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January 15, 2021

By Eric Minh Huu Huynh, Joel Akins and Zach Robinson

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Pension scheme to be implemented

Under the Law on Social Security Schemes and its delegated legislation, there are three social security schemes available to the private sector—occupational risk, health, and pensions. However, only the first two schemes have been implemented in Cambodia. The Cambodian Government has been working on implementing the pension scheme, which is expected to be launched in the near future. According to the draft Sub-Decree on Social Security Scheme Pension for Persons Defined by Provisions of Labour Law including Airline and Maritime Personnel and Household Servants, the pension contribution rate is four percent, of which half is contributed by the employer and the other half is deducted from the employee's salary.

With thanks to Eric Minh Huu Huynh, Joel Akins and Zach Robinson of Tilleke & Gibbins for their invaluable collaboration on this update.




Increase to Minimum Wage

The Ministry of Labour and Vocational Training ("MLVT") has recently increased the minimum wage for workers in the textile, garment and footwear sector. From 1 January 2020, employees are entitled to at least 185 USD per month during their probationary period and thereafter, at least 187–190 USD per month.


Implementation of Seniority Back Payments Regime Postponed

In order to relieve the pressures on employers as a result of the COVID-19 pandemic, the MLVT has recently issued a notification to postpone the implementation of a seniority indemnity back payments regime. Under this regime, employers would typically be obliged to make an enhanced payment to certain employees, equating to seven and a half days of average wages and other benefits (not including bonuses) calculated over a six-month period (although employees in the non-textile, garment and footwear sectors are entitled to an enhanced payment of three days' average wages and other benefits (not including bonuses) calculated over a six-month period and employees in the garment, textile and footwear sector are entitled to 15 days' average wages and other benefits (not including bonuses) calculated over a six-month period, not exceeding six months' average net wages). In calculating daily average wages, employers must treat one month as 26 working days. Any such payments would ordinarily be made between the 1st and 7th of January and July each year. However, as a result of the recent notification from the MLVT, no such seniority back payments are payable in the ordinary course of business until 2021 (although, if an employer dismisses an employee for reasons other than serious misconduct, the employer will be obliged to pay any seniority back payment or seniority payments required under Cambodian law).


Limitations on Fixed Term Contracts

The MLVT recently enacted an instruction which provides that the duration of an initial fixed-term contract ("FTC") for a local or foreign employee should not exceed two years. The contract may be renewed, provided that the total duration of any such renewals does not exceed an additional two years. If the FTC does exceed these limits, it will automatically be deemed an 'undefined duration contract' (or 'indefinite term contract'). If an employee reaches the maximum duration for a FTC (which is potentially up to four years) and the employer is keen to continue engaging the employee on a fixed-term basis, the employer should provide for a one-month break between the expiration of the existing FTC and the start of any new FTC.


Engagement of Foreign Workers

A new regime has recently come into force which allows employers to submit Khmer-language translations of employment contracts with foreign employees to the MLVT when applying for work permits. Both FTC and undefined duration contracts will now be accepted by the MLVT. Previously, employers were only permitted to submit a FTC contract in the form of an MLVT template when applying for a work permit. Under the new regime, an employer must submit an updated agreement to the MLVT if the contract expires or is amended.

With thanks to Jay Cohen of Tilleke & Gibbins for his invaluable collaboration on this update.


Image: Suzanne Horne
Suzanne Horne
Partner, Employment Law Department

Image: Kirsty Devine
Kirsty Devine
Associate, Employment Law Department

Image: Aashna Parekh
Aashna Parekh
Associate, Employment Law Department

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