Under the Labour Law of the Kingdom of Cambodia, generally, termination of the employment contract must be with cause. Termination without cause is possible, however, if the employer pays full termination compensation to the employee. Articles 73 and 74 of the Labour Law define specific circumstances under which an employment contract may be terminated.

A Fixed Duration Contract (FDC) normally terminates at its specified ending date. However, it may be terminated before this point if both parties agree, provided that such agreement is made in writing in the presence of a labour inspector and signed by both parties to the contract. If both parties do not agree, an FDC may be cancelled before its expiration date only in the event of serious misconduct or unforeseen act of God.

The premature termination of the contract at the will of either the employer or the employee alone, for reasons other than those mentioned above, entitles the other party to damages of an amount at least equal to the remuneration he or she would have received until termination of the contract (in the case of termination at the will of the employer), or damages corresponding to that sustained (in the case of termination at the will of the employee).

An Unspecified Duration Contract (UDC) may be terminated at will by one of the contracting parties – subject to prior notice in writing given by the party that intends to terminate the contract. In addition, the employer may not terminate without a valid reason relating to the worker’s aptitude or behavior, based on the requirements of the operation of the employer.

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 only imposes notice requirements in the case of expiration or non-renewal of the contract, not in the case of premature termination. Article 73 of the Labour Law states that if the contract has a duration of more than 6 (six) months, the employee must be informed of the expiration of the contract or of its non-renewal 10 (ten) days in advance of its expiration. This notice period is extended to 15 (fifteen) days for contracts that have a duration of more than one year. If there is no prior notice, the contract will 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 cases of a premature termination of FDCs.

For terminating UDCs, according to Article 75 of the Labour Law, the minimum period of required prior notice is as follows:

• 7 days, if the length of continuous service is less than 6 months;
• 15 days, if the length of continuous service is from 6 months to 2 years;
• 1 month, if the length of continuous service is longer than 2 years and up to 5 years;
• 2 months, if the length of continuous service is longer than 5 years and up to 10 years; and
• 3 months, if the length of continuous service is longer than 10 years.

The Labour Law allows for payment in lieu of prior notice in the case of terminating a UDC. Based on Article 77 of the Labour Law, the termination of a labor contract at will on the part of the employer alone, without prior notice and without compliance with the prior notice periods, obligates the employer to compensate the employee the amount equal to the wages and all benefits that the employee would have received during the official notice period. Payments made in lieu of prior notice do not have to be specified in the employment contract.

2024 MLVT Clarification on Termination Compensation

The Ministry of Labour and Vocational Training (MLVT) issued a notification on March 21, 2024 clarifying the full package of compensation due to employees upon termination of their employment contracts. The clarification confirms that the following components are payable, as applicable to the type of contract:

• Unpaid wages outstanding at the date of termination
• Payment for all unused annual leave days accrued at the date of termination
• For Fixed Duration Contracts (FDCs): a minimum severance payment of 5% of total wages paid during the contract term, unless a collective agreement provides otherwise
• For FDCs terminated without valid cause before expiry: compensation for the remaining contract term
• For Unspecified Duration Contracts (UDCs): notice pay where the required notice period was not given, together with seniority indemnity and dismissal indemnity as applicable under the Labour Law

This clarification does not change the underlying law but provides useful confirmation of the components of the full termination-compensation package that employers are required to pay.