1. Overview
Cambodia’s “Labor Law” was promulgated in 1997 and was formulated under the influence of labor standards in western developed countries. Its requirements are relatively strict and it focuses on protecting labor rights. However, the actual implementation of some clauses may overestimate the actual situation, increasing unnecessary burdens on employers.
This regulation reflects the regular thinking of the Cambodian government in terms of labor policy, actively promotes the localization strategy of technical talents, is committed to solving the problem of excess domestic labor force, and actively seeks foreign job markets.
The labor law does not actually impose too many restrictions on the employment of labor by investors. While there are some restrictions on foreigners working in Cambodia, they are still relatively loose compared to other countries in the region.
The purpose of labor law is to protect the rights of workers. Therefore, the various conditions and benefits provided by the employer must not be lower than the minimum requirements of the labor law, otherwise they will be deemed invalid. Complying with labor laws can be challenging for investors.
2. The core content of the labor law
The Labor Law provides comprehensive protection for the rights and interests of laborers. The main principles of the law are as follows:
●Forced or compulsory labor of any kind is strictly prohibited.
●When an employer hires or fires a worker, it must file a written declaration with the labor authority within 15 days of the date of hiring or firing.
If the employer has more than 8 employees, it is necessary to formulate internal rules and regulations of the enterprise.
●The minimum age for employment is 15, except for cases where the work involves a health, safety or moral hazard, the minimum age for employment is 18.
When a working relationship is established through an employment contract, the employment contract can be concluded in written or oral form, and the employment contract is governed by common law. Employers shall not require the payment of deposits or security deposits of any kind when signing or extending an employment contract. Work contracts can be divided into three types: probationary period, fixed-term contract and irregular contract. The probationary period is defined as no longer than 3 months for general employees, no longer than 2 months for professional workers, and no longer than 1 month for non-professional workers. A fixed-term contract shall not exceed 2 years and may be renewed one or more times, but the renewal period shall not exceed 2 years.
(1) Type of employee
According to the labor law, employees can be divided into four types: ordinary employees, temporary employees, part-time employees and probationary employees. The labor contracts signed by ordinary employees are divided into fixed duration contracts (Fixed Duration Contracts, FDC) and undetermined duration contracts (Undetermined Duration Contracts, UDC). FDC refers to a contract in which the written labor contract clearly specifies the initial period and does not exceed 2 years, while other cases belong to UDC. According to the Labor Arbitration Committee, the FDC contract can be extended several times, but if the total term exceeds 2 years, the contract will be regarded as a UDC contract.
Casual workers are people who perform specific jobs that need to be completed on short notice, or who work on a temporary, intermittent or seasonal basis. However, if casual employees work 21 days a month for more than 2 consecutive months, then they will be considered regular employees. Temporary employees enjoy the same salary treatment as ordinary employees, but enterprises can adjust the treatment according to the working hours of temporary employees. Enterprises may not provide annual leave, sick leave, holidays, bonuses and other benefits to temporary employees, but they must increase their hourly wages accordingly to compensate for their losses. Part-time employees refer to employees whose working hours are less than 48 hours per week. Enterprises can reduce the working hours of part-time employees proportionally to adjust their treatment. Enterprises can set a trial period, but the longest shall not exceed 3 months.
(2) Labor contract
When a working relationship is established through an employment contract, the employment contract can be concluded in written or oral form, and the employment contract is governed by common law. Employers shall not require the payment of deposits or security deposits of any kind when signing or extending an employment contract. Work contracts can be divided into three types: probationary period, fixed-term contract and irregular contract. The probationary period is defined as no longer than 3 months for general employees, no longer than 2 months for professional workers, and no longer than 1 month for non-professional workers. A fixed-term contract shall not exceed 2 years and may be renewed one or more times, but the renewal period shall not exceed 2 years.
(3) Dissolution and termination of the labor contract
01. Fixed term contract cancellation and termination
Fixed-term labor contracts usually terminate on a specified deadline, but the contract can be terminated earlier by mutual agreement. This agreement must be made in writing and signed by both parties in the presence of a labor inspector. Unless due to serious misconduct or force majeure, the contract shall not be terminated early without agreement.
Before the agreed period expires, the enterprise shall notify the employee whether to renew the labor contract in advance according to the period stipulated by law, and the maximum notice period is 15 days. If not notified in advance, the fixed-term labor contract will automatically be extended for the same period. If the notice period is shorter than the legal requirement, the enterprise shall provide payment in lieu of notice as compensation. If the fixed-term labor contract is not renewed without prior notice, the company will also need to pay severance compensation, which is 5% of the total wages received by the employee during the working period of the company.
If the fixed-term labor contract has not expired, the enterprise can terminate the contract within 7 days after learning of the employee’s serious violation. The two parties can also terminate the contract through consensus, but the company needs to pay 5% of the severance compensation. If the company illegally terminates the fixed-term labor contract, in addition to paying 5% of the resignation compensation, it also needs to pay the employee’s wages within the unfulfilled period as compensation. In the same situation, if the employee illegally terminates the fixed-term labor contract, he also needs to compensate the loss suffered by the enterprise.
02. Cancellation and Termination of Indefinite Term Contract
Employees have the right to terminate the contract without a fixed term for any reason, and when the employee resigns voluntarily, the company does not need to pay severance compensation. In the event of a serious breach by an employee, the business can terminate the contract for an indefinite period within 7 days of learning of the breach without providing any severance compensation or compensation. In other cases, the enterprise can only terminate the open-ended contract based on legal reasons such as the ability and behavior of the employee or according to the needs of the enterprise, and must notify the employee in advance and provide resignation compensation in accordance with the law.
The period of advance notice depends on the employee’s working years in the company, and the maximum is 3 months; otherwise, the company needs to pay a fee in lieu of notice.
The severance compensation is determined according to the employee’s working years in the company, and the payment is 15 days per full year, with a maximum of no more than 6 months.
(4) Working hours
The working hours of workers shall not exceed 8 hours per day and 48 hours per week, and it is prohibited to arrange for the same worker to work more than six days a week. For special and urgent work that requires workers to work overtime, the overtime pay shall be 150% of the normal wage. In the case of overtime work at night or on weekly rest days, the overtime wage shall be 200% of the normal wage. Overtime shall be limited to emergencies and exceptional circumstances and shall be voluntary, with a maximum of 2 hours per day. If an employee is unwilling to work overtime, the enterprise shall not impose any punishment on him.
For work plans that require shifts, generally companies can only arrange two shifts, morning shift and afternoon shift. Remuneration for night work shall be paid in accordance with overtime wages, and night refers to the 11 consecutive hours between 10:00 pm and 5:00 am. The overtime pay is calculated as follows: overtime work from Monday to Saturday is paid at 1.5 times the hourly wage; overtime work at night from Monday to Saturday is paid at 2 times the hourly wage; overtime work on Sunday and public holidays is paid at 1.5 times the hourly wage 2x payout.
(5) Salary payment
According to the relevant provisions of the “Labor Law” on workers’ wages, the competent labor department has formulated a minimum guaranteed wage standard and requires workers’ wages to be at least the same as the minimum guaranteed wage. Unless the worker agrees otherwise, payment of wages shall be made in coins or notes directly to the worker himself. Workers’ wages should be paid at least twice a month, with an interval of no more than 16 days; while employers should pay employees’ wages at least once a month.
01. Minimum wage
The Cambodian government has only set minimum wage standards for the textile, clothing and footwear industries. There is no mandatory minimum wage requirement for other industries, and only requires that the wages paid can maintain the personal dignity of workers. In 2015, the minimum wage in the textile, clothing and footwear industry was $128, and the minimum wage during the trial period was $123.
02. Wage payment and deductions
According to the provisions of the labor law, wages should be paid on working days and corresponding wage slips should be provided. If the payment date coincides with a holiday, wages should be paid in advance. In addition, salary shall not be arbitrarily deducted.
The labor law imposes strict restrictions on the deductions of wages by enterprises. Only in the following four situations can enterprises deduct corresponding costs from wages, and the deducted wages must not be lower than the minimum wage level:
(1) Employee fails to return tools or equipment.
(2) Employees cause damage to items under their control or use.
(3) Employees should pay corporate welfare store payments.
(4) Labor union dues payable by employees.
In addition, the Labor Law clearly enumerates the situations where salary deductions are absolutely not allowed, such as: fines based on employees’ violation of rules and regulations or refusal to work overtime, or partial salary deductions as a security deposit for contract renewal, etc.
(6) Holidays and holidays
The government usually announces the public holiday arrangement for the following year around October each year. Ordinary employees are entitled to 18 days of paid annual leave each year. Other employees receive corresponding paid annual leave in proportion to their working hours. For ordinary employees, the company should provide 1 additional day of paid annual leave for every 3 years of service. Employees can take paid annual leave after working for one full year. Unless there is a special emergency, the enterprise shall not refuse the employee’s request for paid annual leave. However, businesses can require employees to give advance notice of the length of the furlough plan.
The entitlement to paid annual leave cannot be waived by agreement. If there is unused paid annual leave, it can be paid to employees as wages. Employees can request sick leave. If the sick leave exceeds 6 months, the company has the right to terminate the labor contract. When the sick leave does not exceed one month, the enterprise needs to pay 100% of the salary; the second and third months of sick leave pay 60% of the salary; starting from the fourth month, no salary is required. In the event of an event that directly affects a worker’s immediate family, the employer shall grant the worker special leave, up to a maximum of 7 days. Businesses generally cannot deny applications for special leave. Businesses can deduct the days of special leave from the employees’ remaining days of paid annual leave. If the employee does not have the remaining days of paid annual leave, the company can require the employee to make a replacement job, but the working hours shall not exceed 10 hours per day and 54 hours per week.
Female employees are entitled to 90 days of maternity leave, and half of their wages and allowances should be paid during the maternity leave. Within 2 months after the end of the maternity leave, the enterprise shall arrange female employees to perform light labor work. For employees who have worked in the company for one year, the company needs to pay 50% of their wages during the maternity leave. For mothers who are feeding babies under the age of one, the enterprise shall provide one hour of breastfeeding leave per day. This maternity leave cannot be redeemed in monetary terms.
(7) Work injury
Work-related injuries refer to accidents that occur during working hours, on the way to and from get off work, or due to work-related reasons. Occupational diseases also belong to the category of work-related injuries.
Under the law, companies are responsible for paying medical and health care costs, disability costs, and death costs incurred by employees due to work-related injuries. However, if an employee intentionally causes a work-related injury, the enterprise may not be held liable. The law has detailed calculation formulas for compensation for work-related injuries, disability and death.
(8) Trade unions
According to the law, enterprises employing more than 8 people must establish a trade union or set up an employee representative system, and employees have the right to join a trade union freely.
Both laborers and employers have the right to independently form professional organizations to study and promote the rights and interests of personnel involved in the organization’s charter in a collective or individual manner, and protect their spiritual and material interests. Professional organizations formed by laborers are called “labor unions” and professional organizations formed by employers are called “employers’ associations”. However, the simultaneous formation of trade unions or associations of which both employers and workers are members is prohibited.
(9) Punish employees
Enterprises need to abide by laws and internal rules and regulations when punishing employees. When punishing employees, there must be corresponding evidence, and the punishment measures should be consistent with the violations of the employees. In the case of serious violations by employees, the company can immediately terminate the contract, but must make a decision within 7 days after the company learns of the violation; for other cases, the punishment decision must be made within 15 days after the company learns.
Serious violations by employees may include the following:
- Fraudulent business.
- Fraud, refusal to abide by the labor contract, leaking secrets.
- Threats, attacks on colleagues or business.
- Serious breaches of disciplinary, safety and health codes.
- Abetting other colleagues to engage in serious violations.
- Use of violence, etc. in a strike.
- Political campaigns, events or protests in the workplace.
Courts can determine whether an employee’s conduct constitutes a serious violation on a case-by-case basis. However, strikes that comply with the law are not considered serious violations.
The enterprise has the right to suspend the performance of the labor contract according to the internal rules and regulations (that is, the enterprise does not pay wages and the employee does not need to work), but this suspension only occurs in rare cases, such as: according to the legal internal rules and regulations, the labor of an employee is suspended companies face serious economic problems, but such suspension must be enforced under the supervision of the Ombudsman.
(10) Handling of Labor Disputes
Labor disputes are usually resolved through negotiation, mediation, arbitration, strikes and litigation. Individual disputes and collective disputes have different resolution steps. An individual dispute is a dispute between a business and a single employee, while a collective dispute usually involves a business and a group of employees, and if the other party is a trade union, it is considered a collective dispute.
A strike requires a secret ballot and the consent of the union, and the company and the Ministry of Labor must be notified at least 7 working days in advance. Any act of violence during a strike is considered a serious violation. During a strike, businesses are not required to pay striking workers, but they cannot replace striking workers and recruit new workers.
Under normal circumstances, the parties to the dispute will negotiate first, and if they cannot reach an agreement, they will enter the mediation process. Mediation is hosted by the Department of Labor and must be completed within 15 days. Participants in individual disputes can voluntarily choose whether to enter the mediation process. During the mediation period, the employee shall not strike, and the enterprise shall not prevent the employee from working. If the mediation reaches an agreement, both parties must implement the agreement.
If mediation fails, the Ministry of Labor will refer the dispute to an arbitration committee for resolution. During the arbitration period, the employee side cannot strike, and the enterprise side cannot prevent employees from working. Both parties must have no objection within 8 days after receiving the arbitration award, otherwise the arbitration award must be enforced.
3. Foreigners working in Cambodia
According to Article 261 of the Cambodian Labor Law, foreigners must obtain permission from the Ministry of Labor to work in Cambodia. In order to ensure compliance with the regulations, on July 16, 2014, the Ministry of Labor and the Ministry of the Interior jointly issued a regulation requiring companies to submit relevant information on the employment of foreigners, including the total number of employees, employee turnover, quota use of foreigners, foreign The person’s employment contract and documents such as passports, visas and work permits for inspection purposes. On August 20 of the same year, the Ministry of Labor issued another regulation, which clearly stated the restrictions on the proportion of foreigners employed by enterprises. In January 2015, the Ministry of Labor issued operational guidelines for enterprises applying for work permits for foreigners. Businesses that illegally hire foreigners face fines of up to $180, and foreigners can be deported.
(1) The main requirements for enterprises to employ foreigners in Cambodia are as follows:
01. Requirements for employed foreigners:
- Must obtain an employment permit to work legally in Cambodia in advance.
- Must enter Cambodia legally.
- Must have a valid passport (business people usually have an E visa, a few people have a K visa).
- Must hold a valid residence permit.
- Must have sufficient skills to suit the needs of the business and be free from communicable diseases.
02. The ratio limit for employing foreigners is as follows:
In principle, businesses should give priority to hiring Cambodian nationals, but businesses may also hire foreign professionals, engineers or persons engaged in other professional work. The proportion of foreign employees shall generally not exceed 10% of the total number of Cambodian employees employed. The specific breakdown is as follows: office personnel shall not exceed 3%; professionals shall not exceed 6%; non-professional persons shall not exceed 1%. If it exceeds 10%, the enterprise needs to provide detailed explanations of special reasons, such as the professional ability and skills of the personnel employed.
(2) The procedural requirements for enterprises to employ foreigners in Cambodia are as follows:
01. Apply for quota first:
Enterprises need to submit a quota application to the Cambodian Ministry of Labor before the end of November each year, and at the same time explain the number of foreigners they plan to hire in the next year, the number of local Cambodian employees, and the reasons for hiring foreigners. When applying for a quota, it is necessary to submit relevant documents such as an application form, a description of the number of persons to be employed, and personnel changes. The estimated application fee is $20.
02. Apply for a work permit again:
After the quota is approved, the company needs to apply for a work permit for each foreigner by the end of March of the following year at the latest. When applying, you need to submit the application form, the total number of existing employees (including Cambodian local employees and foreign employees), photos of foreigners, passports and visas (E or K), employment contracts, and medical certificates. Estimated application fee is $100 per person.
4. The risks of foreigners working locally and related institutions:
The management of the foreign labor market in Cambodia still needs to be strengthened. Some unscrupulous intermediaries take advantage of the psychology of foreign workers eagerly looking for jobs to carry out fraudulent activities, resulting in the occurrence of labor disputes.
In order to resolve issues such as labor disputes, Cambodia established a “Labor Advisory Committee” in 1999 composed of representatives of government departments, trade unions, and employer associations to discuss labor policies. With the assistance of the International Labor Organization (ILO) and the U.S. government, Cambodia established an independent “Labor Arbitration Commission” in April 2003, composed of representatives from the Ministry of Labor and Vocational Training, employers and trade unions, to deal with disputes that cannot be resolved through negotiation. Labor disputes and related matters. Due to the large number of workers in Cambodia’s textile and garment industry, in order to deal with labor disputes and welfare benefits in this industry, major employers have also established the Garment Manufacturers Association of Cambodia (GMAC).
The Ministry of Labor and Vocational Training is the government department in charge of labor and employment affairs in Cambodia, and is responsible for managing all foreign workers who come to Cambodia for employment. The department established the Foreign Workers Management Committee (FWAC) in December 2002, which is responsible for formulating various procedures for foreign workers to work in Cambodia, and assisting foreign workers and employers’ associations to resolve related matters.
