1. Overview

Cambodia's Labor Law was promulgated in 1997. It was influenced by the labor standards of Western developed countries. Its requirements are relatively strict and focus on protecting labor rights. However, some clauses may overestimate the actual situation in actual implementation, adding unnecessary burdens to employers.

The regulation reflects the Cambodian government's regular thinking on labor policy, actively promotes the localization strategy of technical talents, is committed to solving the problem of excess labor in the country, and actively seeks foreign employment markets.

The labor law does not actually impose many restrictions on investors in terms of hiring labor. Although there are some restrictions on foreigners working in Cambodia, these restrictions are still relatively loose compared to other countries in the region.

The purpose of labor law is to protect the rights of labor. Therefore, the conditions and treatment provided by the employer cannot be lower than the minimum requirements of the labor law, otherwise it will be deemed invalid. For investors, complying with labor laws is challenging.

2. Core Contents of Labor Law

The Labor Law provides comprehensive protection for the rights and interests of workers. The main principles of the law are as follows:

● Any form of forced or compulsory labor is strictly prohibited

●When an employer hires or fires a worker, he or she must file a written report with the labor authority within 15 days of the date of hiring or firing.

● If the employer has more than 8 employees, internal company rules and regulations must be formulated

The minimum age for employment is 15, but if the work involves health, safety or moral hazards, the minimum age for employment is 18

When a working relationship is established through an employment contract, it can be concluded in writing or orally and is governed by common law. The employer may not require the payment of a deposit or any form of security when concluding or extending an employment contract. There are three types of employment contracts: probationary, fixed-term and indefinite. The probationary period is defined as not exceeding 3 months for general employees, 2 months for professional workers and 1 month for non-professional workers. Fixed-term contracts are not to exceed 2 years and can be renewed once or more times, but the renewal period may not exceed 2 years.

1. Type of employees

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-term 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 stipulates the starting period and does not exceed 2 years. Other cases are UDC. The Labor Arbitration Committee believes that an FDC contract can be extended multiple times, but if the total period exceeds 2 years, the contract will be regarded as a UDC contract.

Temporary employees are people who perform specific work that needs to be completed in a short period of time, or people who perform temporary, intermittent or seasonal work. However, if temporary employees work 21 days per month for more than 2 consecutive months, they will be regarded as regular employees. Temporary employees and regular employees enjoy the same salary benefits, but the company can adjust the benefits according to the working hours of temporary employees. Companies do not have to provide annual leave, sick leave, holidays, bonuses and other benefits to temporary employees, but they must increase the hourly wage accordingly to compensate for their losses. Part-time employees are employees who work less than 48 hours a week. Companies can adjust the benefits by reducing the working hours of part-time employees in proportion. Companies can set a probation period, but the maximum period shall not exceed 3 months.

(2) Labor Contract

When a working relationship is established through an employment contract, it can be concluded in writing or orally and is governed by common law. The employer may not require the payment of a deposit or any form of security when concluding or extending an employment contract. There are three types of employment contracts: probationary, fixed-term and indefinite. The probationary period is defined as not exceeding 3 months for general employees, 2 months for professional workers and 1 month for non-professional workers. Fixed-term contracts are not to exceed 2 years and can be renewed once or more times, but the renewal period may not exceed 2 years.

(III) Termination and cancellation of labor contracts

1. Cancellation and termination of fixed-term contracts

Fixed-term employment contracts usually end on a specified expiration date, but can be terminated earlier by agreement between the parties. This agreement must be in writing and signed by both parties in the presence of a labor inspector. Early termination without agreement is not permitted except for serious misconduct or force majeure.

Before the expiration of the agreed term, the company should notify the employee in advance whether to renew the labor contract in accordance with the period prescribed by law, with a maximum advance notice period of 15 days. If no advance notice is given, the fixed-term labor contract will be automatically extended for the same period. If the notice period is less than the legal requirement, the company should provide compensation in lieu of notice. If the fixed-term labor contract is not renewed without advance notice, the company must also pay severance pay, which is 5% of the total salary received by the employee during the period of employment in the company.

If the fixed-term employment contract has not expired, the company can terminate the contract within 7 days after learning of the employee's serious violation. The two parties can also terminate the contract by mutual agreement, but the company needs to pay 5% of the severance pay. If the company illegally terminates the fixed-term employment contract, in addition to paying 5% of the severance pay, it must also pay the employee's salary for the unfulfilled period as compensation. In the same situation, if the employee illegally terminates the fixed-term employment contract, he or she must also compensate the company for the losses suffered.

2. Cancellation and termination of an indefinite-term contract

Employees have the right to terminate open-ended contracts for any reason, and when an employee voluntarily resigns, the company does not need to pay severance pay. In the case of serious violations by employees, the company can terminate the open-ended contract within 7 days of becoming aware of the violation without providing any severance pay or compensation. In other cases, the company can only terminate the open-ended contract for legitimate reasons such as the employee's ability, behavior, or according to the company's needs, and must notify the employee in advance and provide severance pay in accordance with the law.

The period of advance notice depends on the employee's years of service in the company, with a maximum of three months; otherwise, the company must pay wages in lieu of notice.

Severance pay is based on the employee's years of service in the company, with 15 days paid for every full year, up to a maximum of six months.

(IV) Working hours

Workers' working hours shall not exceed 8 hours per day and 48 hours per week, and it is prohibited to arrange the same worker to work more than six days a week. In the case of special and urgent work requiring workers to work overtime, the overtime pay shall be 150% of the normal salary. In the case of overtime work at night or on the weekly rest day, the overtime pay shall be 200% of the normal salary. Overtime should be limited to emergency and exceptional circumstances, and employees must participate voluntarily, and the maximum overtime per day shall not exceed 2 hours. If employees are unwilling to work overtime, the company shall not impose any penalties on them.

For work plans that require shifts, companies can generally only arrange two shifts, morning and afternoon. Night work should be paid according to the overtime wage standard, and night refers to 11 consecutive hours between 10 pm and 5 am. Overtime pay is calculated as follows: overtime from Monday to Saturday is paid at 1.5 times the hourly wage; overtime at night from Monday to Saturday is paid at 2 times the hourly wage; overtime on Sundays and public holidays is paid at 2 times the hourly wage.

(V) Payment of wages

According to the relevant provisions of the Labor Law on workers' wages, the labor authorities have established minimum wage standards and require that workers' wages be at least the same as the minimum wage. Unless the worker agrees to pay in other ways, wages should be paid directly to the worker in the form of coins or banknotes. Workers' wages should be paid at least twice a month, with an interval of no more than 16 days; and employers should pay employees' wages at least once a month.

1. Minimum wage

The Cambodian government has set minimum wage standards only for the textile, clothing and footwear industries. There are no mandatory minimum wage requirements for other industries, only requiring that the wages paid can maintain the dignity of workers. In 2015, the minimum wage for the textile, clothing and footwear industries was US$128, and the minimum wage during the probation period was US$123.

2. Wage Payment and Deductions

According to the Labor Law, wages should be paid on working days and corresponding pay slips should be provided. If the payment date happens to be a holiday, wages should be paid in advance. In addition, wages cannot be deducted at will.

The Labor Law has set strict restrictions on enterprises’ wage deductions. Enterprises can only deduct corresponding costs from wages in the following four circumstances, and the wages after deductions must not be lower than the minimum wage level:

(1) Employees fail to return tools or equipment

(2) Damage caused by an employee to property under his control or use

(3) Corporate welfare payments payable by employees

(4) Union dues payable by employees

In addition, the Labor Law clearly lists situations where wage deductions are absolutely prohibited, such as: fines for employees who violate rules and regulations or refuse to work overtime, or deducting part of the salary as a deposit for contract renewal.

(VI) Public holidays and vacations

The government usually announces the public holidays for the following year around October each year. Ordinary employees are entitled to 18 days of paid annual leave each year. Other employees receive paid annual leave in proportion to their working hours. For ordinary employees, companies should provide an additional day of paid annual leave for every three years of service. Employees need to work for a full year before they can take paid annual leave. Companies cannot refuse employees' requests for paid annual leave unless there is a special emergency. However, companies can require employees to notify the length of their vacation plans in advance.

The right to paid annual leave cannot be waived by agreement. If there is unused paid annual leave, it can be deducted from the employee's salary. Employees can request sick leave, and if the sick leave exceeds 6 months, the company has the right to terminate the labor contract. If the sick leave does not exceed 1 month, the company must pay 100% of the salary; 60% of the salary for the second and third months of sick leave; from the fourth month onwards, no salary is required. If an incident occurs that directly affects the worker's immediate family, the employer should grant the worker special leave for a maximum of 7 days. Companies generally cannot refuse applications for special leave. Companies can deduct special leave days from the employee's remaining paid annual leave days. If the employee has no remaining paid annual leave days, the company can require the employee to make up for it by working in a replacement job, but the working hours per day shall not exceed 10 hours and the working hours per week shall not exceed 54 hours.

Female employees are entitled to 90 days of maternity leave, during which half of their wages and allowances should be paid. Within 2 months after the end of maternity leave, the company should arrange for female employees to do light labor. For employees who have worked in the company for 1 year, the company must pay them 50% of their wages during maternity leave. For mothers who are feeding babies under 1 year old, the company should provide 1 hour of breastfeeding leave every day. This breastfeeding leave cannot be deducted in the form of money.

(VII) Work-related injuries

Work-related injuries refer to accidents that occur during working hours, on the way to or from get off work, or due to work reasons. Occupational diseases also fall under the category of work-related injuries.

According to the law, companies are responsible for paying for medical and health care expenses, disability expenses, and death expenses incurred by employees due to work-related injuries. However, if the employee intentionally causes the work-related injury, the company is not responsible. The law has detailed calculation formulas for compensation for disability and death caused by work-related injuries.

(8) Trade Unions

According to the law, companies that employ more than eight people must establish a trade union or set up an employee representative system, and employees have the right to freely join a trade union.

Both workers and employers have the right to independently form professional organizations to study and promote the rights and interests of people involved in the organization's charter in a collective or individual manner and to protect their spiritual and material interests. Professional organizations formed by workers are called "labor unions" and professional organizations formed by employers are called "employer associations." However, it is prohibited to form industry unions or associations in which both employers and workers are members.

(IX) Punishing employees

When punishing employees, companies need to comply with the law and internal rules and regulations. They must have relevant evidence when punishing employees, and the punishment measures should be consistent with the employee's violation. In the case of serious violations by employees, the company can terminate the contract immediately, but the decision must be made within 7 days after the company learns of the violation; for other cases, the punishment decision must be made within 15 days from the date the company learns of the violation.

Serious employee misconduct may include the following:

1. Deceiving businesses
2. Fraud, refusal to comply with labor contracts, leaking secrets
3. Threatening or attacking colleagues or the company
4. Serious violations of discipline, safety and hygiene rules
5. Instigating other colleagues to engage in serious violations
6. Use of violence during strikes, etc.
7. Political advocacy, activism or protest in the workplace

The court can determine whether the employee's behavior constitutes a serious violation based on the specific circumstances. However, strike actions that comply with legal provisions are not considered serious violations.

An enterprise has the right to suspend the performance of an employment contract in accordance with its internal rules and regulations (i.e. the enterprise does not pay wages and the employee does not need to work), but such suspension only occurs in very rare cases, such as: suspending an employee's employment contract in accordance with legal internal rules and regulations, and the enterprise faces serious economic problems, but such suspension must be carried out under the supervision of an inspector.

(X) Handling of labor disputes

Labor disputes are usually resolved through negotiation, mediation, arbitration, strikes and litigation. Individual disputes and collective disputes have different resolution procedures. Individual disputes refer to disputes between an enterprise and a single employee, while collective disputes usually involve an enterprise and a group of employees. If the other party is a trade union, it is considered a collective dispute.

A strike requires a secret ballot and approval from the union, and the company and the Ministry of Labor must be notified at least seven working days in advance. Any violent behavior during a strike is considered a serious violation. During a strike, the company can refuse to pay the striking employees, but it cannot replace the striking employees and recruit new employees.

Generally, the parties to the dispute will negotiate first. If no agreement can be reached, the dispute will enter into a mediation process. The mediation is hosted by the Ministry 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, employees are not allowed to strike, and the company cannot prevent employees from working. If an agreement is reached through mediation, both parties must implement the agreement.

If mediation fails, the Ministry of Labor will submit the dispute to the arbitration committee for handling. During the arbitration period, employees are not allowed to strike, and the company 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 executed.

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. To ensure compliance, on July 16, 2014, the Ministry of Labor and the Ministry of 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 usage of foreigners, employment contracts of foreigners, and documents such as passports, visas and work permits for inspection. On August 20 of the same year, the Ministry of Labor issued another regulation to clearly state the proportion of foreigners that companies can employ. In January 2015, the Ministry of Labor issued an operational guide for companies to apply for work permits for foreigners. Companies that illegally employ foreigners will face fines of up to $180, and foreigners may be deported.

1. The main requirements for enterprises to employ foreigners in Cambodia are as follows:

1. Requirements for employed foreign nationals:

• You must obtain an employment certificate in advance to work legally in Cambodia
• Must enter Cambodia legally
• Must hold a valid passport (business people usually hold an E visa, a few hold a K visa)
• Must hold a valid residence permit
• Must have adequate skills to meet the needs of the business and be free of infectious diseases

2. The proportion of foreign employment is limited as follows:

In principle, companies should give priority to hiring Cambodian nationals, but they can also hire foreign professionals, engineers or people 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 staff shall not exceed 3%; professionals shall not exceed 6%; non-professionals shall not exceed 1%. If it exceeds 10%, the company needs to provide detailed explanation of special reasons, such as the professional ability and skills of the employed personnel.

(II) The procedural requirements for enterprises to employ foreigners in Cambodia are as follows:

1. Apply for quota first:

Enterprises must submit quota applications to the Cambodian Ministry of Labor before the end of November each year, and state the number of foreigners to be hired in the next year, the number of Cambodian employees, and the reasons for hiring foreigners. When applying for a quota, you need to submit an application form, a statement of the number of people to be hired, and relevant documents such as personnel changes. The estimated application fee is US$20.

2. Apply for a work permit again:

After obtaining the quota approval, the company must 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 an application form, the total number of current employees (including Cambodian local employees and foreign employees), the foreigner's photo, passport and visa (E or K), employment contract and medical certificate. The application fee per person is expected to be US$100.

IV. Risks of foreigners working locally and related institutions:

The management of Cambodia's foreign labor market still needs to be strengthened. Some unscrupulous intermediaries take advantage of foreign workers' eagerness to find jobs to commit fraud, leading to labor disputes.

In order to resolve labor disputes and other issues, Cambodia established a "Labor Advisory Committee" in 1999, which is composed of representatives from government departments, trade unions and employers' associations, to discuss labor policies. With the assistance of the International Labor Organization (ILO) and the US government, Cambodia established an independent "Labor Arbitration Committee" in April 2003, which is composed of representatives from the Ministry of Labor and Vocational Training, employers and trade unions, and is responsible for handling labor disputes and related matters that cannot be resolved through negotiation. Since Cambodia's textile and garment industry employs a large number of workers, in order to deal with labor disputes and welfare benefits in the industry, major corporate employers have also established the Garment Manufacturers Association of Cambodia (GMAC).

The Ministry of Labor and Vocational Training is the government department responsible for labor and employment affairs in Cambodia, responsible for managing all foreign workers coming to Cambodia for employment. The department established the "Foreign Workers Management Committee" (FWAC) in December 2002, responsible for formulating the various procedures required for foreign workers to come to Cambodia for employment, and assisting foreign workers and employers' associations in resolving related matters.