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Termination and Severance Policies

Learn about the legal processes for employee termination and severance in Cambodia

Notice period

In Cambodia, the notice period an employer or employee must provide before terminating an employment contract is regulated by the Cambodian Labor Law, specifically Articles 67, 70, and 75. The required length of notice depends on the type of contract and the employee's length of service.

Notice Periods for Fixed Duration Contracts (FDC)

For contracts of 6 months or less, no notice period is required as per Labor Law, Article 67. For contracts lasting more than 6 months to 1 year, a 10-day notice is required, and for those lasting more than 1 year, a 15-day notice is required. If an employer fails to provide proper notice before the end of an FDC, the contract may be automatically renewed for an equivalent period or become an Indefinite Duration Contract (IDC).

Notice Periods for Indefinite Duration Contracts (IDC)

The required notice periods for IDCs are based on the employee's length of continuous service with the employer. For employees who have served less than 6 months, a 7-day notice is required. For those who have served 6 months to 2 years, a 15-day notice is required. For employees who have served 2 to 5 years, a 1 month's notice is required. For those who have served 5 to 10 years, a 2 months' notice is required, and for those who have served more than 10 years, a 3 months' notice is required.

Important Considerations

Employees are entitled to up to two days of paid leave per week during the notice period to search for a new job as per Labor Law, Article 70. Additionally, employees may terminate their employment early during the notice period if they secure a new job.

Severance pay

Severance pay in Cambodia is primarily governed by the Cambodian Labor Law of 1997. The law distinguishes between severance pay based on the type of employment contract.

Fixed-Duration Contracts (FDC)

Employees under FDCs are entitled to severance pay upon the contract's expiration or lawful termination. The severance pay is calculated as a minimum of 5% of the total wages received during the contract's entire duration, as per Article 72 of the Labor Law.

Unlimited Duration Contracts (UDC)

Employees under UDCs are entitled to severance pay when their contract is terminated for reasons other than serious misconduct. The calculation of severance pay, according to Article 89 of the Labor Law, is based on the length of service. It is 7 days of wages and benefits for employment between 6 months and 1 year, and 15 days of wages and benefits for each full year of employment.

Changes to Severance Pay

The 2018 amendment to the Labor Law removed the previous cap on severance pay, which was a maximum of 6 months' wages.

Additional Notes on Severance Pay

Severance pay includes regular wages and other standard benefits. Employers are obligated to provide severance pay in addition to other end-of-contract payments such as final wages and unused leave compensation. Employees may forfeit severance pay rights if they terminate an employment contract without a valid legal reason.

The Cambodian Labor Law (1997) provides the primary legal framework for severance pay entitlements. Relevant Prakas (Ministerial Decrees) may provide additional clarifications and specific calculations methods for severance pay.

Termination process

Terminating an employee in Cambodia significantly depends on the type of employment contract in place.

Fixed-Duration Contracts (FDC)

FDCs generally expire on a pre-determined end date. No additional formal termination is necessary. Both the employer and employee can mutually agree to terminate the FDC early, with terms outlined in a written agreement signed in the presence of a labor inspector (Labor Law, Article 70). The employer or employee may terminate the FDC early for lawful reasons like force majeure or breach of contract, but specific procedures must be followed.

Unlimited Duration Contracts (UDC)

An employer must observe notice periods and may need to provide valid justification (Labor Law, Articles 75 and 83). Examples include economic hardship, redundancy, or disciplinary reasons. An employee can terminate a UDC with notice but may forfeit severance pay if no valid legal justification exists.

General Procedures for Termination

  1. Notification: Written termination notice must specify the reason(s), effective date, and applicable compensation. Notice periods, if applicable, must be observed.
  2. Documentation: A written record of termination should be kept, ideally signed by both parties.
  3. Settlement of Entitlements: This includes payment of final wages and unused leave compensation.

Important Considerations

Disputes about termination may proceed to mediation or arbitration and ultimately to labor courts. Collective Bargaining Agreements (CBA) may contain additional provisions and procedures regarding termination.

The primary legal source for employment termination is the Cambodian Labor Law (1997), outlining notice periods, compensation requirements, and grounds for dismissal. Specific Prakas (Ministerial Decrees) may be issued relating to termination procedures and administrative requirements.

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