If an employee with an undetermined duration contract is terminated for any reason other than the their own serious misconduct, and at least one month has passed since the last seniority payment without the subsequent seniority payment being paid, then the employee is entitled to a seniority payment equal to seven days of wages and fringe benefits. The amendment is silent as to whether an employee hired under a fixed term contract would be entitled to this seniority payment.
The amendment follows the existing formula under the Labor Law for calculating the daily wage of an employee for indemnity payments. The daily wage is calculated based on all wages and fringe benefits, including commissions and bonuses, that an employee received within the past 12 months of service. That said, ambiguities remain as to the exact formula for determining the daily wage as no formula is provided.
In addition to matters related to the seniority payment, the amendment also addresses damages for early termination of an employment contract. First, the amendment addresses an earlier ambiguity in the Labor Law by clarifying that if a company closes down and terminates its employees it will not be required to pay its employees any damages or compensation in lieu of prior notice under the Labor Law. Second, the amendment states that if an employee is entitled to damages, the employee can request a lump sum payment that is equal to all previous seniority payments received, plus any future seniority payments to be received under the employee’s contract, in lieu of proving the actual amount of damages. This revision is significantly pro-employee, as the Labor Law previously capped damages at six months of wages and fringe benefits.
The amendment states that the Ministry of Labor and Vocational Training will issue further additional regulations to address ambiguities in the applicable law and to more specifically clarify the implementation of the seniority payment.
Ambiguities under the new amendment that are yet to be resolved include:
- whether an employee under a fixed-term contract is entitled to receive a seniority payment;
- whether an employee hired before this amendment is entitled to a seniority bonus for time employed before the enactment of this amendment;
- whether an employer can pay all employees a seniority payment at the same time or whether the employer must time the seniority payment to each employee’s specific start date; and
- the specific conditions under which an employer may terminate employees when closing down an enterprise without having to pay damages and compensation in lieu of prior notice.
Regardless of any future clarification, it is clear that employers will be obliged to make the mandated seniority payments for any employees hired after the implementation of this amendment, and all companies with employees in Cambodia would be prudent to take note of this significant change in future staffing decisions.