What is seniority indemnity? Under the laws of Cambodia, seniority indemnity is an indemnity provided to worker who is working for the employer. Through the amendment to Article 89 and other relevant articles of the Labor Law in 2018, this seniority indemnity has replaced the dismissal indemnity. What are the similarities and differences of the two kinds of indemnities? How is seniority paid to the worker? This article will answer to these questions
1. What are the similarities and differences between seniority and dismissal indemnities?
Although dismissal indemnity was superseded by seniority indemnity as described above, in order to make it easier to understand seniority indemnity, it is important to compare the two types of indemnities.
The two indemnities have the following similarities:
- Both indemnities are only given to workers of undetermined duration contracts (UDC). Workers of fixed duration contracts (FDC) do not receive these two kinds of indemnities.
- These two kinds of indemnities are given to workers in case of dismissal due to illness.
- The amount of indemnity is equal to 15 days of the wage and other allowance.
- Both types of indemnities are not provided to workers who have resigned from work.
- Both indemnities are not paid to workers who are dismissed by the employer on the ground of serious misconduct.
The two kinds of indemnities have the following differences:
- Seniority indemnity is paid to workers who are currently working for the employer, while dismissal indemnity is only paid to workers who are dismissed by the employer on the ground other than serious misconduct.
- The rules of seniority indemnity seem to benefit workers more than those of dismissal indemnity because seniority indemnity is paid to workers twice per year. Under the rules of seniority indemnity, in the event that the worker resigns or that the worker is dismissed due to serious misconduct, the worker will lose only the indemnity to be paid in the semester the resignation or dismissal happens. On the other hand, according to the rules of dismissal indemnity, if the worker resigns or is fired by the employer, this worker cannot receive this dismissal indemnity.
2. How is seniority paid to the worker?
According to Prakas No. 443 dated 21 September 2018 on the Payment of Seniority Indemnity, issued by the Ministry of Labor and Vocational Training, there are two types of seniority indemnity, which include seniority indemnity from 2019 and back payment of seniority indemnity before 2019.
2.1. Seniority indemnity from 2019:
Pursuant to Article 89 (New) of the Labor Law, the employer must provide the worker who is currently working for the employer with a seniority indemnity equal to 15 days of the wages and other allowances per year. Every six months, the employer must pay the worker half of the seniority indemnity.
Article 89 (New) further states that if an undetermined duration employment contract is terminated by the employer in accordance with the provisions of the Labor Law, the employer must provide worker who has seniority from one month to less than six months with a seniority indemnity equal to seven days of the wage and allowances.
Regarding the implementation of Article 89 (New) above, Prakas No. 443 dated 21 September 2018 on the Payment of Seniority Indemnity of the Ministry of Labor and Vocational Training stipulates that the payment of seniority indemnity is implemented from 2019 in accordance with the following procedures.
- Employer must provide the worker with a seniority indemnity equal to 15 days of wage and allowances per year. This seniority indemnity is paid to the worker for seven and a half days in June and seven and a half days in December of each year.
- For worker who starts employment with employer in the first year and has been working continuously from one to six months, the employer must pay seven and a half days of seniority indemnity. (Article 2, Prakas No. 443)
The seniority of a worker for the payment of seniority indemnity is counted from the time of signing the employment contract as a full-time worker, excluding the probationary period. The payment of seniority indemnity in each year from 2019 is guided in detail by Instruction No. 058/19 dated June 10, 2019 of the Ministry of Labor and Vocational Training.
2.2. Back pay for seniority indemnity before 2019:
In addition to the payment of seniority benefits implemented from 2019, Prakas No. 443 above also determines the payment of seniority indemnity of workers who has work seniority with employer before 2019. Under this Prakas No. 443, there are two kinds of back pay of seniority indemnity as follows:
- Back pay for seniority indemnity before 2019 to workers at the textile, garment and footwear establishments is paid twice per year (15 days of indemnity in June and 15 days of indemnity in December). (Article 3, Prakas No. 443) Back pay for seniority indemnity is explained in detail by Instruction No. 057/19 dated 10 June 2019 of the Ministry of Labor and Vocational Training.
- Back pay for seniority indemnity before 2019 to the workers of the enterprise, establishment other than textile, garment and footwear sectors, is paid twice a year (seven and a half days of seniority indemnity in June and seven and a half day of seniority indemnity in December). (Article 3, Prakas No. 443) However, according to the Instruction No. 042/19 dated March 22, 2019 of the Ministry of Labor and Vocational Training on the Back Pay for Seniority Indemnity that exist before 2019 for enterprises and establishments other than textiles, garments and footwear sector, the back pay for seniority indemnity has been postponed until December 2021.
In conclusion, seniority indemnity is better than the dismissal indemnity because the worker’s risk of losing seniority indemnity is minimized by the requirement of payment twice a year. The implementation of seniority indemnity is now is in transitional period for some enterprises and establishments as they have to pay new seniority indemnity from 2019 and back pay of seniority to workers who have seniority before 2019.
Please note that this article is not legal opinion or legal advice.