Employment Contract in Cambodia

This article provides readers with an overview of employment contract laws in Cambodia. The legal rules of employment contract have been comprehensively stipulated in the Civil Code and the Labor Law of Cambodia. The Civil Code provides the general provisions of contracts while the Labor Law comparatively provides specific provisions of the employment contracts. Accordingly, both fundamental laws are used as basis for the discussion and explanation of employment contract laws in Cambodia.

1. What is employment contract?

According to Article 664 of the Civil Code, employment contract is an agreement in which a party promises to provide labor or service to the other party who promises to provide remuneration for the said labor or service. The party who promises to provide labor or service is called “worker” and the other party who promises to pay wage is called “employer”. Worker is natural person of all sex and nationality who signs employment contract in return for remuneration under the direction and management of the employer. (Article 3, Labor Law) Employer is natural person or legal person, public or private who employs one or more workers, even discontinuously. (Article 2, Labor Law)

Under the Labor Law of Cambodia, there are two main types of employment contracts. They are fixed duration contract (FDC) and undetermined duration contract (UDC). The parties to contract can agree on any type of contracts for their employment relation. However, in practice, the employer is the one who decides the type of contract with his or her worker.

2. Probationary contract or period

Before employer and worker enter into a defined employment relation, they may sign a separate probationary contract or include clauses of probationary period as a part of their employment contract. This probationary period allows the employer to judge the professional worth of the worker and allows the worker to know concretely the working conditions provided. In order to avoid using probationary contract or probationary period for long term relation, the Labor Law, especially Article 68, limits the probationary period to not more than three months for regular employees, two months for specialized works and one month for non-specialized workers.

Probationary contract or employment relation during probationary period can be terminated at the initiative of either party without prior notice. (Article 82, Labor Law) However, in practice, most of internal regulations of the companies require seven days prior notice of termination of probationary period.

3. Fixed duration contract 

Fixed duration contract is concluded for a specified period. Please note that in order using fixed duration contract is a choice of parties but they need to strictly the following legal requirements. Failing to comply may cause their contract to become underdetermined duration contract.

  •  Precise expiry date: 

The contract is concluded for a specific duration and must state a precise finishing date. (Article 67, paragraph 1, Labor Law) For example, the parties signed an employment contract in which the parties agree that period of contract is one year starting from 01 January 2020 to 31 December 2020. Accordingly, the precise finishing date of this contract is 31 December 2020.

  • Maximum duration: 

Fixed duration contract cannot be concluded for a period longer than two years. It can be renewed one or more times as long as the renewal does not surpass the maximum duration of two years. (Article 67, paragraph 2, Labor Law) Based on Instruction No. 050/19 dated 17 May 2019 on determination on types of employment contracts of Ministry of Labor and Vocational Training, the initial term of FDC cannot be longer than four years. If FDC is renewed once or more times and has total period more than four years, the contract will be automatically converted to UDC. For example, the initial term of FDC is one year, and then the total length of FDC can be up to three years. If the initial term is two years, then the total length can be up to four years at maximum. Hence, the total period of FDC including initial and renewal cannot be longer than four years.

  • Written contract: 

Fixed duration contract must be in writing. If not, it becomes undetermined duration contract. Accordingly, although the parties verbally agree for contract with specific duration, such verbal agreement is not fixed duration contract, but it is an undetermined duration contract.

  • No tacit and quiet continuation: 

When a contract is signed for a fixed period of or less than two years, but the work tacitly and quietly continues after the end of the said fixed period, the contract becomes undetermined duration contract. Accordingly, it is important to have new contract signed by employer and worker, if they wish to continue their employment relation under the fixed duration contract.

  • Fixed contract without precise finishing date:

Pursuant to Article 67 of the Labor law, there are also cases where fixed duration contract may have unspecified date when fixed duration contract is made for the purpose of (1) replacing a temporarily absent worker; (2) carrying out seasonal work; and (3) occasional periods of extra works or non-customary activities of the enterprises. This contract with unspecified date is terminated by (1) return of the absent worker to the enterprise or termination of his or her contract; (2) end of the season, and (3) end of occasional period of extra work or of the non-customary activity of the enterprises. Fixed duration contract without a precise date can be renewed at will as many times as possible without losing their validity. 

  • Daily or hourly worker: 

In addition to above cases where fixed duration is concluded without specified date, the Labor Law further states that contracts of daily or hourly workers who are hired for a short-term job and who are paid at the end of the day, the week or fortnight period, are considered to be contracts of fixed duration with an unspecified date.

  • Termination of contract: 

Fixed duration contract normally ends at the precise finishing date. However, fixed duration contract can be terminated before the finishing date, if both parties are in agreement on the condition that this agreement is made in form of writing in the presence of a labor inspector and signed by the two parties to the contract. If both parties do not agree, a contract specified duration can be cancelled before its termination date only in the event of serious misconduct or acts of God.

If the employer unilaterally terminates fixed duration contract before the precise finishing date without mutual agreement, serious conduct of worker or acts of God, the worker is entitled to damage in an amount at least equal to the remuneration he or she would have received until the termination of the contract. For example, the employer signed one-year employment contract from 01 January 2020 to 31 December 2020 with the worker. Without any reason mentioned above, the employer unilaterally terminates the contract 6 months before the expiry date. Consequently, the employer has to pay damage which is equal to 6 months wage of the said worker.

In the case where the worker unilaterally terminates the contract before the expiry date for reason other than mutual agreement, serious misconduct of employer or act of God; the employer is entitled to damages in an amount that corresponds to the damage sustained.

  • Notice of expiry or non-renewal of contact:

The remarkable requirement of fixed duration contract is that even through there is precise expiry date of the contract; the employer has the obligation to notify the worker about the expiry or non-renewal of the contract. Article 73, paragraph 5 of the Labor Law provides that if the contract has a duration of more than six months, the worker must be informed of the expiration of the contract or of its non-renewal ten days in advance. This notice period is extended to fifteen days for contracts that have duration of more than one year. If there is no prior notice, the contract shall be extended for a length of time equal to its initial duration or deemed as a contract of unspecified duration if its total length exceeds the time limit specified in Article 67 (maximum duration of fixed duration contract can be 4 years). 

Employer has no obligation to provide notice of expiry or non-renewal of fixed duration contract which is concluded for the period equal to or less than six months.

  • Severance pay: 

At the expiration of the contract, the employer must provide the worker with the severance pay proportional to both the wages and the length of the contract. The exact amount of the severance pay is set by a collective agreement. If nothing set in such agreement, the severance pay is at least equal to five percent of the wages paid during the length of the contract. 

In every case of contract termination, the worker can require the employer to provide him with an employment certificate.

4. Undetermined duration contract

Undetermined duration contract (UDC) is concluded for an open-ended duration. If compared to fixed duration contract, it has no expiry date of contract termination. Hence, undetermined duration contract can be terminated at will by one of the contract parties. However, the party who wishes to terminate the contract must give written prior notice of contract termination to the other party. (Article 74, paragraph 1, Labor Law)

  • Prior notice period of contract termination

Article 75 of the Labor Law stipulate the minimum period of prior notice of contract termination based on the length of employment relation. Such obligation to serve prior notice is required to prevent any potential damages arising from the surprising termination of contract. 

The minimum period of a prior notice is set as follows:

  • Seven days, if the worker’s length of continuous service is less than six months;
  • Fifteen days, if the worker’s length of continuous service is from six months to two years;
  • One month, if the worker’s length of continuous service is longer than two years and up to five years.
  • Two months, if the worker’s length of continuous service is longer than five years and up to ten years
  • Three months, if the worker’s length of continuous service is longer than ten years.

Any clause of employment contract, of an internal regulation, or any other individual agreement that sets the prior notice period to be less than the minimum set forth above is void. (Article 76, Labor Law)

The employer who unilaterally terminates the contract and fails to comply with the said rules on prior notice period must compensate the worker the amount equal to the wages and all kinds of benefits that the worker would have received during the said notice period. (Article 77, Labor Law)

It is important to note that both employer and worker have obligation to serve prior notice if any of them decides to unilaterally terminate the contract.  However, the worker who has been dismissed or laid off by employer for reasons other than serious misconduct can leave the enterprise before the end of the notice period if he or she finds a new job in the meantime. In such case, the worker will not be required to compensate the employer. (Article 78, Labor Law)

During the notice period of contract termination, the worker is entitled to two days leave per week with full payment to look for a new job. These leave days are paid to the worker at the normal rate of remuneration, regardless of how it is calculated. This payment also includes other perquisites. (Article 79, Labor Law)

The employer or worker is released from the obligation of giving prior notice under the case of (1) probation or an internship specified in the contract, (2) serious offense on the part of one of the parties, or (3) acts of God that one of the parties is unable to meet his obligations.(Article 82, Labor Law)

  • Dismissal with valid reason 

Employer who wishes to dismiss the worker must present valid reason relating to the worker’s attitude or behavior, based on the requirements of the operation of the enterprise, establishment or group.  (Article 74, paragraph 2, Labor Law) The obligation to provide valid reason for dismissal is another obligation of the employer in addition to the obligation of prior notice.

  • Seniority indemnity payment

Seniority indemnity is given to workers who are currently working for the employer. This indemnity payment is equal to 15 days per year of sum of wages and other perquisites. Half of the indemnity which is equal to 7.5 days of sum of wage and other allowances is paid every six months to the worker. If the worker who has seniority period from one month to six months is dismissed before the day the seniority is paid has the right to seniority payment equal to seven days of a sum of wage and other payments. It is noted that the seniority payment is given to worker who is terminated for reasons of illness. However, seniority payment is not granted to worker who is dismissed due to his or her serious misconduct. (Article 89-New, Labor Law)

Seniority indemnity payment is implemented since 2019 pursuant to Prakas No. 443 dated 21 September 2018 of the Ministry of Labor and Vocational Training. Half of 15 days of seniority indemnity which is equal to 7.5 days is paid June and other 7.5 days is paid in December every year. For the first year of employment contract and if the worker has been working continuously from 1 to 6 months, the employer must pay indemnity equal to 7.5 days to the worker. (Article 2, Prakas No. 443) The seniority period which is entitled to indemnity starts from the date the defined employment relation is established. Employment relation during probationary period is not included in the seniority period. The payment of seniority indemnity from 2019 is detailed in Instruction No. 058/19 dated 10 June 2019 of the Ministry of Labor and Vocational Training.

In addition to the new indemnity payment as mentioned above, Prakas No. 443 also stipulate the back payment of seniority indemnity to worker who has seniority before 2019. Pursuant to Article 3 of Prakas No. 443, back payment of seniority indemnity is given to workers in textile, garment and footwear production sectors must be made twice a year. 15 days of seniority indemnity is paid in June and 15 days of seniority indemnity is paid in December of each year. The back payment of seniority indemnity before 2019 for enterprise and establishment in textile, garment and footwear production sectors is detailed in Instruction No. 057/19 dated 10 June 2019 of the Ministry of Labor and Vocational Training.

Pursuant to Article 3 of Prakas No. 443, back payment of seniority indemnity is also given to workers of sectors other than textile, garment and footwear production sectors must be made twice a year. 7.5 days of seniority indemnity is paid in June and 7.5 days of seniority indemnity is paid in December of each year. However, according to Instruction No. 042/19 dated 22 March 2019 of the Ministry of Labor and Vocational Training on back payment of seniority indemnity before 2019 for sectors other than textile, garment and footwear production sectors, the back payment of seniority indemnity before 2019 is postponed.

  • Damages

In addition to the seniority indemnity payment, the worker can claim for the damage if his or her resignation is the consequence of evil actions of the employer to force the worker to terminate the contract. If the employer treats the worker unfairly or repeatedly violates the terms of the contract, he also has to pay seniority indemnities and damages to the worker. (Article 90- New, Labor Law)

In the case where the termination of the contract without valid reason, by either party to the contract, entitles the other party to damages. These damages are not the same as the compensation in lieu of prior notice or the seniority indemnity. The worker, however, can request to be given a lump sum equal to the seniority indemnity received or to be received during the course of the employment contract. In this case, he is relieved of the obligation to provide proof of damage incurred. (Article 91-New, Labor Law)

5. Conclusion

It is always interesting to study rules on employment contracts even though the issues of contracts are complicated. Of course, there are a lot more rules on employment contract which are not included in this text. I hope that readers may find this article useful for them and that you can tell me which area of employment contract you wish to share or wish me to do more research and share thereafter.

Please note that this article is not legal opinion or legal advice.

Categories Employment and Labor Laws

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