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March 27, 2024

Cambodia Clarifies Compensation Due for Employment Contract Termination

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Cambodia’s Ministry of Labor and Vocational Training issued the Notification on the Compensation for Terminating an Employment Contract on March 21, 2024, clarifying the compensation due to employees upon the termination of their employment contracts.

The notification outlines different requirements depending on the nature of the termination and the type of employment contract, as laid out below.

Termination without Valid Reason and in Absence of Serious Misconduct

If an employment contract has been terminated by an employer without a valid reason and the employee did not commit any serious misconduct as defined under the relevant article of the Labor Law, the employer must compensate the employee as follows:

Fixed-Duration Contract:

  • Wages that have not yet been paid;
  • Unused and unpaid annual leave through the termination date;
  • Severance payment equal to at least 5% of the wages paid to the employee during the length of the contract; and
  • Damages for being laid off before the expiration date of the fixed-duration contract, at least equal to the wages the employee would have received had he or she completed the original contracted term of employment.

Unspecified-Duration Contract:

  • Wages that have not yet been paid;
  • Unused and unpaid annual leave through the termination date;
  • Compensation in lieu of notice if the employer did not give prior notice in accordance with the Labor Law;
  • Seniority indemnity for the semester that the employee is terminated and total seniority back payments that have not been paid; and
  • Damages for being laid off, in an amount equal to the seniority payment received during the employment contract.

Termination in Cases of Serious Misconduct

Employees who commit any serious misconduct as defined under the Labor Law (regardless of whether they are under a fixed-duration or unspecified-duration contract) are entitled only to the following compensation:

  • Wages that have not yet been paid; and
  • Unused and unpaid annual leave through the termination date.

Termination Due to Bankruptcy

Since bankruptcy is considered not to affect an employee’s dignity or to lead the public to doubt the employee’s behavior, ability, or productivity, employees whose contracts are terminated for reasons of bankruptcy are not entitled to any damages. Employers are only responsible for making the following compensation:

Fixed-Duration Contract:

  • Wages that have not yet been paid;
  • Unused and unpaid annual leave through the termination date; and
  • Severance payment equal to at least 5% of the wages paid to the employee during the length of the contract.

Unspecified-Duration Contract:

  • Wages that have not yet been paid;
  • Unused and unpaid annual leave through the termination date;
  • Compensation in lieu of notice if the employer did not give a prior notice in accordance with the Labor Law; and
  • Seniority indemnity for the semester that the employee is terminated and total seniority back payments that have not been paid.

To learn more about this new notification or any aspect of employment law in Cambodia, please contact Tilleke & Gibbins at [email protected].

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