As an alternative to hire employees on payroll, there is an increasing use of contingent workers to perform work traditionally performed by employees in order to save costs and improve operational efficiency. Contingent workers may include individual independent contractors or contractors supplied by other enterprise. Engaging contingent workers are considered more cost-effective as the enterprise does not assume any employer’s obligations under the Cambodian Labour Law, and it gives flexibility to the enterprise to adjust workforce requirements based on its business needs. To ensure compliance with the Cambodian Labour Law and minimize interruption to business operation, enterprises should consider key questions as outlined below when opting for contingent worker arrangement.
(1) Can a business legally engage contingent workers?
Unlike some countries where the laws prohibit using contingent workers unless certain conditions are met, the Cambodian Labour Law does not expressly restrict using contingent workers such as individual independent consultants or sub-contractors supplied by other enterprise.
(2) How does the arrangement with contingent workers work under the current legal framework?
An enterprise may engage an individual as an independent contractor to assist in delivery of services in accordance with the Civil Code by entering into a contract for work. A contract for work is defined as a contract whereby one party (contractor) assumes the obligation to perform agreed work and the other party assumes the obligation to pay the remuneration for the result of such work. If the final result of the work is not made in compliance with the specifications stated in the contract for work, the enterprise may take action in accordance with the Civil Code.
An independent contractor should be free to determine the performance of the contract for work including how the work should be performed and be free from the direction, control and supervision of the enterprise.
While a third-party enterprise that supplies workforce to another enterprise may be considered as an independent contractor whereby the relationship between the parties is governed by the Civil Code, it may also be considered as a labour contractor and is subject to specific legal requirements under the Cambodian Labour Law.
(3) Are there any legal distinction between “employees” and “contingent workers”?
The Cambodian Labour Law draws a distinction between employees who are hired as employees and those who are engaged as an independent contractor. Under the Cambodian Labour Law, an employee is a person who is under the direction and supervision of another person. Independent contractors are hired under a service contract and is not subject to substantive direction and supervision of the person who hires them.
The Cambodian Labour Law does not explicitly define the terms ‘direction and supervision’. However, based on the Arbitration Council, a body mandated by the Cambodian Labour Law to resolve labour disputes, when making a determination with regard to direction and supervision, consideration should be given to (a) determination of remuneration; (b) imposing an obligation to adhere to the work rules and working schedules set out by an employer (such rules typically address working hours, working schedules, leave, how the work is done, workplace, behavior, and other things); and (c) disciplinary actions against an employee and termination of employment.
Sub-contractors are those who are employed by a labour contractor. Under the Cambodian Labour Law, a labour contractor contracts with an enterprise and recruits the necessary employees to complete certain work or provide certain service for the enterprise for an all-inclusive price.
(4) Are there any risks when engaging an individual independent contractors or sub-contractors?
In the event that the enterprise substantively controls, supervises and directs the independent contractor and/or sub-contractors, especially when the services performed by the latter are delivered at the premises of the enterprise and they are subject to similar working conditions as employees of the enterprise, the relationship between the enterprise and the latter may be viewed as an employer-employee relationship.
In addition, under the Cambodian Labour Law, the enterprise is liable for the obligations of the labour contractor towards the sub-contractors in the event of insolvency of or default by the labour contractor.
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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.