Navigating employment termination in Cambodia requires careful adherence to the Labour Law to ensure compliance and avoid potential disputes. Both employers and employees have rights and obligations that must be respected throughout the termination process. Understanding the legal framework is essential for businesses operating in the country, whether dealing with individual dismissals or larger workforce changes.
Properly managing the end of an employment relationship involves several key steps, including providing adequate notice, calculating and paying correct severance, establishing valid grounds for termination, and following specific procedural requirements. Failure to comply with these regulations can lead to significant legal and financial consequences for the employer, including fines, back pay awards, and reinstatement orders.
Notice Period Requirements
The required notice period for terminating an employment contract in Cambodia depends on the type of contract and the employee's length of service. Different rules apply to contracts of definite duration (CDD) and contracts of undetermined duration (CUD).
For Contracts of Undetermined Duration (CUD), the minimum notice period is based on the employee's seniority:
| Length of Service | Minimum Notice Period |
|---|---|
| Less than 6 months | 15 days |
| From 6 months to 2 years | 1 month |
| From 2 to 5 years | 2 months |
| More than 5 years | 3 months |
This notice must be given in writing. The employer can choose to pay the employee in lieu of notice, meaning the employee receives compensation equivalent to the salary they would have earned during the notice period but does not have to work.
For Contracts of Definite Duration (CDD), the contract automatically terminates upon reaching its specified end date. Generally, no notice is required unless stipulated otherwise in the contract itself. However, if a CDD is terminated by the employer before its expiry date without a valid reason (serious misconduct), the employer is typically required to pay the employee compensation equivalent to the wages they would have received until the end of the contract term.
Severance Pay Calculations
Severance pay, also known as indemnity for dismissal, is a mandatory payment for employees on Contracts of Undetermined Duration (CUD) upon termination by the employer, unless the termination is for serious misconduct. The calculation is based on the employee's average wages over the past 12 months and their length of service.
The standard severance pay calculation for CUD employees is as follows:
| Length of Service | Severance Entitlement (per year of service) | Maximum Severance |
|---|---|---|
| From 6 months to 10 years | 15 days of wages | 6 months of wages |
| More than 10 years | 21 days of wages | 9 months of wages |
- Calculation Basis: The "days of wages" are calculated based on the employee's average monthly wage over the last 12 months, divided by 30.
- Proration: Severance is calculated proportionally for incomplete years of service after the first six months.
- Maximum Cap: Severance pay is capped at a maximum of 6 months of wages for service up to 10 years, and an additional 3 months of wages for service exceeding 10 years, totaling a maximum of 9 months of wages for very long-serving employees.
For Contracts of Definite Duration (CDD), upon the expiry of the contract, the employee is entitled to an end-of-contract indemnity. This indemnity is typically calculated at a rate of at least 5% of the total wages paid during the contract term. If a CDD is terminated early by the employer without serious misconduct, the employee is entitled to compensation for the remaining term of the contract, as mentioned previously, in addition to the pro-rata end-of-contract indemnity for the period worked.
Grounds for Termination
Employment contracts in Cambodia can be terminated for various reasons, which are generally categorized as termination with cause or termination without cause.
Termination With Cause (Serious Misconduct): An employer can dismiss an employee without notice or severance pay if the employee commits an act of serious misconduct. The Labour Law provides examples of serious misconduct, which include:
- Theft, embezzlement, or misappropriation of funds or property.
- Acts of violence, assault, or serious insubordination.
- Serious breaches of safety regulations causing significant risk.
- Revealing professional secrets causing prejudice to the enterprise.
- Serious damage to the enterprise's equipment or property.
- Repeated and intentional failure to perform duties after warnings.
- Serious dishonesty or fraud.
For termination based on serious misconduct to be lawful, the employer must follow a specific disciplinary procedure, typically involving a written warning and an opportunity for the employee to explain their actions, unless the misconduct is exceptionally severe.
Termination Without Cause: Termination without cause occurs when the employer ends the employment relationship for reasons that are not due to the employee's serious misconduct. This can include:
- Economic reasons (e.g., reduction in workforce, restructuring).
- Technological changes.
- Closure of the business.
- Employee's inability to perform duties (not due to fault, e.g., long-term illness).
- Other legitimate business reasons not related to serious misconduct.
When terminating a CUD without cause, the employer is required to provide the mandatory notice period and pay the statutory severance pay as detailed above.
Procedural Requirements for Lawful Termination
Regardless of the grounds, employers must follow specific procedures to ensure a termination is lawful. Key procedural steps include:
- Written Notice: For termination without cause (CUD) or termination of CDD before expiry without serious misconduct, a written notice must be provided to the employee respecting the required notice period. The notice should clearly state the effective date of termination.
- Notification to Ministry of Labour: The employer is generally required to notify the Ministry of Labour and Vocational Training (MLVT) of the termination. This notification should typically be done within a specified timeframe (e.g., 15 days) after the termination takes effect.
- Payment of Final Dues: Upon termination, the employer must pay the employee all outstanding wages, accrued unused annual leave, severance pay (if applicable for CUD without cause), and the end-of-contract indemnity (for CDD).
- Issuance of Work Certificate: The employer must provide the employee with a work certificate detailing the period of employment and the type of work performed.
- Internal Disciplinary Process (for Termination with Cause): If terminating for serious misconduct, the employer must follow a fair internal disciplinary process. This typically involves investigating the alleged misconduct, providing the employee with written notification of the allegations, holding a meeting to allow the employee to respond, and issuing a written decision. Failure to follow a fair process can render a termination for cause unlawful.
Common pitfalls include failing to provide sufficient notice, incorrectly calculating severance or end-of-contract indemnity, not having valid grounds for termination, or failing to follow the correct notification and disciplinary procedures.
Employee Protections Against Wrongful Dismissal
Cambodian Labour Law provides employees with significant protections against unfair or wrongful dismissal. If an employee believes they have been unfairly terminated, they have the right to challenge the dismissal.
- Labour Inspectorate: The employee can first file a complaint with the Labour Inspectorate. The Labour Inspector will attempt to mediate a resolution between the employer and the employee.
- Arbitration Council: If mediation fails, the case can be referred to the Arbitration Council, an independent body that handles collective labour disputes and can also hear individual dismissal cases under certain conditions. The Arbitration Council issues awards that are legally binding unless challenged in court.
- Courts: Employees can also pursue their case through the court system.
If a termination is found to be unlawful (e.g., no valid grounds, incorrect procedure, insufficient notice/severance), the employer may be ordered to:
- Reinstate the employee to their position.
- Pay back wages for the period of unemployment.
- Pay additional damages or compensation.
- Correctly calculate and pay the required notice and severance/indemnity.
Employers must maintain thorough documentation throughout the employment relationship and the termination process to demonstrate compliance with the law and defend against potential claims of wrongful dismissal. This includes employment contracts, payroll records, leave records, performance reviews, warning letters, and termination notices.
