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​ 

December 4, 2024
Thailand Legal Basics, a valuable primer for foreign investors, explores all aspects of living and doing business in Thailand. Written by specialists at Tilleke & Gibbins in Bangkok, it is the only comprehensive English-language guide to the Thai legal system with a focus on the concerns of foreign business and investment.
October 1, 2024
Three of Tilleke & Gibbins’ labor and employment specialists in Vietnam have contributed the Vietnam chapter to the newly issued Labor and Employment Disputes 2024, a comprehensive guide from Lexology Panoramic to labor and employment dispute resolution in various jurisdictions around the world. The Vietnam chapter covers the following topics: Pre-action considerations: Key requirements, third-party funding, contingency fee arrangements Issuing a claim: Forum, territorial jurisdiction, standing, commencing claims, fees, service Defendants and legal personality: Types of claims, time limits, counterclaims Case management: Procedure, rules, amendments to claims, adding parties to proceedings, consolidating proceedings Class and collective actions: Special considerations Evidence: Witnesses, tactical considerations Interim relief: Availability, requirements Trial: Hearings conduct and typical time frames, confidentiality and public access, media reporting Elements of successful claims and burden of proof Alternative dispute resolution: Available types, requirements and expectations Enforcement: Collective employment and labor rights, enforcement of collective rights, standing Remedies and enforcement: Available remedies, assessing compensation, enforcement mechanisms Appeals: Appeal procedure and time frames, other means of challenge Update and trends: Recent cases and developments, technology developments, other issues The Vietnam chapter was authored by Truc Thi Thanh, Linh Ngoc Nguyen, and Kien Trung Trinh. Tilleke & Gibbins also contributed the Cambodia and Thailand chapters to Labor and Employment Disputes 2024.
October 1, 2024
Four of Tilleke & Gibbins’ labor and employment specialists in Bangkok have contributed the Thailand chapter to the newly issued Labor and Employment Disputes 2024, a comprehensive guide from Lexology Panoramic to labor and employment dispute resolution in various jurisdictions around the world. The Thailand chapter covers the following topics: Pre-action considerations: Key requirements, third-party funding, contingency fee arrangements Issuing a claim: Forum, territorial jurisdiction, standing, commencing claims, fees, service Defendants and legal personality: Types of claims, time limits, counterclaims Case management: Procedure, rules, amendments to claims, adding parties to proceedings, consolidating proceedings Class and collective actions: Special considerations Evidence: Witnesses, tactical considerations Interim relief: Availability, requirements Trial: Hearings conduct and typical time frames, confidentiality and public access, media reporting Elements of successful claims and burden of proof Alternative dispute resolution: Available types, requirements and expectations Enforcement: Collective employment and labor rights, enforcement of collective rights, standing Remedies and enforcement: Available remedies, assessing compensation, enforcement mechanisms Appeals: Appeal procedure and time frames, other means of challenge Update and trends: Recent cases and developments, technology developments, other issues The Thailand chapter was authored by Eric M. Meyer, Chusert Supasitthumrong, Pathanin Sornchangwat, and Chayathorn Kruatao, all in the Thailand dispute resolution and litigation team. Tilleke & Gibbins also contributed the Cambodia and Vietnam chapters to Labor and Employment Disputes 2024. The full Thailand chapter is available below as a PDF.
August 14, 2024
Myanmar has once again made significant amendments to its minimum-wage framework by introducing additional allowances for both public- and private-sector workers. On August 9, 2024, the National Committee for Setting the Minimum Wage issued Notification No. 1/2024, which entitles private-sector workers to a new additional daily allowance of MMK 1,000 (approximately USD 0.48). This increase is on top of the MMK 1,000 additional daily allowance introduced last year. As a result, workers at private-sector employers with more than 10 employees are now entitled to the base minimum wage of MMK 4,800 plus additional allowances of MMK 2,000, for a total of MMK 6,800 (approximately USD 3.20) per day for an eight-hour workday, effective August 1, 2024. A similar additional allowance had been announced for workers in government departments and organizations on July 26, 2024. Background The MMK 4,800 (approximately USD 2.29) minimum wage for an eight-hour workday (equivalent to MMK 600 per hour) was established in May 2018 for all workers, irrespective of location or job type. In September 2023, the Ministry of Planning and Finance announced an additional daily benefit of MMK 1,000 for workers in government departments and organizations, and on October 9, 2023, the National Committee for Setting the Minimum Wage extended this benefit to workers at private-sector employers with more than 10 employees, bringing the effective minimum daily wage to MMK 5,800 (approximately USD 2.77). These changes took effect on October 1, 2023. Applicability of Additional Allowances for Private-Sector Workers The latest announcement also entitles employees to the base minimum wage and additional allowances for days used from their entitlement to leave and holidays, in accordance with the 1951 Leave and Holidays Act. However, the daily allowances—totaling MMK 2,000—are not to be included when calculating overtime payments. Instead, overtime payments must be calculated based on