Cambodia Investment Review

Cambodian employment law in the age of COVID-19

Cambodian employment law in the age of COVID-19

Brian Badzmierowski

COVID-19 changed the nature of doing business under Cambodian employment law as employees were laid off while employers struggled to stay afloat. 

As the virus continues to wane, employers are now focused on keeping their offices COVID-free to keep operations rolling, but are they legally allowed to require employees to vaccinate?

Jay Cohen, partner, and director at the Tilleke & Gibbons law office in Phnom Penh joined Tilleke associate Sochanmalisphoung Vannavuth to discuss these issues and more at a conference on Wednesday organized by the Australian Chamber of Commerce.

According to Cohen, many of the COVID-induced layoffs were valid because Cambodian law allows companies to suspend employees due to force majeure or serious economic distress.

Force majeure occurs when a party is prevented from fulfilling its contractual obligations due to unforeseeable circumstances.

Since COVID-19 was an unforeseen event that also put companies in economic straits, employers can use this as a defense for laying off employees.

Under Cambodian employment law, dismissed employees should be eligible for seniority payments equal to 7.5 days of salary every six months.

However, the Cambodian government suspended seniority payments for 2020 due to COVID. The payments were due to be made this year but it is unclear who has received those payments and which workers are still waiting.

Cohen said this issue will likely soon be addressed.

“Currently there is no obligation to pay them. But as COVID is now coming to an end and Cambodia is opening up, we can anticipate that the Ministry of Labor will clarify seniority payment obligations of employers shortly,” he said.

Over 150,000 workers were laid off in the garment and tourism industries during the pandemic. 

NagaWorld also laid off around 1,300 employees in April in reaction to falling profits and avoided paying its suspended workers their full compensation due to regulations that were relaxed due to the pandemic. 

Airport workers also suffered layoffs as travel ground to a halt due to COVID.

Cambodian employment law – Can employees be forced to vaccinate?

Concerning vaccines, Vannavuth said that April’s Sub-Decree No. 66 stipulated that public officials receive vaccinations, but these requirements have yet to be extended to the private sector. 

A gray area exists because it is unclear if an employer terminating an employee based on their vaccination status is considered discrimination.

Cambodian law protects all employees from discrimination based on race, color, gender, religion, political opinion, ancestry, social origin and union membership or union activities.

How will the new Cambodian employment pension system work

Cambodia’s new pension system, which has yet to be enacted, bears watching because it is not yet clear if pension contributions will be capped.

The new pension scheme falls under a company’s mandatory National Social Security Fund (NSSF) contributions. Under Cambodian law, companies must pay .8 percent of each employee’s average salary for occupational risk insurance and 2.6 percent of salaries towards health insurance.

The law also dictates that four percent of an employee’s gross salary will be apportioned for a pension, with two percent paid by the company and two percent paid by the employee. These rates are set to increase every five years.

While the health insurance requirement is capped at $10.20 per month, there is yet no cap for the pension funds. This could result in costly payments for well-paid employees.

“I think this is a hot issue and it’s something that employers should be looking out for to see when the new pensions and regulations are enacted and whether it actually gives some more clarity on whether there are any caps on the four percent payments because that could actually be a significant payment if that is not capped.”

Contracts, overtime, and sick leave in Cambodian employment law

Cohen also clarified the laws governing contracts, overtime pay, and sick leave.

There are two types of contracts available for employees in Cambodia: undetermined duration contracts and fixed duration contracts, and benefits vary depending on which contract an employee signs. For example, seniority payments are only available to employees on undetermined contracts, Cohen said. 

Employees on fixed duration contracts, which have a maximum length of four years, are entitled to five percent of their total wages paid as a severance package. 

Employers are permitted to extend probationary periods of three months for regular employees, two months for specialized employees, and one month for non-specialized employees.

While working days are capped at eight hours per day, under Cambodian law employers are permitted to force employees to work six days a week – typically from Monday to Saturday – or 48 hours per week.

The normal rate for overtime pay is 150 percent of a regular wage and is capped at two hours per day. Employees who work at night are entitled to 130 percent pay, while overtime pay on public holidays earns employees 200 percent of their normal pay rate.

While Cambodian overtime law exists, it is not always followed

For maternity leave, employees are entitled to 50 percent of their wages while on leave if they have worked at the company for at least one year. If they have worked under one year, no payment is required.

Sick leave is generous in the Kingdom, as employers with more than eight employees are required to pay 100 percent of a sick employee’s wage for the first month of their illness. For the second and third months, employers pay 60 percent of the employee’s salary, and starting with the fourth month, no payment is required. 

Workers in the garment and footwear industries are the only employees in the Kingdom to be guaranteed a minimum wage, which was raised to $192 per month this year and $194 in 2022. 

Protection of personal data is still in its early stages in the Kingdom, with the only legal mention occurring in the recently passed Law on E-commerce, Vannavuth said.

She said under this law, businesses that store personal information must take action to ensure the information is protected.

While personal data is still loosely defined under Cambodian law, Vannavuth said employers should request the consent of employees to store their personal information and fully inform them about how their data will be used or shared.

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