Hire in Cambodia through our Employer of Record (EOR)

Cambodia's employment landscape is characterized by a young, growing workforce predominantly engaged in agriculture, with emerging sectors like garment manufacturing, construction, and tourism playing increasingly important roles. The country faces challenges in education and skill development, with efforts underway to address these issues and diversify the economy. Despite progress, there remains a significant skills gap, particularly in technical and soft skills, which impacts the labor market dynamics.

Overview of Labor Laws

Cambodia's labor laws provide a framework for employment relationships, covering areas such as working hours, minimum wage, and employee rights. The Labor Law of 1997 is the primary legislation governing employment in the country. It stipulates a standard 48-hour workweek, sets provisions for overtime pay, and mandates at least one day off per week. The law also covers aspects of occupational health and safety, social security, and trade union rights.

The minimum wage is regularly reviewed and adjusted, particularly for the garment and footwear sector, which has seen steady increases in recent years. However, enforcement of labor laws can be inconsistent, especially in informal sectors and rural areas.

Cultural Considerations

Cultural norms significantly influence the Cambodian workplace. Family obligations often take precedence over work commitments, and employers are generally expected to be understanding of this. The concept of 'face' is crucial in Cambodian culture, affecting communication styles and conflict resolution in the workplace.

Hierarchy is deeply ingrained in Cambodian society, reflected in organizational structures where respect for authority and seniority is paramount. Decision-making tends to be top-down, with limited input from lower-level employees. Leadership styles often lean towards paternalistic, with managers taking a personal interest in their employees' well-being.

Communication in Cambodian workplaces tends to be indirect, with an emphasis on maintaining harmony. Direct criticism or confrontation is generally avoided, and nuanced interpretation of non-verbal cues is often necessary to understand true meanings.

Challenges of Direct Hiring

Direct hiring in Cambodia presents several challenges for foreign employers:

1. Skill Mismatch: The gap between available skills and job requirements can make it difficult to find suitable candidates, especially for technical or specialized roles.

2. Language Barriers: While English proficiency is improving, particularly in urban areas, it can still be a significant obstacle in recruitment and daily operations.

3. Cultural Differences: Understanding and navigating local cultural norms, especially regarding communication and workplace relationships, can be challenging for foreign employers.

4. Legal Complexities: Cambodia's labor laws and regulations can be complex and subject to change, making compliance difficult without local expertise.

5. Administrative Burden: Setting up a legal entity, managing payroll, and ensuring compliance with local tax and social security requirements can be time-consuming and complex.

6. Retention Issues: High turnover rates, particularly in certain sectors, can make it challenging to maintain a stable workforce.

7. Limited Talent Pool: For certain specialized roles, the local talent pool may be limited, necessitating the need to look for expatriate talent or invest heavily in training and development.

These challenges underscore the importance of having a deep understanding of the local context or partnering with local experts when hiring in Cambodia. An Employer of Record (EOR) service can be particularly valuable in navigating these complexities, ensuring compliance, and facilitating smooth employment relationships in this unique cultural and legal landscape.

Cambodia's payroll and tax system is a crucial aspect of employment relationships in the country. Both employers and employees have specific responsibilities and contributions to make, ensuring compliance with local regulations and supporting the nation's social security framework. Let's delve into the details of payroll and taxes in Cambodia, exploring the obligations for both employers and employees.

Cambodia operates a Pay-As-You-Earn (PAYE) system, where employers are responsible for withholding and remitting taxes on behalf of their employees. The tax system is designed to ensure that both local and foreign workers contribute to the country's development while providing social security benefits. Understanding these requirements is essential for businesses operating in Cambodia and individuals working in the country.

Employer Contributions

Employers in Cambodia have several financial obligations when it comes to payroll and taxes:

1. Tax on Salary (ToS): Employers must withhold and remit the Tax on Salary from their employees' monthly wages. The amount varies based on the employee's salary and tax residency status.

2. Tax on Fringe Benefits (ToFB): Any additional benefits provided to employees, such as housing allowances or company cars, are subject to the Tax on Fringe Benefits. Employers must calculate and remit this tax monthly.

3. Monthly Prepayment Tax: Companies are required to pay a monthly prepayment tax, which is 1% of their monthly turnover. This serves as a minimum tax and is offset against the annual income tax liability.

4. National Social Security Fund (NSSF): Employers with eight or more employees must register with the NSSF and contribute 0.8% of each employee's monthly wage to cover Occupational Risk Compensation (ORC).

5. Skills Development Fund (SDF): Depending on the industry and other factors, some employers may be required to contribute to the SDF to support workforce development initiatives.

6. Withholding Tax: Employers must withhold tax on payments for royalties and rent to both resident and non-resident recipients.

It's important for employers to maintain accurate records of all employee salaries, taxes withheld, and contributions made to ensure compliance with Cambodian tax regulations.

Employee Contributions

While employers bear the majority of the tax and social security burden in Cambodia, employees also have certain financial responsibilities:

1. Income Tax: Employees are subject to income tax, which is withheld at source by their employers. The tax is calculated based on a progressive rate structure, with rates varying depending on the individual's income level.

2. National Social Security Fund (NSSF): Employees contribute 0.8% of their gross salary to the NSSF for work-related injury and illness benefits.

3. Voluntary Pension Contributions: If offered by the employer, employees may choose to make additional voluntary contributions to a pension plan.

4. Union Membership Fees: If applicable, union membership fees can be deducted from an employee's salary.

Employees should be aware that they may be eligible for certain tax allowances or deductions, which could potentially reduce their overall income tax burden. It's advisable for individuals to stay informed about the latest tax regulations and consult with tax professionals to optimize their tax positions.

In conclusion, understanding the payroll and tax system in Cambodia is crucial for both employers and employees. By fulfilling their respective obligations, they contribute to the country's economic growth and social welfare system while ensuring compliance with local regulations. As tax laws and contribution rates may change over time, it's essential to stay updated with the latest information from the General Department of Taxation (GDT) and seek professional advice when needed.

Cambodia offers a comprehensive set of employee benefits, both mandatory and optional, designed to support workers and enhance their overall well-being. As an Employer of Record (EOR), Rivermate expertly manages these benefits, ensuring compliance with local labor laws while also helping companies attract and retain top talent. By partnering with an EOR, businesses can navigate the complexities of Cambodia's benefit landscape with ease, focusing on their core operations while providing employees with the support they need.

Mandatory Benefits

Cambodia's labor law mandates several benefits that employers must provide to their employees:

• Annual Leave: Employees accrue 1.5 days of paid leave per month after one year of service, totaling 18 days annually for full-time workers.
• Public Holidays: Workers are entitled to paid time off for 15 public holidays throughout the year.
• Sick Leave: Up to six months of sick leave is available with a valid medical certificate.
• Maternity Leave: Female employees receive 90 days of paid maternity leave at 50% of their regular salary.
• Social Security: Employers and employees contribute to a mandatory social security scheme covering healthcare, pensions, and unemployment benefits.
• Probationary Period: A probationary period of up to six months is allowed for new hires.
• Notice Period: Both parties must provide notice before terminating employment, with the duration depending on length of service.
• Severance Pay: Employees may be entitled to severance pay under specific circumstances.
• Overtime Pay: Workers receive higher rates for overtime hours worked.

Optional Benefits

To create a more competitive and attractive work environment, employers in Cambodia often offer additional benefits:

• Health and Wellness Benefits:

  • Comprehensive health insurance plans
  • Life insurance coverage
  • Wellness programs and gym memberships

• Financial Benefits:

  • Housing allowances to assist with living costs
  • Transportation allowances or company-provided transportation
  • Meal allowances
  • Performance-based bonuses

• Work-Life Balance Benefits:

  • Flexible working arrangements, including remote work options
  • Additional paid time off beyond mandatory leave
  • On-site amenities such as daycare facilities or relaxation areas

• Professional Development:

  • Training programs and conference attendance opportunities
  • Tuition reimbursement for further education

• Employee Recognition Programs:

  • Rewards and recognition for outstanding achievements

• Company Discounts:

  • Special offers on company products or services for employees

By offering a mix of these mandatory and optional benefits, employers in Cambodia can create a supportive and attractive work environment that promotes employee satisfaction and retention. As an EOR, Rivermate ensures that all mandatory benefits are properly administered while also helping companies implement optional benefits that align with their organizational goals and culture.

The process of termination and offboarding in Cambodia involves several important steps and considerations. Understanding these procedures is crucial for both employers and employees to ensure a smooth transition and compliance with local labor laws.

When it comes to terminating an employment contract in Cambodia, employers must have valid grounds for dismissal. These can include unsatisfactory performance, disciplinary reasons, or economic factors affecting the business. In cases of serious misconduct, such as violence, fraud, or repeated unauthorized absences, employers may terminate the contract without notice.

For standard terminations, proper notice must be given. The notice period varies depending on the type of contract and the employee's length of service. Fixed-duration contracts typically require notice equal to the pay period, while indefinite-duration contracts have longer notice periods based on seniority, ranging from 7 days to 3 months.

Severance pay is another important aspect of the termination process. Employees dismissed for economic or operational reasons under a fixed-duration contract are entitled to severance pay, calculated at 5% of the total wages received during the contract period.

Offboarding Process

The offboarding process in Cambodia should include the following steps:

1. Formal Notification: Provide the employee with a written termination notice, clearly stating the reasons for dismissal and the effective date.

2. Exit Interview: Conduct an exit interview to gather feedback and ensure a professional closure to the employment relationship.

3. Return of Company Property: Collect all company-owned items, such as laptops, access cards, and uniforms.

4. Final Pay Calculation: Prepare the final paycheck, including any outstanding wages, unused leave, and applicable severance pay.

5. Documentation: Complete all necessary paperwork, including termination letters and certificates of employment.

6. Benefits Closure: Inform relevant departments to process the termination of benefits, such as health insurance and pension contributions.

7. Knowledge Transfer: Arrange for the departing employee to hand over their responsibilities and share important information with colleagues or their replacement.

8. System Access Revocation: Ensure all access to company systems, email accounts, and sensitive information is revoked.

By following these steps and adhering to the legal requirements for termination, employers in Cambodia can maintain compliance with labor laws while ensuring a professional and respectful offboarding process for their employees.

Cambodia, with its growing economy and increasing foreign investment, has become an attractive destination for international workers. However, navigating the visa and work permit requirements can be complex for both employers and employees. Here's a concise overview of the key points to consider:

Visa Requirements

Foreign nationals planning to work in Cambodia typically need to obtain a business visa (Type E). This visa can be acquired upon arrival at major entry points or through Cambodian embassies abroad. The initial business visa is usually valid for one month and can be extended for longer periods.

Work Permit Process

1. Employment Card: All foreign employees must obtain an Employment Card from the Ministry of Labor and Vocational Training.

2. Work Permit: After receiving the Employment Card, workers must apply for a Work Permit, which is valid for one year and renewable annually.

3. Employer Responsibilities: Employers are required to register foreign employees and assist with the work permit application process.

Key Considerations

• Timing: The work permit application should be initiated within 30 days of entering Cambodia or starting employment.

• Documentation: Various documents are required, including a valid passport, visa, employment contract, and health certificate.

• Quota System: Cambodia maintains a foreign worker quota, generally limiting foreign employees to 10% of a company's workforce.

• Renewals: Work permits and visas must be renewed annually, with the process typically starting 30 days before expiration.

Penalties for Non-Compliance

Failure to comply with visa and work permit regulations can result in fines, deportation, and legal consequences for both employers and employees.

Understanding and adhering to Cambodia's visa and work permit requirements is crucial for foreign workers and their employers. While the process may seem daunting, proper planning and assistance from experienced professionals can help ensure compliance and a smooth transition for international employees in Cambodia.