In review: entering the employment relationship in Cambodia

All questions

Basics of entering into an employment relationship

The purpose of employment contracts is fundamentally to legally establish employment relationships. There are two types: a fixed duration contract (FDC) and an unfixed duration contract (UDC).

The maximum duration of an FDC is two years. It must be in writing and clearly specify the start and expiry dates. Depending on the purpose of the contract, an FDC may or may not have a clear expiry date.¹⁶ Based on the AC's majority interpretation, when the entire duration of the contractual relationship exceeds two years, whether renewed or not, the FDC will automatically convert to a UDC regardless of the parties' original intent.¹⁷

However, the MLVT issued Instruction 050, which provides that the maximum duration of an FDC (i.e., the initial term of the FDC plus any subsequent renewals, up to a maximum of two years) is contingent upon the duration of the initial FDC. In any event, it shall not exceed a maximum of four years.¹⁸ However, this interpretation is not consistent with past rulings rendered by the AC.

Unlike FDCs, UDCs are not required to be in writing. However, to ensure that the parties are aware of their rights and obligations, it is recommended that they are in writing. UDCs must meet the minimum standards set by the Labour Law (and its related regulations), otherwise they will be unenforceable. However, this does not preclude the parties from agreeing on more favourable terms.¹⁹

Certain mandatory content must be specifically included in any employment contract, such as wages, working hours and other working conditions.²⁰ The term 'working conditions' includes those specified under the Labour Law, such as wages, working hours, night work, weekly time off, paid holidays, paid annual leave, special leave and workers recruited from outside the workplace.²¹

Additionally, the employer may include other necessary terms based on the business's operational needs or requirements. These terms should be added only to the extent necessary and must not contradict the mandatory terms under the Labour Law.

For matters not covered by the employment contract, the Labour Law provisions, other applicable laws and regulations will be applicable by default. Employers are not permitted to unilaterally change the terms and conditions of employment contracts; otherwise, the employee has the right to immediately terminate his or her employment contract.²² The employer should therefore notify and obtain employees' consent to amend any of the terms and conditions of employment.

An initial probation period will apply to an employment contract, during which time an employer may determine the suitability of the relevant employee. Employment contracts can be terminated without notice during the probationary period.²³ This period must not exceed three months for regular employees, two months for specialist workers and one month for non-specialist workers.²⁴

A foreign company that hires employees to carry on business in Cambodia must register its establishment. To hire local employees, the foreign company must assist its local employees in obtaining their work books,²⁵ and declare the recruitment through a declaration of staff movement to the MLVT.²⁶ Furthermore, when a foreign national is employed to work in Cambodia, he or she must obtain a foreign work permit.²⁷ To fulfil this requirement, the company must have a permanent establishment (taxable presence) in Cambodia and be registered with the MLVT.

Alternatively, foreign companies can enter into a service agreement to outsource employees from an agency or labour hire company. In this arrangement, the agency will be responsible for registration of the employees. However, the foreign company cannot exercise direction and supervision over these foreign employees. Similarly, the foreign company can engage an independent contractor, but must refrain from exercising direction and supervision over the independent contractor.²⁸

If an employer substantially supervises and directs the independent contractor, the relationship between the employer and the contractor may be viewed as an employer–employee relationship, thus potentially rendering the employer responsible for all of the employer's obligations under the Labour Law.