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Chapter 16 : Labour and Employment

The 1997 Labour Law (“Labour Law”) is the primary legislation governing all employment activities in Cambodia. It is enforced and implemented by the Ministry of Labour and Vocational Training (“MLVT”). Within the MLVT, there are specific Departments of Labour and Vocational Training (“DLVT”) for Phnom Penh and each province. Whether the MLVT or DLVT has authority over an enterprise for labour related matters depends on the location of an enterprise and number of employees that the enterprise employs. Pursuant to Prakas 185 on the Determination of Supervision of Employees in Small and Medium Sized Enterprise Located in Phnom Penh dated 28 August 2008, if the enterprise is located in Phnom Penh and the number of employees is 100 or fewer, the responsible authority is the DLVT of Phnom Penh. If the number of employees is greater than 100, the responsible authority is the MLVT. For enterprises located in the provinces outside of Phnom Penh, the responsible authority for labour related matters is the DLVT of the province regardless of the number of employees. The Labour Law replaced the 1992 Labour Law, and it strengthened employees’ rights to bargain collectively, form unions and strike – which enables this law to meet certain international standards. By meeting international standards, the changes in the Labour Law also meet the requirements of the United States for granting Most-Favored Nation (MFN) and General System of Preferences (GSP) status. Although the current law contains significant changes from the 1992 Labour Law, it has retained some of the socialist-style provisions from the previous law.

The Labour Law is probably the most prescriptive law in force at this time in Cambodia. With an increasing awareness of employee rights and employee organizations such as trade unions, a working knowledge of the Labour Law and its practical application is essential for any commercial enterprise in Cambodia, regardless of the size of its workforce.

Foreign-owned companies have relatively unrestricted access to Cambodia’s labour force as there are essentially no restrictions on employing Cambodian labourers with proper documentation. However, certain restrictions do exist for employing foreigners. The MLVT and Ministry of Interior (“MOI”) have recently taken steps to more strictly enforce the laws concerning the employment of foreign nationals in Cambodia. Following the release of the Joint Prakas 2662 on Inspection of Foreign Workforce in the Kingdom of Cambodia dated 16 July 2014, a joint foreign Labour inspection team comprised of officials from the MLVT and MOI was established to ensure that formalities and conditions as provided in the Labour Law and the Law on Immigration are followed. The MLVT issued several regulations, including Prakas 195 on Foreigner Work Permit and Foreigner Employment Card dated 20 August 2014 and Prakas 196 on Employment of Foreign Labour dated 20 August 2014 to ensure that the enterprises follow the requirements for employing foreigners, particularly the requirement of an employment card and work permit (“Work Permit”). Failure to comply with the foreign employee Work Permit requirements could (among other things) result in monetary fines or in serious circumstances, imprisonment of up to three months and potential deportation of any foreign employee not duly registered.

1. Local Employees

Enterprises are required to apply for an employment card together employment identification card for each local employee. Employment cards for local employees are only issued once at the commencement of their employment at an enterprise. A local employee is required to undertake a health check and obtain a health certificate from the Labour Medical Department of the MLVT, one time upon the commencement of their employment at a new enterprise.

2. Foreign Employees

The employment of foreign nationals is regulated by the Labour Law. Only foreigners satisfying the following conditions may be lawfully employed;

hold a Work Permit issued by the MLVT;
have entered Cambodia legally;
have the right to reside in Cambodia;
hold a valid passport;
have a good reputation and good behavior;
have the physical qualifications for the job; and
have no communicable diseases.

Enterprises employing or intending to employ foreign employees are required to apply for a quota from the MLVT. Under the quota system, a maximum of 10 percent of an employer’s workforce may be foreign, comprised of; office employees (3 percent); skilled labour employees (6 percent); and unskilled labour (1 percent). This quota may be increased, at the discretion of the MLVT, if the enterprise requires employees with specific skills that are currently unavailable in Cambodia. All subsequent quota applications must be submitted by 30 November each year and upon receipt of approval, cannot be changed during the course of a year.

After obtaining the quota approval, enterprises are required to apply for a Work Permit for each foreign employee. Regardless of when the Work Permit is issued by the MLVT/DLVT, it is only valid for one year, with validity up to 31 December in the year of issuance. Work Permits for foreigners must be renewed on an annual basis. To extend the Work Permit, both the employer and each foreign employee must apply for an extension at the MLVT/DLVT by 31 March of each year.

Employers are required to submit necessary documentation (including a written employment contract) in order for the MOI to issue long-term visas (Category E Regular Visas or commonly known as Business Visas) to foreign workers. There are no limitations on appointing foreign workers to higher-level positions. However, employers are restricted in the numbers of foreigners they employ in accordance with the quota approval discussed above.

3. Reporting Requirements

According to the Labour Law, enterprises must submit an opening declaration with the MLVT/DLVT before they commence operations. An exception applies to enterprises employing fewer than 8 employees that do not use machinery – whereby such an enterprise may submit its declaration with the MLVT/DLVT within 30 days following the commencement of operations. The Labour Law does not provide any indication as to what constitutes ‘commencement of operations’, however, as a matter of practice, the MLVT or DLVT generally requires registration upon receipt of a patent tax certificate, issued upon completion of registration of an enterprise with the General Department of Tax (see the Tax section in Chapter 6 for further details).

Together with the declaration of the enterprise opening, the employer is also required to submit to the MLVT/DLVT a declaration of employees, establishment book and payroll ledger. With approval from the labour inspector, an enterprise may decide to create a payroll ledger through a different method (including by electronic means) as long as it contains the same basic information as described in the relevant MLVT Prakas.

When hiring or terminating employees, enterprises are required to file a declaration of staff movement with the MLVT/DLVT within 15 calendar days after the date of hiring or termination of employment. The enterprise is required to record the commencement of employment and departure of the employee in the employee’s employment card and obtain a stamp from the MLVT/DLVT within seven days of the employee’s date of commencement or departure. Although it is rare in practice, it is also a requirement under the Labour Law for the employer to record any promotion, demotion or change in an employee’s position in the employee’s employment card and obtain a stamp from the MLVT/DLVT within seven days of the date of the change. The Labour Law details the above process and the MLVT /DLVT has issued notice forms for these requirements. Upon approval from the MLVT/DLVT, the enterprise must maintain these documents at its place of business for inspection by the labour inspector.

Enterprises employing eight or more employees are required to hold elections for staff representatives and submit the election minutes to the MLVT/DLVT within eight days following the date of election. The requirements for the number of staff representatives will vary depending upon the precise number of employees in the enterprise. The election procedures must be in accordance with the Labour Law and the Law on Trade Union.

In addition, each enterprise with eight or more employees must establish “internal work rules” that address issues such as application procedures, salary information, leave policies, disciplinary matters, and the like. These internal rules must be consulted upon with shop stewards and approved by a labour inspector. The adoption of internal rules is an important procedure as it enables the employer to regulate the suspension and termination of employment, which cannot be done by way of an employment contract.

Furthermore, all enterprises employing more than 60 employees must train apprentices based on the follow quotas proportional to the enterprise’s total workforce;

10 percent for enterprises that employ between 60 to 200 employees;
8 percent for enterprises that employ between 201 to 500 employees; and
an additional 4 percent for every further 500 employees at enterprises that employ more than 501 employees, provided that a maximum of 110 apprentices may be trained by an enterprise in one year.

The MLVT issued a notification in November 2015 to remind all enterprises employing more than 60 employees to conduct annual training of apprentices with the above percentage.

4. Employment Contracts

In Cambodia, employment is usually governed by a contract, although in some instances a letter of engagement may be used instead. Both written and oral employment contracts are valid under Cambodian law for Cambodian nationals although, problematically, the Labour Law does not expressly define labour contract or the necessary terms, beyond stating that it is “a contract, which creates relations between the employee and the employer”. However, under the Civil Code, which became eﬀective on 21 December 2011, employers will include the provisions on salary, working hours and conditions for employees in the employment contract. In the case of implementation contrary to the conditions stated in the contract, an employee may terminate an employment contract immediately.

Under the Labor Law, contracts may be of either unlimited duration (“UDC”) or fixed duration (“FDC”). The latter must specify in writing when the contract ends or it is redefined as a UDC. Similarly, an FDC may not be longer than two years. A UDC, however, can be made verbally or in writing containing no end date and with or without a clear starting date. There is no limitation of duration for a UDC. It is possible for new employees to undergo a probationary period, although this cannot exceed one month for non-specialized labourers, two months for specialized labourers and three months for general employees.

A UDC may be terminated by either party if proper notice is given, subject to a number of exceptions detailed in the Labour Law. The employer must have reasonable cause to terminate the contract. The Labour Law sets out various notice requirements based on the length of employment, ranging from seven days to three months. An employee terminated without prior notice is entitled to compensation equal to the wages and benefits that he or she would receive during the notice period as set out in the law.

A dismissed employee is entitled to severance pay ranging from seven days’ to six months’ salary, depending on the length of service with the employer, except where the employee has committed serious misconduct or the employment contract or internal rules permit such dismissal. Under an FDC, the employee is entitled to severance pay of at least five percent of the total wages paid during the contract. The employee may also be entitled to additional compensation for unreasonable (“wrongful”) termination, if so decided by a court.

Collective layoﬀs are permissible due to a reduction in business or an internal reorganization. Labour inspectors must be consulted on collective layoﬀ procedures and criteria used. The Labour Law specifies the order in which employees may be laid oﬀ.

Finally, an employee must be issued an employment certificate upon termination describing the nature of the work performed.

5. Law on Trade Union

The Law on Trade Union dated 17 May 2016 (“Law on Trade Union”) is intended to: (a) provide rights and freedom for enterprises, establishments and persons governed by the provisions of the Labour Law and persons serving in air and maritime transportation and (b) set out the organization and functioning of professional organizations of employees and employers. This law includes provisions related to, among other things, the establishment, operation, dissolution, rights and obligations and dispute resolution concerning professional organizations of employees and employers. This law also addresses provisions related to staff representatives, employee unions with the most representative status, termination procedures of specially protected employees and negotiation of collective bargaining agreements (“CBA”).

The Law on Trade Union introduces significant changes relating to the eligibility of staff to be representatives when compared to the Labor Law. Under the Law on Trade Union, an employee who is 18 years old, has employment seniority of three months and is able to read and write Khmer (additional qualification) is eligible to seek a position as a staff representative. Staff representatives may be elected from among candidates nominated by a local union or from among employees who, while not members of a local union, volunteer to be candidates. Effectively, this requires that any enterprise employing eight or more employees must now arrange for an election of staff representatives after the enterprise has been in operation for three months.

In addition, Law on Trade Union indicates that an employees’ union has three levels (a local union, a union federation and a union confederation), whereas the employers’ association has two levels (employers’ association and employer federation). The threshold to form a union is at least 10 employees for a local union at the enterprise level. The employee can be a member of only one union at a time. The registration of these unions and associations is under the jurisdiction of the MLVT. One of the significant requirements for registration is that the bank account information of employees’ union or employers’ association must be provided to the MLVT within 45 days after the registration date.

This law requires representatives of local unions to seek and obtain approval from the employer before entering the enterprise to perform their union duties. The employer must not withhold approval unless such approval may hinder the normal operation of the enterprise. Union management and administrators duly dismissed continue to have the right to enter the enterprise temporarily, limited to 60 days from the date of dismissal. This post-dismissal right to enter does not apply where dismissal is for serious misconduct.

The mechanism and procedures for special protection against termination under the Labour Law and relevant regulations are incorporated into the Law on Trade Union, such that staff representative candidates, elected staff representatives, union leader candidates and the elected union leaders are entitled to protection against termination of employment. Local unions are now required, in addition to submitting a list of individuals entitled to special protection to the employer, to file the same list with the MLVT.

Furthermore, in order to obtain the most representative status, a union must be duly registered and request the certification of the most representative status from the MLVT. A union can obtain the most representative status when: (1) the number of its members is from 30% of total employees in the enterprise (if there is only one union in the enterprise); and (2) it gets the most support from other unions and such support is equal to 30% of total employees in the enterprise (if there is more than one union in the enterprise). In the event that the previous two conditions are not met, an election must be held to obtain the supporting votes equal to at least 30% of total employees in the enterprise. If the most representative status of the union cannot be obtained, the negotiation of the CBA must be done by Union Negotiation Committee and the employer, the procedure of which will be determined by further regulations by the MLVT.

This law also address additional obligations to the employer such as the obligation to maintain and update monthly employees’ list in relation to employees’ name, status of employment contract and employment level for immediate review in the case that a union requests for the certification of the most representative status and to maintain all records related to the deduction of employees salary to pay union contribution fees or service agent fees.

Failure to comply with the Law on Trade Union results in written warnings or monetary fines of between KHR 5,000,000 (approximately USD 1,250) to KHR 10,000,000 (approximately USD 2,500). For instance, employers are prohibited from retaliating against whistleblowers who report or provide testimony about an enterprise’s compliance with Labour regulations. A breach of this restriction may result in a monetary fine of up to KHR 5,000,000 (approximately USD 1,250).

6. Wages

No minimum wage has been established by law except in the garments, textiles and footwear manufacturing industries, where the minimum wage is set at USD 135 per month during the probationary period and USD 140 per month thereafter. This new minimum wage was implemented on 1 January 2016 and subject to change every year in accordance with Labour regulations issued by the MLVT. For all other employers, the wage must ensure “a decent standard of living compatible with human dignity” but no further specificity is provided. Wages must be paid directly to the employee during working hours (unless he or she accepts another method), and a wage slip issued. If wage payment falls on a day oﬀ, arrangements should be made to pay it in advance.

7. Mandatory Employee Beneﬁts

The terms of employment pertaining to compensation, maximum working hours, vacation leave, maternity leave, family leave, employee complaint processes, night and holiday work, medical care, and special rules governing child and women employees, are stipulated by law.

Maximum working hours are normally 8 hours per day and 48 hours per week, although some variation in the number of hours worked is permitted by regulation under certain circumstances, provided that rules on the maximum number of hours that can be worked per day are enforced.

Overtime is compensated at 1.5 to two times the normal wage, depending on the time at which the overtime is worked.

Annual leave is set at one and a half days for each month of employment, resulting in 18 days of leave per year with an additional day for each additional three years of employment.

Employers are required to provide maternity leave of at least 90 days, during which the employee receives half salary if she has worked one continuous year or more for the enterprise.

Special leave to meet family needs (such as weddings, funerals, etc.) is set at a maximum of seven days per year. These leave days can be deducted from the employee’s annual leave (if such is available) or can be compensated for by extra hours of work by the employee, which are paid at the normal rate.

Long term sick leave for illness certified by a qualified doctor is allowed for no more than six months but can be extended until there is a replacement for the sick employee. At the discretion of the employer, sick leave may be permitted and compensated for, under the conditions set in the enterprise’s internal work rules.

Employers with 100 or more female employees must either provide a nursing room and a childcare center for babies or pay for childcare if such a facility cannot be installed.

8. The National Social Security Fund

In September 2002, the government promulgated the Law on Social Security (Social Security Law) with the aim of establishing a new social security regime applicable to all employees to whom the provisions of the Labour Law apply. However, the system was only recently put into force.

The National Social Security Fund (“NSSF”) scheme covers three pillars: (a) health insurance; (b) retirement pension; and (c) occupational risk (work-related accident and occupational disease) insurance. The NSSF has implemented the occupational risk insurance scheme since 2008, followed by the recent introduction in 2016 of health insurance. The retirement pension component of the scheme is yet to be implemented. The scheme is managed by the NSSF, a public establishment to which all employers, employees and workers must pay contributions. To date, only the work-related accident insurance scheme is fully operational with the details of the health insurance due to be confirmed in further regulations.

The occupational risk insurance scheme covers employees and workers in case of a work-related accident or illness caused by the occupation (both are considered “labour risks”). The employer is required to provide the employee or worker with certain benefits, care, and treatment, depending on the circumstances. An accident is considered to be work-related, regardless of the cause, if it happens to an employee or worker in the workplace or during the direct commute to and from the workplace. If the victim requires hospital treatment, he must be sent to one of the listed, approved hospitals. Two further Prakas have set out the procedure for registering enterprises and their employees with the NSSF and have determined the rate of contribution to be paid with respect to the work-related injury component of the scheme.

In October 2008, the NSSF issued a notification clarifying the timeframe for payment of NSSF contributions. It also sets out a number of important details regarding which hospitals the victims of work-related injuries may be sent to, and details regarding the claim procedure. Employers or enterprise owners employing 8 or more employees are obliged to register their business and its local and foreign employees with the NSSF within 45 days after the date of its actual opening or the date upon which they first employ 8 or more employees and pay monthly contribution ranging from USD 0.4 to USD 2 per employee and per month to the NSSF. Each registered enterprise must report to the NSSF on the number of employees before the 15^th of every month. Each enterprise is required to pay its first monthly contribution to the NSSF within 30 days after the issuance date of the NSSF registration certificate and to pay the next contribution by the 15^th dayof the following month.

On 6 January 2016, health care scheme was introduced by Sub-Decree 01/16. The Benefits of the health care scheme include preventive health service, treatment and medical care service and daily allowances during work suspension resulting from disease treatment or accidents other than occupational risk and maternity leave. These benefits are applicable to persons covered by the provisions of the Cambodian Labour Law, including spouse and dependent children of workers who are members of the NSSF and NSSF members who are receiving a pension resulting from the permanent disability and survivors. Pursuant to this Sub-Decree, employers and workers under the provisions of the Social Security Law must pay contribution for health care scheme to NSSF. The contribution rate to be paid by an employee should not exceed the rate contributed by an employer. However, the details regarding process and procedures on payment of contribution rate will be determined by Prakas of the MLVT.

9. Workplace Safety

Employers are required to keep all work areas clean and safe, and ensure workers’ health. They must comply with a number of specific regulations governing the workplace, including the number and standard of toilets, infirmary requirements, seating, lighting and the provision of hygienic drinks.

If there are any workplace accidents, including disease caused by performing work, either at the work site or in a direct commute between the home and work site, the employer is responsible for arranging and paying for all medical care. However, an employee who suﬀers a work-related accident is not entitled to compensation if the employee intentionally causes the accident. The employer is required to report all workplace accidents to the MLVT/DLVT to enable an investigation of the circumstances and take measures to prevent such accidents from recurring.

If a workplace accident prevents the worker from working for four days or less, the worker will only receive regular wages. If the accident prevents the worker from working from 5 days to less than 20 days, he or she is entitled to daily compensation equal to the average daily wage from the fifth day, in addition to regular wages.

In the case of more serious accidents that render a worker unable to work for 20 days or more, or fatal accidents, in addition to the above-mentioned compensation, the worker or beneficiary shall receive an annuity, calculated based on annual basic salary and degree of disability. An MLVT regulation sets out the procedure for determining the level of disability and the resultant amounts due are based on the employee’s average wage for various types of injuries. The proportionate amount due to a surviving spouse and/or dependents is also specified.

10. Dispute Resolution

The Labour Law categorises labour disputes as either “rights disputes” or “interest disputes”. Rights disputes relate to rights guaranteed by the Labour Law or other labour regulations, employment contracts or collective bargaining agreements. Interest disputes involve disagreements over desired benefits and entitlements that are outside the scope provided for under the Labour Law, regulation or contract. The procedures for resolving labour disputes depend on the type of dispute (rights or interest) and on whether the dispute is an individual dispute or a collective dispute.

If the conciliator cannot identify a satisfactory solution for the parties, and they do not have, or cannot find, any agreement on dispute settlement procedure, the Minister of the MLVT will refer the case to the Arbitration Council for its decision which is required to be made within 15 days. The Council’s decision can be implemented immediately if no party appeals to the Minster of the MLVT within 8 days. The employer must post a copy of the Arbitration Council’s award in the workplace and the oﬃce of the local labour inspectorate. Both the conciliation and arbitration services mentioned above are provided free of charge.

Employees are permitted to strike only when the three forms of dispute resolution (negotiation, conciliation, and arbitration) have failed. The strike may be conducted only after a secret ballot of the concerned employees and seven days’ prior notice must be given. It is illegal to strike in order to revise a collective bargaining agreement or arbitral award that is still in eﬀect. Furthermore, based on the Law on Trade Unions, a union is considered to be performing their duties improperly if it leads a strike or demonstration that contravenes the legal procedures. Unlawful strike is defined by the Law on Trade Union as the strike that is still continued by the striker(s) after the decision by the labor court as an unlawful strike. Notwithstanding, the employers are also prohibited from obstructing the employees by any means to participate in a lawful strike.

Although the Labour Law provides for the creation of labour courts with jurisdiction over labour matters, such specialized courts have not yet been established. Until their formation, the provincial and municipal courts must be used as a final forum for adjudication of labour disputes and issuance of labour rulings.

11. Employment of Disabled Persons

In August 2010, the government issued a Sub-Decree on Determination of Rates and Procedures for Selecting Disabled Persons for Employment. This Sub-Decree extends to apply to state ministries’ institutions and legal persons, which are obliged to select and recruit disabled persons who are qualified and capable of performing functions, roles and responsibilities.

A legal entity/person with a total of 100 or more employees must have at least one percent (of the total workforce) as qualified disabled persons who are capable of carrying out the required functions and performing roles and responsibilities according to types of work defined by the MLVT/DLVT. Failure to do so will incur a contribution amounting to 40 percent of the monthly minimum wage for disabled workers to the Disabled Persons Foundation. The payment will be determined by the Ministry of Social Aﬀairs, Veterans and Youth Rehabilitation (“MOSAVYR”) upon request by the board of directors of the Disabled Persons Foundation.

Additionally, enterprises employing 100 or more workers are required to submit a written report to the MLVT and MOSAVYR in January each year on the total number of full-time employees and the rate of employment of disabled persons performing various types of work in the enterprise.

Despite the Sub-Decree above, we find no regulations defining the types of work deemed suitable for disabled persons or to determine the penalty contribution requirement issued by the MLVT and MOSAVYR.

Under the new Criminal Code that took eﬀect on 30 November 2010, no employer shall reject employment or terminate an employee due to his or her physical disability. Employers who fail to comply may be liable to imprisonment from one month to one year and a fine from KHR 100,000 to KHR 2,000,000 (equivalent to USD 25 to USD 500).