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Employment Agreement Essentials

Understand the key elements of employment contracts in Cambodia

Types of employment agreements

In Cambodia, the labor law recognizes two main categories of employment contracts based on their duration: Fixed-Duration Contract (FDC) and Undetermined-Duration Contract (UDC).

Fixed-Duration Contract (FDC)

A Fixed-Duration Contract (FDC) is an employment agreement that specifies a predetermined end date for the employment relationship. These contracts are suitable for temporary positions, project-based work, or seasonal needs.

  • Maximum Duration: An FDC cannot exceed two years in total, including any renewals.
  • Renewal: The contract can be renewed by mutual agreement between the employer and employee, as long as the total duration doesn't surpass two years.
  • Termination: Early termination before the expiry date requires a mutual agreement or a valid reason with justification according to labor law, such as serious misconduct by the employee.

The legal source for this information is Article 67 of the Labor Law of Cambodia.

Undetermined-Duration Contract (UDC)

An Undetermined-Duration Contract (UDC), also known as an indefinite contract, is an employment agreement that has no predetermined end date. This is the most common type of employment contract in Cambodia and offers greater job security for the employee.

  • UDCs provide ongoing employment until terminated by either party with proper notice periods outlined in the Labor Law.

The legal source for this information is Article 68 of the Labor Law of Cambodia.

Essential clauses

An employment agreement in Cambodia should clearly identify both the employer and employee, including their full names, addresses, and identification details. It should specify the type of contract, whether it's a Fixed-Duration Contract (FDC) or an Undetermined-Duration Contract (UDC), and outline the duration if applicable.

Job Description and Workplace

The agreement should clearly define the employee's job title, duties, and responsibilities. It should also specify the primary work location, including details on remote work arrangements if applicable.

Compensation and Benefits

The contract should outline the employee's gross salary, payment frequency, and any allowances. It should detail any benefits offered, such as health insurance, paid leave entitlements (including minimum annual leave of 1 day per month accrued), and mandatory social security contributions.

Working Hours and Overtime

The agreement should clearly define standard working hours per day and week, including rest periods, as stipulated by Cambodian labor law (typically 8 hours per day and 48 hours per week). It should establish procedures and compensation rates for overtime work if applicable (overtime pay must be at least 1.5 times the regular wage).

Leave Policies

The contract should outline procedures for requesting and obtaining paid leave, including annual leave, sick leave, and maternity/paternity leave as mandated by law.

Intellectual Property

The agreement should address the ownership of intellectual property created by the employee during their employment.

Termination Clauses

The contract should outline grounds and procedures for termination by either party, adhering to Cambodia's Labor Law (e.g., providing notice periods). It should specify any required severance pay or compensation due in case of termination (with higher severance for termination without cause).

Probationary period

The probationary period is a trial phase in a Cambodian employment relationship. It allows both employers and employees to assess suitability before committing to a long-term arrangement.

Cambodia's Labor Law establishes the foundation for probationary periods in employment contracts. The maximum duration varies depending on the type of contract:

  • For Fixed-Duration Contracts (FDCs), the probationary period cannot exceed two months.
  • For Undetermined-Duration Contracts (UDCs), the standard probationary period is two months. However, under specific circumstances, it can be extended up to six months. These circumstances include positions that involve complex technical skills and significant responsibility, or when a longer period is deemed necessary to properly evaluate the employee's capacity for the role.

It's important to note that employers cannot arbitrarily extend the probationary period beyond the legal limits.

Purposes of the Probationary Period

The probationary period offers benefits for both employers and employees:

  • From the employer's perspective, it allows them to evaluate the employee's skills, knowledge, and work ethic to ensure they meet job requirements. It also helps assess the employee's fit within the company culture and team dynamics.
  • From the employee's perspective, it provides an opportunity to gain a deeper understanding of the job duties and responsibilities. It also helps determine if the work environment aligns with their expectations and career goals.

Key Points to Remember

During the probation period, both parties can terminate the contract with a shorter notice period compared to a confirmed employee. Open communication regarding expectations and concerns is crucial for a successful probationary period. Employers should provide adequate training, support, and feedback during the probation to help new hires succeed. By effectively utilizing the probationary period, Cambodian employers can make informed decisions about confirming employees and build a strong foundation for successful long-term working relationships.

Confidentiality and non compete clauses

In Cambodia, employment agreements may incorporate confidentiality and non-compete clauses to safeguard sensitive company data and potentially restrict competition from former employees. However, understanding the legal context of these clauses in Cambodia is crucial.

Confidentiality Clause

A confidentiality clause prevents employees from revealing confidential business information to unauthorized third parties. This could include trade secrets, client lists, marketing strategies, or unpublished inventions.

Key Points:

  • The agreement should explicitly define what is considered confidential information.
  • The clause should specify the duration of the confidentiality obligations, which may extend beyond the employment term.
  • Unlike some jurisdictions, Cambodia's Labor Law does not explicitly regulate confidentiality clauses. However, Cambodian courts are likely to uphold reasonable confidentiality clauses that protect legitimate business interests.

Legal Source: Although it does not directly address confidentiality clauses, the Labor Law of Cambodia (1997) establishes a general framework for employee obligations.

Non-Compete Clause

A non-compete clause limits an employee's ability to work for a competitor or start a competing business after leaving the company.

Legal Considerations in Cambodia:

  • Unlike confidentiality clauses, non-compete clauses are not explicitly recognized or regulated by Cambodian labor law.
  • Due to this lack of legal precedent, the enforceability of non-compete clauses in Cambodia is uncertain. Courts may consider them an unreasonable restriction on an employee's right to work.

Alternatives to Non-Compete Clauses:

  • Employers may consider non-solicitation clauses, which restrict employees from soliciting the company's clients or employees for a certain period after leaving.
  • Non-disclosure of know-how clauses can prevent employees from using specific knowledge or expertise acquired during their employment for the benefit of a competitor.
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