Cambodia, located on the Indochinese mainland, is characterized by plains and rivers and is situated between Chinese and Indian trade routes. According to the International Monetary Fund (IMF), Cambodia is forecasted to have the fastest-growing economy in Southeast Asia, with a projected GDP growth rate of 6.9% by 2025. With a population of 17 million, this growth is expected to positively impact the country’s economic development in the coming years.
Cambodia has implemented business-friendly regulations to promote investment and entrepreneurship, such as tax breaks and streamlined registration procedures. Hence, Cambodia can be a fantastic option for entrepreneurs and small business owners wishing to tap into a rapidly expanding market with a positive business climate.
Recruitment and selection in Cambodia involves a significant commitment and comes with increased liabilities and regulations, making it important to understand the process and requirements involved.
Now, how to get started with the hiring process in Cambodia?
Read on to learn the nitty-gritty of hiring employees in Cambodia.
Things to Know Before Hiring in Cambodia
Before carrying on with recruitment and selection in Cambodia, one must know the following.
Working hours and overtime
As stipulated by Cambodian employment law, the standard working schedule consists of eight hours per day and 48 hours per week. An employee cannot work more than 10 hours of overtime per day, which includes their regular work hours. They also have the option to choose not to work overtime.
The overtime is limited to two hours per working day over the normal eight hours. In Cambodia, employees who work overtime during normal working hours are eligible to receive overtime pay of 150% of their regular hourly wage. However, employees who are engaged in permanent or shift work that falls between 10:00 pm to 5:00 am are allowed to receive overtime pay at a rate of 130% of their normal pay rate.
According to recent news reports, the minimum wage in Cambodia as of 2022 is KHR 7,86,670.00US ($194) per month. However, in September 2022, the authorities raised the minimum wage to KHR 818,800.00 (US$200) per month, effective 1 January 2023.
Bonuses in Cambodia include seniority bonuses and attendance bonuses. Seniority bonus is given after a year of employment and ranges from 8,000 KHR to 44,000 KHR per month, equal to the year of service, and is capped at 44,605.00 KHR after 11 years of service.
On the other hand, an attendance bonus is given to regular employees who are paid at a fixed rate of 40,000 KHR per month.
Probationary and notice periods
The maximum duration of the probationary period, as specified by the law in Cambodia, is three months for regular employees, two months for specialized employees, and one month for non-specialized employees.
Employers looking to hire staff in Cambodia should note that the notice period structure in Cambodia varies according to the length of service.
- Six months / less: One week’s notice
- Six months – 2 years: Two weeks’ notice
- Two years – 5 years: One month’s notice
- Five years – 10 years: Two month’s notice
- More than ten years: Three month’s notice
Someone looking to recruit Cambodian employees should know about the following rules:
- Employers must provide paid annual leave to their staff members for 18 days a year, or 1.5 days per month.
- In Cambodia, employees who have completed three consecutive years of service are entitled to an extra day of annual leave. This means they will be eligible for 19 days of paid annual leave each year after three years of continuous employment. After six years of continuous employment, they will be eligible for 20 days of paid annual leave per year.
The number and dates of paid public holidays are determined by a Prakas that is issued annually by the Ministry of Labor. There are around 22 public holidays.
The list of paid holidays:
- International New Year’s Day
- Victory Over Genocide Day
- International Women’s Day
- Khmer New Year
- International Labor Day
- King Birthday
- Visak Bochea Day
- Royal Plowing Ceremony
- King Mother’s Birthday
- Constitution Day
- Pchum Ben Day
- The commemoration of Former King Norodom Sihanouk
- King’s Coronation Day
- Independence Day
The sick leave policy in Cambodia is not mandated by law. However, employers can choose to provide sick leave to their employees. In Cambodia, employers are required by the Ministry of Labor and Vocational Training (MLVT) and the Department of Labor and Vocational Training (DLVT) to provide their employees with either short-term or long-term paid sick leave, as per their Internal Work Rules (IWRs) and other relevant policies.
The general practice in Cambodia is to provide paid sick leave for up to three months, with the first month being paid at 100% of the employee’s salary and the second and third months being paid at 60% of their salary. After the third month, the employee can take unpaid leave for up to three additional months.
The International Labour Organization’s (ILO) Convention No. 183 specifies that maternity leave must be at least 14 weeks, out of which at least six weeks must be taken following childbirth.
There are no specific provisions in Cambodian labor law regarding parental leave. However, employees may request up to 7 days of special leave for personal reasons that affect their immediate family, including the birth of a child.
Additionally, in the event of the death of an immediate family member, an employee is entitled to bereavement leave, although the duration of this leave is not specified.
Social security is an important aspect covered under recruitment and selection in Cambodia. The entitlement of employees to social security benefits is enshrined in the Cambodian Constitution and national development frameworks, including the Rectangular Strategy. However, the specific details of the social security policy for Cambodian employment, such as the types of benefits available and the eligibility criteria, are not concrete.
The International Labour Office (ILO) has implemented a project in Cambodia, funded by the European Commission, to improve social protection and promote employment in the country.
Employers looking to employ Cambodian staff should know the country’s tax laws:
- Employers in Cambodia are responsible for withholding taxes monthly. In Cambodia, the prevailing standard rate of Value Added Tax (VAT) is 10%, which is applicable to most goods and services. However, exports are exempted from VAT, meaning the export rate is 0%. Employers must also pay statutory benefits, including a seniority bonus ranging from $2 to $11 monthly after a year of employment.
- In addition to the above taxes and benefits, the employer is responsible for calculating the severance payment for terminated employees. The notice period and severance payment depend on the length of the employee’s service, as described in.
- Moreover, Cambodia has entered into Double Taxation Agreements (DTAs) with other countries, including Singapore, to promote cross-border trade and investment while improving the mechanism for tax collection and information exchange, as explained in.
Cambodia does not have a personal income tax system. Instead, individuals who derive income from employment are subject to a monthly salary tax. However, consulting income is excluded from this tax and is instead subject to tax on income.
- Cambodia’s employment benefits include a seniority pay policy that mandates employers to pay their employees 15 days of wages and fringe benefits annually.
- Furthermore, Cambodia welcomes foreign investment contributing to its economic growth, with relatively easy business setup procedures and a low-cost workforce.
Termination of employment
According to the Cambodia Labor Law, employees terminated with the cause but without serious misconduct are entitled to prior written notice of termination or compensation in lieu.
The following schedule must be followed when serving a termination notice in writing:
- Ten days – over six month’s service
- 15 days – over one year of service
The Cambodia Labor Law specifies that severance and redundancy pay and the salary must be paid at the end of the month. However, there may be differences in the amount of severance and redundancy pay depending on the type of employment contract used, which includes Fixed Duration Contracts (FDC) and Undetermined Duration Contracts (UDC).
- Employees generally have the right to at least 5% of their total compensation as severance pay after a fixed-term contract.
- Employees on indefinite contracts receive the following severance pay based on their term of service:
- Employees who render 6 to 12 months of service shall be entitled to 7 days’ worth of pay.
- For each year of employment, an employee is eligible for 15 days’ worth of pay, capped at a maximum of 6 months’ worth of wages.
The Cost of Hiring an Employee in Cambodia
Employers must weigh various expenses when employing staff, including recruitment fees in Cambodia, job advertisements, and other aspects of the hiring process.
No specific regulations or guidelines are mentioned regarding the recruitment expenses for employers in Cambodia. Onboarding employees is largely left up to companies, and collective bargaining agreements (CBAs) and trade unions may stipulate separate compliance laws for specific industries.
Cambodian employment law requires employers to provide certain types of remuneration to their employees:
- To comply with Cambodia’s seniority pay policy, employers must pay their employees 15 days of wages and fringe benefits per year, which should be distributed in two payments of 7.5 days every six months. This means the payments should be made in June and December, as stipulated.
- Severance pay should be calculated at 15 days of the regular salary rate for each year of employment, up to a maximum total of 6 months.
- The Employment Injury Insurance Scheme requires employers to pay 0.8% of the employee’s assumed wage before tax.
Pre-employment background checks
Most companies do at least one background check before hiring employees in Cambodia. The costs of background checks for employers in Cambodia vary depending on factors such as the type and scope of the check and the provider.
It is recommended that employers in Cambodia consult with local legal and HR experts to determine the costs and best practices for conducting pre-employment background checks.
It is noted that an employer needs to specify the training cost, the length of time the employee must continue working for the company after completing the training, and the repayment requirements that apply if the employee leaves the company before the specified length of time. The cost of training is a negotiable term between the employer and employee and could vary depending on the specific circumstances of the training program.
What Does a Company Need to Hire Employees in Cambodia?
To start with the recruitment process in Cambodia, a company must first establish a legal entity in the country. One may opt for a subsidiary, a partnership, a private or a public company, or a joint venture.
A company needs to fulfill the following requirements to hire employees in Cambodia:
- A local office
- A legal address registered as the company subsidiary
- A current bank account with a local bank in Cambodia
- Obtain approval from the Ministry of Labour and Vocational Training (MLVT) for a quota to employ foreign employees, if applicable.
- Tax registration
- Federal Insurance
- Social Security adherence
Various Options for Hiring Employees in Cambodia
Typically, there are two ways in which an employer can conduct recruitment and selection in Cambodia.
- Through a subsidiary: To hire employees in Cambodia through a subsidiary, a company must establish its presence in the country. However, the process of hiring through a subsidiary can be resource-intensive and time-consuming. This means that companies must complete the incorporation process before hiring Cambodian employees.
- Through EORs: However, partnering with an Employer of Record (EOR) can be extremely beneficial if a company wants to hire Cambodian employees without a physical business presence.
- Hiring Contractors: To reduce the potential risks of hiring employees in Cambodia, employers may opt to engage independent contractors.
The Steps to Hiring in Cambodia
To recruit Cambodian employees, the following are the steps that a company might follow to carry out a seamless hiring process:
- Post job ads: If someone is looking to post job ads in Cambodia, there are a number of job sites available to help them find the right candidates.
- Screening applications: Employers hiring employees in Cambodia are entitled to conduct background checks before hiring an employee. This step includes checking credit history, criminal records, and previous employment records. Screening allows for a quick shortlisting of the final candidates, making the hiring process quicker.
- Review and shortlist resumes: One can start by reviewing resumes and shortlisting candidates who meet the requirements. Cambodian legislation allows employees to work up to 48 to 60 hours a week, so one needs to ensure that the candidates are willing to work the hours required by the organization.
- Evaluate language proficiency: In Cambodia, Khmer, and English are recognized as official languages, making the country bilingual. Therefore, depending on the job specifications, assessing a candidate’s competency in both languages may be necessary.
- Conduct interviews: Once an employer has shortlisted candidates, they can schedule interviews to assess their skills and suitability for the position. Additionally, consider providing job training to help employees succeed, especially if the position requires specialization.
- Evaluate salary expectations: An employer should also evaluate the candidates’ salary expectations. The average salary for low-skilled employees in Cambodia is $150 to $300 per month, while technicians can earn around $600 per month, and jobs requiring specific specialization can pay over $1,000 per month. Keep in mind that there are different tax brackets in Cambodia based on the salary range.
- An offer letter and employment contract: Companies employing five or more staff members for 24 hours or more per month must offer a written employment agreement. The employer looking to hire employees in Cambodia may choose to reveal the entire contract upfront or disclose essential details and keep the complete document for the onboarding procedure.
- Onboard new employees: As organizations embark on the onboarding process, it’s crucial to develop a thorough employee code of conduct, plan interactive training sessions, create a structured employment agreement, and provide detailed offer letters to ensure a smooth and professional experience for new employees.
Let Multiplier Be Your EOR Platform in Cambodia
Navigating the complex rules and regulations of international jurisdictions can be challenging. Many companies opt for an employer of record (EOR) solution to ensure smooth and compliant hiring processes across borders. Multiplier, a top-tier EOR provider, has established local business entities in more than 150 countries, spanning APAC, Europe, and America.
As a reputable EOR, we provide a seamless onboarding experience for your selected employees, ensuring compliance with employment regulations and delivering comprehensive contracts and protocols while expertly managing benefits and incentives.