified probation period.

Leave

Work leave in Cambodia is classified into different types. We’ll look at each type in this section.

Paid Annual Leave

Employers are required to give their employees paid annual leave of 1.5 days per month, for a total of 18 days per year at minimum. 

• This minimum is legally mandated to increase by 1 day for every 3 years of continuous employment at the same organisation. 

• If an employment contract is terminated prior to one year of employment, the employee is entitled to an indemnity calculated by dividing the total number of days worked in a month by 1.5.

Sick Leave

Cambodian labour law does not have specific provisions for sick leave other than mandating organisations to suspend a contract for up to six (6) months in case of a serious illness. 

Rulings from the Arbitration Council and Prakas promulgated over the years, however, have urged employers to adjust internal regulations to accommodate sick employees presenting a medical certificate.

Paid Public Holidays

Cambodia has many public holidays each year and these paid public holidays are often determined by a Prakas from the Ministry of Labour. 

Since 2020, the number of official paid holidays were reduced - the King’s birthday public holiday was reduced from three to only one day, and five other national and international days (Meak Bochea Day, National Day of Remembrance, Children’s Day, Paris Peace Accords, and Human Rights Day) were removed from the list of public holidays. This was partially done to improve investor confidence and increase productivity as the Kingdom had among the highest number of public holidays in the world - it still does have a healthy number of holidays.

Overtime work during a public holiday must be paid 200% of their regular daily wage. Within the garments and manufacturing sectors (which also have unique minimum wage laws) there are also some options available to employers and employees to deal with the public holidays.

INSIDER TIP:

There are three major long holidays in Cambodia - Khmer New Year, Pchum Ben, and Water Festival - it is common for many businesses to close for a period longer than the official holidays, and similarly common for Khmer employees to take extra time off - sometimes without notice. This is just a local working condition employers need to manage. The same can be said for the Chinese Lunar New Year - this is not an official holiday but many businesses, even official offices, will more than likely be closed for periods of time during this holiday period.

Special Leave

Employees are given the right to request for up to 7 days of “special leave”. This normally covers personal and family matters, specifically:

• Marriage of either the employee or their children

• Birth of employee’s child

• Death and/or sickness in the employee’s family

Special leave can be a separate period of time off work or can be deducted from the legally mandated leaves the employee has.

Maternity and Paternity Leave

Expectant mothers are entitled to 90 days of maternity leave provided they have worked for at least one (1) year in the company. It is not specified whether or not that leave must start before or after the child’s birth.

• Companies are required to pay half (50%) of the employee’s average wage over the past 12 months. Employers are prohibited from dismissing female employees during their maternity leave. 

• The NSSF also provides extra financial support to postnatal female workers.

As of early 2023, Cambodia’s labour laws have no provisions for paternity leave although this may fall under “special leave”.

Termination of Employment in Cambodia

Under Cambodian labour law, terminations or dismissals must be made with cause. While termination without cause is possible, employer-initiated dismissals will require the employer to pay a severance, the specifics of which depend on the nature of the terminated employee’s contract.

Termination of FDC (FIxed Duration Contract)

Generally, An employee under an FDC cannot be terminated before its expiry date. Cambodian labour law does lay out exceptions to this rule:

• Mutual agreement to end the FDC

• A force majeure

• Serious misconduct by the employee

Should the employer pursue a termination that does not fall under the exceptions, the employee is entitled to:

• At least 5 per cent of annual salary, and benefits to the employee during the full contract period if there isn't a collective bargaining agreement that offers otherwise.

• Compensation for unused annual leave

• The last unpaid salary

Should the employee initiate separation, they are required to pay the organisation damages that result from the termination of the contract.

Given the nature of FDCs, Cambodian labour law requires employers to give notice to employees under this contract, depending on their contract’s duration. 

The specifics are as follows:

• For FDCs of six to twelve months duration, the organisation must give notice of its expiration and nonrenewal at least 10 days prior to the expiration date.

• For FDCs of greater than one year (12 months), the organisation must give notice of its expiration and nonrenewal at least 15 days prior to the expiration date.

It is worth remembering that failure to give an employee notice will result in the FDC being extended equally to the duration specified in the original contract. Should the renewal exceed two (2) years, the FDC will automatically turn into a UDC.

Termination of UDC (Unfixed Duration Contracts)

Employees under a UDC can be terminated provided there is a reasonable cause. Cambodian labour law considers these as grounds for a valid termination:

• Based on the aptitude, behaviour, and/or requirements of the organisation

• A force majeure

• Serious misconduct by the employee

• Financial downturns in the company’s finances

An employee under UDC being terminated with cause (provided it is not serious misconduct) is entitled to the following:

• A notice period is specified in writing. Notice duration depends on the length of continuous service:

• Less than 6 months of service: 7 days' notice

• 6 months to 2 years of service: 15 days' notice

• More than 2 years to 5 years of service: 1-month notice

• More than 5 years to 10 years of service: 2 months' notice

• More than 10 years and greater: 3 months' notice

• Two (2) days of paid leave per week during the notice period to look for new employment

• Seniority payments

• Compensation for unused annual leave

An employee under UDC being terminated with cause involving serious misconduct is still entitled to the following:

• Compensation for unused annual leave

• Final unpaid salary

Wages or indemnity owed by the employer to the employee must be paid within 48 hours of termination.

Wages, Payment Schedule, and Statutory Benefits

Wages in Cambodia must be paid directly to the employee unless agreed otherwise. Labour law specifies payment schedules depending on the nature of the worker.

• Manual workers should be paid at least twice per month. Their pay periods shouldn't be more than 16 days apart

• Salary payments must be made at least once per month for regular employees

• Commission-based workers must be paid at least every three (3) months

Salary payments can be made through bank transfers or by cash. The labour law mandates payments be made in the current month. Wages paid on a regular basis should include the following:

• Overtime and other allowances

• All fringe benefits such as (but not limited to) housing, car, education, or mobile

Bonus

Bonuses are largely at the company’s discretion. It is not uncommon for some companies to pay a 13th bonus to their employees in Cambodia. Companies have been known to pay bonuses worth 1 to 4 months of work depending on performance and company finances.

Bonuses are usually paid at year-end or during major holidays such as Khmer New Year or Pchum Ben.

Insider Tip: Most local staff expect some sort of additional bonus pay around major holidays such as Khmer New Year or Pchum Ben - as many will travel to see their families (often in the provinces). This gratuity is not mandatory but is often advised to keep Cambodian staff satisfied.

Minimum Wage

As of 2023, Cambodia’s minimum wage is $200* per month. However, unlike other countries, the Kingdom’s minimum wage only applies to specific sectors such as garments, footwear, and textiles.

Seniority Indemnity Payments

Cambodian law mandates seniority indemnity payments for its employees. According to Article 89 of Cambodia’s new labour law, the seniority indemnity payment amounts to 15 days of of wages and other allowances per year. The indemnity payment will be paid in half every six months of the year.

National Social Security Fund (NSSF)

The NSSF is Cambodia’s state-run social security program and is the only insurance program mandated by the Kingdom’s labour laws. Every enterprise with at least one employee must be registered with the NSSF.

NSSF premiums are paid by the employer and range from $1.70 to $10.20. A salary of $300 and above is required to pay the maximum of premium of $10.20 a month.

Pension Funds

As of early 2023, Cambodia does not have any pension plans or laws enforcing pension funds to be supported by employers.

As of 2022, Cambodia launched its first iteration of its pension scheme for private sector workers. The new system will be part of the NSSF, and will require both employee and employer to pay a share of 2% each. This rate increases 4% each after 5 years.

Supplemental Healthcare and Insurance

As of early 2023, Cambodia does not have any mandatory health insurance or other supplemental insurance within the workplace outside of the NSSF to be provided by employers.

Salary Taxation

Salary/income tax in Cambodia is tiered from 5% to 20% of the base pay. This includes the following

• Remuneration

• Wages

• Bonuses

• Overtime

• Other allowances

Taxes on salaries are withheld from the paycheck by the employer on the employee’s behalf and are paid to the General Department of Taxation (GDT) by the 20th calendar day of the month after wages are paid. 

Should the payment date for that month fall on a  holiday or weekend, payment deadlines are extended to the following business day.

Overall, there have been significant improvements in Cambodian employment and labour regulations, which try to promote the protection of rights for women and employees in the low-skilled industry. The government aims to have a more diversified, skilled, and productive workforce who have the protection of laws which better meet international standards.

The ongoing digitisation of the Kingdom also has impacted aspects of doing business, such as taxes and salaries being paid via apps and digitally rather than in cash or by cheques (which still take place), Businesses can pay far more official fees, taxes and penalties online.