Cambodia PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Cambodia to companies willing to enter the Cambodia market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in Cambodia.  However our solution allows you to start the operations in Cambodia within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. 

Cambodia fast facts

Population, million: 15.3

Land area, sq. km: 181,035 km2

Capital: Phnom Penh

Local currency: Riel (KHR)

Hiring, Negotiating and Doing Business in Cambodia

Necessity of written employment contract

The employment relationship between an employer and a worker is governed by the provisions of the employment contract entered into between the parties.

Unlike FDCs, the Labour Law does not require UDC agreements to be in writing. While parties are free to negotiate the entire agreement orally, best commercial practice mandates that a UDC should also be in writing to avoid any potential disputes among the parties and to ensure the parties are aware of their rights and obligations under the agreement.

Cambodia Employment Contract

Types of employment agreements

Under the Labour Law, there are two main types of employment contracts:

• Fixed duration contract (FDC).
• Undetermined duration contract (UDC).

An FDC must be in writing and can have a total duration of a maximum of two years from the date of commencement. Based on Instruction 050/19 recently issued by the MLVT, the initial term of an FDC must not exceed two years, and all consecutive renewals of it must not exceed a total period of two years. In the event that the FDC is consecutively renewed for a total period exceeding two years, it will be automatically converted into a UDC regardless of the intent of the parties.

For example:

• If the initial FDC has a fixed term of six months, the maximum period of the FDC will be two years and six months.
• If the initial FDC has a fixed term of one year, the maximum period of the FDC will be three years.
• If the initial FDC has a fixed term of two years, the maximum period of the FDC will be four years.

Based on the above, the total and maximum length of an FDC regime (comprised of the initial term of the FDC, plus all consecutive renewals) is contingent on the period of the initial FDC (up to two years).

Before the issuance of the 2019 Instruction, according to past AC rulings, the total duration of an FDC could not exceed two years and would be converted into a UDC regardless of the original intent of the parties when the entire duration of the FDC (renewals included) exceeded two years.

Cambodia working hours

Under the Labour Law, normal working hours cannot exceed eight hours per day or 48 hours per week. “Night work” under the Labour Law represents a period of at least 11 consecutive hours that includes the interval between 10:00 pm and 5:00 am In addition to continuous work that is performed by rotating teams who sometimes work during the day and sometimes at night, work at the business may always include a portion of night work.

Vacation leave in Cambodia

All workers under the Labour Law are entitled to paid annual leave. Annual leave in Cambodia is accrued at the rate of one and a half working days of paid leave per month of continuous service at the business. Therefore, annual leave consists of 18 working days per year, unless there are provisions more favourable to workers in collective bargaining agreements (CBA) or individual employment agreements. The amount of annual leave will be increased according to the seniority of the worker at the rate of one additional day for every three years of service.

Sick leave: 

Entitlement to paid time off

The Labour Law is silent on short-term sick leave entitlements for workers. If any short-term sick leave entitlement is provided to workers, it is generally included in the Internal Work Rules (IWRs) of each business or establishment or as negotiated between the worker and the employer. Long-term sick leave is generally allowed for up to six months.

At the discretion of the employer, which is normally mentioned in the IWRs recommended by the MLVT or DLVT, sick leave can be permitted and compensated for as follows:

• The first month of sick leave is fully paid.
• During the second and third month of sick leave, 60% of the salary of the worker is paid to the worker.
• From the fourth to the sixth month of sick leave, the employment agreement is suspended without pay.

Entitlement to unpaid time off

Not applicable.

Cambodia Maternity Leave

Under the Labour Law, female workers are entitled to maternity leave of at least 90 days. During the maternity leave period, employers are required to pay half of the female worker’s regular wages, including other benefits (as discussed below), provided that such worker has completed at least one year of uninterrupted service within the business or establishment.

Employers are prohibited from dismissing a female worker during their maternity leave, or at any date when the end of the notice period would fall during their maternity leave.

Cambodia Severance Laws

Notice periods

The notice period required when one party unilaterally terminates a labour contract depends on the type and duration of employment under the contract and the reason for termination. The Labour Law provides different notice periods for FDCs and UDCs.

For FDCs, the Labour Law states that if the contract has a duration of more than six months, the worker must be informed of the expiration of the contract or of its non-renewal ten days in advance of its expiration. This notice period is extended to 15 days for contracts that have a duration of more than one year. If there is no prior notice, the contract must be extended for a length of time equal to its initial duration or deemed a UDC if its total duration exceeds the time limit specified.

The Labour Law does not state the notice requirement for termination of an FDC before the FDC’s expiration date.

For UDCs, the Labour Law provides notice periods as follows (applicable to both the employer and to the employee on terminating the employment):

• Continuous service of less than six months: seven days.
• Continuous service of between six months and two years: 15 days.
• Continuous service of between two years and five years: one month.
• Continuous service of between five years and ten years: two months.
• Continuous service of more than ten years: three months.

For a UDC, a worker does not have to give a reason for termination, but the Labour Law requires an employer to have a valid reason relating to the worker’s aptitude or behaviour, based on the requirements of the operation of the business, establishment or group.

Severance payments

Under the Labour Law, statutory termination compensation for termination without cause (that is, any of the reasons listen above under Notice periods) is as follows:

• Affected workers under UDCs:
  • compensation for accrued unused annual leave (if any);
  • last unpaid salary and benefits (if any);
  • written notice or compensation in lieu of prior notice based on the worker’s length of continuous service;
  • two days of paid leave per week to look for a new job during the notice period;
  • seniority payments; and
  • damages at least equal to seniority payments capped at six months of current salary and benefits.
• Affected workers under FDCs:
  • written prior notice (only applicable in the case of expiration or non-renewal of the FDCs);
  • severance pay of at least 5% of the total salary and benefits the worker has received during the duration of the employment contract;
  • compensation for accrued annual leave (if any);
  • last unpaid salary and benefits (if any); and
  • damages equal to the salary and benefits the worker should be entitled to up to the expiration date of the FDCs.

Cambodia Tax

Residents

The monthly cash salary of residents is taxed at the following rates:

* Cambodian riel (KHR)

Non-residents

Non-residents are taxed at a flat rate of 20%, which constitutes a final tax.

Social security contributions

Employers are required to make Occupational Risks Contribution (ORC) and payment for healthcare to the National Social Security Fund (NSSF).

With regard to ORC, an employer with at least eight employees must register itself and all its employees with the NSSF. The employer is required to contribute ORC equal to 0.8% of the monthly average wage of an employee to the NSSF’s designated bank account.

In addition to the NSSF contribution payment for occupational risks, the employer is also required to contribute, collect, and remit the contribution for healthcare to the NSSF on a monthly basis. The healthcare contribution is required from both employers and employees at 1.3% (each) of the monthly average wage of employees. However, from 1 January 2018, the obligation to pay the contribution of healthcare as stated in the above paragraph shall be the full burden (100%) of the employer.

Additional Benefits in Cambodia

• health care allowances
• housing allowances
• transportation allowances
• attendance bonuses

Cambodia Holidays

The MLVT issues a Prakas each year detailing the mandatory paid public holidays that are available to all workers of businesses and establishments in Cambodia.

Based on Sub-Decree No. 112 OrNKr/BK dated 2 August 2019 on the Public Holidays Calendar of Civil Servants, Employee, Workers for 2020, there are 22 public holidays.

To ensure that workers receive the full benefits of public holidays, if a public holiday falls on a Sunday, the worker has a right to take the subsequent business day as a compensation holiday. If an employer requires a worker to work during a public holiday, the worker has the right to receive remuneration equivalent to double their normal pay.

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.