You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

August 6, 2018

Cambodia Labor Law Amendment Mandates Seniority Payment and Clarifies Damages for Early Termination

On July 11, 2018, Cambodia passed an amendment to the Labor Law that eliminates “indemnity for dismissal”—a local legal concept equivalent to a severance payment—for undetermined duration contracts (i.e., employment contracts without a fixed expiration date), and replaces it with an ongoing requirement for employers to pay employees a new “seniority payment.” These amendments affect undetermined duration contracts, and may also affect fixed-term contracts (i.e., employment contracts with a fixed expiration date).

Prior to the amendment, an employer was only required to pay indemnity for dismissal to an employee with an undetermined duration contract when the employer unilaterally terminated that employee for any reason other than that employee’s serious misconduct. Similar to the severance provisions of most other jurisdictions, this indemnity for dismissal was only paid at the end of the employment relationship and was based on length of employment.

After the amendment, an employer is no longer required to pay an indemnity for dismissal. However, an employer must instead pay employees a seniority payment every six months. On an annual basis, the total amount of the seniority payment is equal to 15 days of an employee’s wages and other fringe benefits, such as commissions and gratuities. As this seniority payment must be paid every six months, each installment of the seniority payment is half of the above amount.

If an employee with an undetermined duration contract is terminated for any reason other than the their own serious misconduct, and at least one month has passed since the last seniority payment without the subsequent seniority payment being paid, then the employee is entitled to a seniority payment equal to seven days of wages and fringe benefits. The amendment is silent as to whether an employee hired under a fixed term contract would be entitled to this seniority payment.

The amendment follows the existing formula under the Labor Law for calculating the daily wage of an employee for indemnity payments. The daily wage is calculated based on all wages and fringe benefits, including commissions and bonuses, that an employee received within the past 12 months of service. That said, ambiguities remain as to the exact formula for determining the daily wage as no formula is provided.

In addition to matters related to the seniority payment, the amendment also addresses damages for early termination of an employment contract. First, the amendment addresses an earlier ambiguity in the Labor Law by clarifying that if a company closes down and terminates its employees it will not be required to pay its employees any damages or compensation in lieu of prior notice under the Labor Law. Second, the amendment states that if an employee is entitled to damages, the employee can request a lump sum payment that is equal to all previous seniority payments received, plus any future seniority payments to be received under the employee’s contract, in lieu of proving the actual amount of damages. This revision is significantly pro-employee, as the Labor Law previously capped damages at six months of wages and fringe benefits.

The amendment states that the Ministry of Labor and Vocational Training will issue further additional regulations to address ambiguities in the applicable law and to more specifically clarify the implementation of the seniority payment.

Ambiguities under the new amendment that are yet to be resolved include: 

  1. whether an employee under a fixed-term contract is entitled to receive a seniority payment;
  2. whether an employee hired before this amendment is entitled to a seniority bonus for time employed before the enactment of this amendment;
  3. whether an employer can pay all employees a seniority payment at the same time or whether the employer must time the seniority payment to each employee’s specific start date; and
  4. the specific conditions under which an employer may terminate employees when closing down an enterprise without having to pay damages and compensation in lieu of prior notice. 

Regardless of any future clarification, it is clear that employers will be obliged to make the mandated seniority payments for any employees hired after the implementation of this amendment, and all companies with employees in Cambodia would be prudent to take note of this significant change in future staffing decisions.

Tilleke & Gibbins will be monitoring the developments of these new obligations. If you have any questions or require assistance assessing your labor obligations, please contact us at mailto:[email protected] or +855 23 964 210.  

RELATED INSIGHTS​ 

July 7, 2025
On June 20, 2025, Cambodia’s Ministry of Economy and Finance issued Instruction No. 19116 to clarify when board members and company directors must receive salaries and pay payroll taxes. Board members and company directors who are not considered employees are subject to a withholding tax. This category consists of people who complete services for a nonresident individual and people who perform independent work for a company in Cambodia. Board members and company directors who are considered employees, including those appointed by a foreign head office to temporarily manage a company in Cambodia, must pay payroll taxes on any salary they receive, regardless of whether they are paid by a local or foreign branch of the company. The above obligations apply regardless of whether the person has a work permit. Board members and company directors are exempt from paying payroll tax if they: Are not present and not performing a regular management role at the company despite being registered on the company’s statutes or patent tax card; Participate only in board meetings and occasional shareholder meetings; and Do not receive a salary from a company in Cambodia. Overall, this instruction provides an important clarification regarding the tax obligations of board members and company directors. Companies should pay attention to the classification of their board members and directors and be mindful of the exemption.   This article was written with the assistance of Tilleke & Gibbins interns Amelia Gemma Erickson and Amrin Keat.
July 7, 2025
On June 27, 2025, Thailand issued the new Ministerial Regulation Prescribing the Criteria and Rates for Receiving Unemployment Benefits (No. 2) B.E. 2568 (2025), which amended a similarly named ministerial regulation by boosting the rate of social security benefits to alleviate hardships for employees who are terminated. The new ministerial regulation took effect the following day. Under this new ministerial regulation, eligible terminated employees are entitled to receive unemployment benefits under the Social Security Fund (SSF) for a maximum of 180 days per year, at the rate of 60% of the employee’s monthly wages at the time of termination, up from 50% previously. However, the maximum wage used as the basis for calculating the benefit remains capped at THB 15,000 per month. Therefore, the maximum unemployment benefit that an employee can receive from the SSF is now THB 9,000 (up from THB 7,500) per month for a period of up to six months. To qualify for the unemployment benefits from the SSF, employees must be registered with the Social Security Office and must have contributed to the SSF for at least six months within the 15 months prior to the start date of the relevant unemployment period. This new ministerial regulation was enacted to increase the amount of financial support provided to insured persons in the case of termination, as part of the government’s objective of alleviating economic hardship under current economic and social conditions in Thailand. For more details on unemployment benefits in Thailand, or on any aspect of employment law in the country, please contact Pimvimol (June) Vipamaneerut at [email protected], Dusita Khanijou at [email protected], Ketnut Pukahuta at [email protected], or Chomanut Arif at [email protected].
July 4, 2025
On July 1, 2025, new minimum daily wage rates for Bangkok and certain business types nationwide were published in the Government Gazette, taking effect on the same day. The daily minimum wage rate for Bangkok has been increased to THB 400 per day, while the minimum wage rates for other provinces remain unchanged from the rates that took effect on January 1, 2025. However, daily minimum wage rates have also been increased to THB 400 nationwide for type 2, type 3, and type 4 hotels under the Hotel Act and for entertainment establishments under the Entertainment Place Act. This THB 400 rate applies to all businesses that meet the criteria, even if the province’s general rate is lower. The new minimum wage rates supersede any lower wages agreed upon in existing employment contracts or conditions of employment that were in force before this announcement came into effect. As a result, these employees must be paid their wages at the newly prescribed rate for work performed from July 1, 2025, onward.
June 30, 2025
On March 4, 2025, Cambodia’s Ministry of Labor and Vocational Training (MLVT) issued Prakas No. 073/25 on Procedures for Resolving Individual Labor Disputes, replacing Prakas No. 318 on the same topic from 2001 and introducing significant changes to how individual labor disputes are filed, processed, and escalated. In addition, Prakas No. 073 outlines the roles and responsibilities of labor inspectors, the process for filing and handling complaints, and the steps for conciliation and further legal recourse, as described below. Filing a Complaint Any party to an individual labor dispute can file a complaint with the Labor Dispute Department of the MLVT or the Department of Labor at the capital or provincial level. Upon receiving a complaint, a labor inspector will review the case and may initiate either conciliation or a labor inspection. Invitation letters will be issued to the disputing parties to provide relevant information and documents. Conciliation Process Prakas No. 073 places strong emphasis on the conciliation process, introducing strict procedural rules and deadlines with clear consequences for noncompliance: If the claimant fails to provide required information within the specified deadline (or within three working days thereafter without reasonable excuse), the complaint is deemed void. If the respondent fails to attend the conciliation meeting within the deadline (or within three working days thereafter without reasonable excuse), the conciliation is considered unsuccessful, and the respondent is deemed guilty as claimed. Once all necessary information is gathered, a labor inspector will invite both parties to a joint conciliation meeting, which must be held within three weeks of the complaint being received. If the claimant fails to attend the meeting or sign the minutes without a reasonable excuse, the complaint is void. If the respondent fails to attend the meeting without a reasonable excuse, the conciliation is unsuccessful, and the respondent