Labor

The 1997 Labor Law, as amended in 2007, regulates employment and such matters as benefits and obligations in employment contracts. The law limits the proportion of foreign employees on a payroll but for the most part Cambodian and foreign employees are covered equally however, foreign employees require visas and work permits.

The Civil Code (passed in 2007 and implemented in 2011) and the Law on Social Security Schemes for Persons Defined by the Provisions of the Labor Law (2002) (“Social Security Law”), supplement the Labor Law as well as other labor-related regulations mainly issued by the Ministry of Labor and Vocational Training (MLVT).

1. Must investors hire nationals? Is there a minimum number or percentage of nationals? A maximum number of foreign employees?

The Labor law requires employers to give priority to hiring Cambodians and in general, 90% of staff must be Cambodian nationals. Among the 10% standard quota for foreign employees, generally 3% are office staff, 6% are specialized employees, and 1% are non-specialized employees. These ratios are not strictly required and an employer who demonstrates need for employees with special skills or qualifications which are not readily available can apply to the MLVT to increase the number of foreign employees on staff.

2. Are foreign employees required to have licenses or work permits? What are the requirements and application procedures for visas and work permits?

Foreign persons must have a valid visa, a work permit, employment card, and residency permit in order to work lawfully in Cambodia. Work permits and employment cards can be obtained at the relevant department of the Ministry of Labor and Vocational Training and are valid for one year. One year working/business visas for investors and foreign staff are not difficult to obtain through a local sponsoring employer or business entity. Once obtained, such visas can be subsequently be renewed for up to one year at a time so long as the person still has a supporting local sponsor in Cambodia.

In case there are no local qualified resources available, employers must request advance approval (i.e. quota) from the MLVT to hire foreign workers. A request to employ foreigners for the coming year must include the numbers of local and foreign employees, the reasons for hiring foreigners and must be submitted to the MLVT before December of each year.

Each foreign employee must register their written employment contract with the MLVT (for those who work in Phnom Penh) or at the relevant provincial Department of Labor and Vocational Training (for those working outside Phnom Penh.)

Application procedures for initial work permits and extensions applications for work permits and employment cards vary according to different categories of foreigners: (i) foreigners whose entry visa has a limited period of stay; (ii) Vietnamese or Laotians working in the Cambodia-Laos-Vietnam Triangle Development Zone along the border of certain Cambodian provinces; and (iii) foreigners whose permanent stay in Cambodia is permitted.

Applications and payments to extend work permits and employment cards must be made before the end of March of each year.

3. Is adequate labor available, both skilled and unskilled? Are investors legally required to train employees?

Cambodia has a sizable labor sector consisting of both skilled/educated and unskilled workers.  Many young Cambodians study English, Japanese, Korean, Chinese and other foreign languages, and most are computer literate and able to use the Internet.

There is no compulsory employee training obligation, but foreign companies often find that formal and on-the-job training of local staff is necessary for their specific needs.

4. What types of employment contracts and agreements exist in law? Which are the most beneficial to foreign investors?

The Labor Law outlines two main types of employment contracts:

(1) a fixed duration contract (FDC) stating a specific contract period – typically 1 year; and

(2) unspecified duration contracts (UDC).

A FDC must be in writing, stating the starting and ending dates, with a maximum term of two (2) years duration. The two types of labor contract have different rules pertaining to termination, benefits and employer obligations.

A FDC has a unique characteristic – unless the employer gives appropriate advance and written notice to the employee of the contract expiration and non-renewal prior to the expiry date, the contract is automatically renewed upon expiration for a length of time equal to its initial duration, or deemed as a UDC if the total length of the contract term exceeds 2 years. A FDC cannot be terminated prior to the end of its term, except due to gross misconduct, act of god (i.e., force majeure), or a written agreement made in the presence of a Labor Inspector.

A UDC is not required to be in writing, but making it in writing and setting out clear terms and conditions of employment will be useful. A UDC will continue until it is terminated by either or both parties according to the legal procedures.

Each of the 2 contract types has its own advantages depending on the circumstances and the needs of the employer. A FDC is usually fit for a short term project, whereas an UDC would be more appropriate for long-term employment.

A well-executed labor contract will help minimize the risks of misunderstanding, misstatement and cross-expectation of the contract terms. It will also create a healthy employment relationship and more importantly, save cost, time and prevent risk of disputes and risks to reputation.

5. What benefits must an employer provide to employees?

The Labor Law requires employee benefits – some of which are not well-defined and employers meet them in various ways. For example, the Labor Law requires employers to provide primary health care. As such, some employers offer group health insurance, some self-insure, and some have trained medical care providers on staff.

Other standard requirements are a 48-hour (6 days) work week, annual leave of 18 (eighteen) days, days off for public holidays and for special events such as weddings, child delivery and illness of a child or parent (deductible from annual leave).

The Labor Law requires employers to establish clean working environments and maintain standards of hygiene and sanitation for employees. Moreover, a number of benefits including primary health care, breast-feeding break, nursing room and day care center (if there are 100 or more female workers) are mandated by the Labor Law.

Additionally, other employment related benefits include:

• Weekly time off: Maximum working hours are 8 hours per day with a total of 48 hours per week, with a weekly break of at least one full day, which should principally be a Sunday. As per common practice among most companies (other than those in the manufacturing industry), both Saturday and Sunday are granted as weekly days off.
• Public holidays: Paid public holidays for workers/employees of all enterprises are determined by the Ministry in charge of Labor yearly through its Prakas (ministerial edict). There is also a sub-decree issued annually by the Royal Government specifying public holidays for both government officials and private sector employees within the year. In addition, there may be other incidental holidays which need to be granted such as leave for national elections or important national ceremonies. Under the Labor Law, if a public holiday falls on Sunday, workers will have the following working day as compensatory day off.
• Annual leave: In addition to paid public holidays, each employee is entitled to one-and-a half (1.5) days of annual leave per month of continuous service (thus, eighteen (18) days per year). Employees can take annual leave after one full year of service, although in practice a lot of companies allow staff to take accrued annual leave since the first year of employment for administrative convenience.
• Annual leave increases one (1) day for every three (3) years of service. Unused annual leave can be carried forward to the next year, on the condition that the deferment cannot exceed three (3) consecutive years and can only apply to leave exceeding twelve (12) working days per year.
• Sick leave: Whereas the Labor law allows employees to take sick leave, it fails to determine the duration for paid sick leave. The Ministry in charge of Labor does not issue any regulation or official guidance dealing with this matter either. However, according to standard internal regulations approved by the Ministry and awards issued by the labor Arbitration Council, recommended duration and payments for sick leave are as follows:
  • 100% of wage for the first month;
  • 60% of wage of the second month;
  • 40% of wage for the third month; and
  • Unpaid leave for the fourth until the sixth months.
• Special leave: Employees can take up to seven (7) days of special leave per year for personal marriage, paternity, child’s marriage, or illness or death of spouse, child or parent. Special leave can be deducted from available annual leave days or subject to make-up work with certain conditions.
• Maternity leave: A female employee is entitled to ninety (90) days of maternity leave, and, provided that she has been working for at least one year, she is compensated with half pay during this leave.
• Termination benefits: Employee entitlements from termination of employment vary according to the type of contract, which may include notice, severance, and damages. In addition, employees enjoy the following benefits:
  • If any annual leave days remain unused at the time of termination, payment in lieu thereof must be paid to the employee.
  • At the termination, employees can request for a certificate of employment, which cannot contain any harmful statement.
  • Wages and indemnity of any kind must be paid within forty-eight (48) hours following the date of termination of work.

6. Is there a minimum wage?

A minimum wage has only been set for workers employed in the textile, garment and footwear sector.  There are no legally required minimum wages for other sectors, but the minimum wage for the garment sector is applied generally in the manufacturing industry.

As yet, there is no minimum wage for the private sector as a whole, but generally employees are paid according to their level of skills and experience.

7. Is there a social security requirement that employers must contribute to?

Employers hiring at least 8 employees must register their organization together with their employees and pay contribution to the National Social Security Fund (NSSF). The Social Security Law mentions health care, pension, and other schemes; however, at present only the occupational risk scheme has been implemented. The current contribution rate for occupational risk insurance is 0.8% of the monthly average wage.

8. What rules must be followed in hiring or firing employees? What obligations, if any, does an employer have to a dismissed employee?

The Labor Law forbids discrimination in hiring, paying, promoting, assigning, training and firing employees for a variety of reasons, including race, sex, religion and political opinion (but not professional qualifications). Employers cannot hire people to work off debts or require a payment or bond as a condition of hiring. Probationary periods are permitted and vary for different jobs.

The law has several specific provisions covering termination. An employer must have a valid reason, based on “requirements of the operation of the enterprise, establishment or group,” on “the worker’s attitude or behavior,” on serious misconduct or on an event of force majeure (or act of God).

A terminated employee is entitled to benefits under the law, including payment for untaken annual leave and severance pay under some circumstances. Termination payouts are different for specified and unspecified duration contracts.

9. Are companies required to recognize and allow unions? Are there mandatory collective bargaining agreements?

Companies are required to recognize and allow registered employee unions. Collective bargaining agreements are voluntary.

The Labor Law also requires elections of shop stewards as employee representatives within the enterprise. The number of shop stewards varies in proportion to the total number of workers.