Employing in Cambodia: What You Need to Know
Shield GEO is not operating in Cambodia at this time. However, feel free to contact us and we’ll do our best to assist you with your employment needs or connect you with a trusted partner.
Key Factors to Consider When Employing in Cambodia
There are several key areas to be aware of within Cambodia’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.
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Contracts
In Cambodia, employment relationships between an employer and employee can be governed either by oral or written contract. There are two types of contract – Fixed Duration Contracts (also referred to as Specific Duration Contracts), and Undetermined or Unfixed Duration Contracts. The former must be made in writing, otherwise it becomes an unfixed duration contract. Contracts made for a specific duration cannot be made for a period exceeding two years, and may be renewed within this two year limitation. After the two years, the contract becomes an undetermined duration contract.
Employee Entitlements
| Information | Explanation |
|---|---|
| Working on Sundays ? | 100% overtime pay is required if employees are requested to work on Sundays. |
| Disclosure and Confidentiality of Personal Information ? | Employees are protected from disclosure of personal information. |
| Employee Protection and Anti-discrimination Rights ? | The law provides that employers are required to protect employees from discrimination and sexual harassment, although it does not set out penalties if employers fail to do so. |
| Time Off Work ? | Full time employees, who work 48 hours a week, are entitled to 1.5 days of annual leave for one month of service. Payment of the wages during annual leave is required to be made before the worker takes their leave. This is organised individually with the employer. |
| Medical Leave ? | Workers are entitled to up to 6 months sick leave if medical certification is provided by a qualified doctor. For the first month, the employee is entitled to 100% of wages, then 60% for the second and third months, and unpaid leave for the fourth to sixth months. Employers are entitled to dismiss workers after more than 6 months sick leave. |
| Annual Leave Accrual Entitlement ? | A minimum of eighteen days leave with pay is stipulated by law. There is also paid leave for public holidays on New Years Day, Victory Day, Khmer New Year, King’s Birthday and various other holidays. |
| Maternity Leave in Cambodia ? | Female employees are entitled to not less than 90 days at half their regular wage. Some companies allow workers to have a monthly medical check up during their pregnancy by using their annual leave, for up to 5 pre-natal check ups. |
Employment Termination
| Information | Explanation |
|---|---|
| Severance / Redundancy Pay ? | Severance pay is as follows:
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| Termination of Employment ? | Only under very specific circumstances may an employment contract be terminated. These are:
If one party unilaterally terminates an employment contract, the notice period set forth by employment law must be adhered to. They are as follows:
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Probation
| Information | Explanation |
|---|---|
| Probation Period ? | Probationary periods must be separately accounted for within a probationary contract, which can be of a term from between 1 and 3 months. |
Pension
| Information | Explanation |
|---|---|
| Pension Requirements ? | Pension and benefits have not yet been formally implemented in a scheme for Cambodians, but it is common practice for them to be regulated internally by some companies. |
Payroll
| Payroll | Cambodia |
|---|---|
| Management Fee for Employer of Record Services / Monthly Payroll Costs | Shield GEO does not operate in Cambodia. |
| Notes | N/A |
| Currency ? | The official currency is the Cambodian Riel (KHR), although the US Dollar is used almost as frequently, if not more so, than the Riel. |
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| Tax Returns Supplied | Shield GEO does not operate in Cambodia. |
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| Employers Social Security and statutory contributions |
Employers are required to contribute 3.4% of the average monthly wage of workers to the National Social Security Fund (NSSF). |
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| Employees Social Security and statutory contributions |
Employees do not make any contribution to the NSSF. |
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Payroll and Tax in Cambodia
Shield GEO is not operating in Cambodia at this time. However, feel free to contact us and we’ll do our best to assist you with your employment needs or connect you with a trusted partner.
Depending upon whether your company employs foreign nationals or local Cambodian employees, there are a variety of specific rules regarding taxation and payroll in Cambodia. The primary concerns for a foreign company that needs to comply with tax laws in Cambodia are income tax, social security contributions to the National Social Security Fund and resident withholding tax.
- Employee Information Required
- Tax Registration Requirements
- Social Security Registration in Cambodia
- Documentation Required for New Employees
- Corporate Income Tax
- Income Tax Rate
- Sales Tax
- Withholding Tax
- Payment Mode
- Frequency of Salary Payment
- Invoice/Payslips Required
- Minimum Wage in Cambodia
| Information | Explanation |
|---|---|
| Remote Payroll ? | A remote payroll in Cambodia is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Cambodia. Many businesses with branches in Cambodia do not require payroll services all year round and therefore choose to outsource them to a remote payroll. Remote payroll services must complete the initial registration of companies and employees before going on to prepare monthly payroll and other required services. |
| Local Payroll Administration ? | In some cases, a company will register their business in Cambodia under one of the various business entity types available, but may prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider. |
| Internal Payroll ? | Larger companies with significant business involvement in Cambodia may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Cambodian payroll, and can fulfill all tax, withholding, and payroll requirements. This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Cambodian employment laws. |
| Fully Outsourced Payroll & Employment ? | Shield GEO does not operate in Cambodia. |
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Setting up payroll in Cambodia
| Information | Explanation |
|---|---|
| Currency ? | The official currency is the Cambodian Riel (KHR), although the US Dollar is used almost as frequently, if not more so, than the Riel. |
| Employee Information Required ? | Before payroll ledgers can be used, they must be numbered and initialed by the Labor Inspector. It must record:
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| Tax Registration Requirements ? | The following documents must be provided to the General Tax Department:
This is obtained at one of the tax department branch offices at the Khan (district) level, of which there are 7 in each city. Businesses must then submit a written declaration to the Ministry of Labour. |
| Social Security Registration ? | The application form for the National Social Security Fund must be submitted, along with:
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| Documentation Required for New Employees ? | The following documentation is required for new employees:
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Tax Figures
| Information | Explanation | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Corporate Income Tax ? | 20%, with the exception of mining companies (taxed at 30%), and insurance gross premiums (taxed at 5%). |
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| Income Tax Rate ? |
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| Payroll Tax ? | N/A |
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| Sales Tax ? | 10% VAT |
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| Withholding Tax ? | Withholding taxes include the following: |
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| Income Tax (Personal Allowance) ? | N/A |
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| Time to prepare and Pay Taxes ? | 173 Hours |
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| Time required to start a Business ? | 99 Days |
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Payments
| Information | Explanation |
|---|---|
| Payment Mode ? | Direct bank account payment is the most common method. |
| Frequency of Salary Payment ? | 26 fortnightly salary payments are stipulated by the Labour Code. |
| Invoice / Payslips required ? | Payslips must be distributed to staff before money is transferred to their account, written in both Khmer and English. |
| Minimum Wage ? | At present, a minimum wage is only applicable for the garment, textiles and footwear industry, which is $66 per month. |
Immigration and Work Permits in Cambodia
Shield GEO is not operating in Cambodia at this time. However, feel free to contact us and we’ll do our best to assist you with your employment needs or connect you with a trusted partner.
Although Cambodia is known for its leniency in practice with foreign workers possessing appropriate documentation for employment, by law they are required to have the proper visas and work permits in Cambodia, as established by immigration laws. Work permits must be secured for employees, and sponsored by a locally licensed and incorporated entity, which can be a problem for companies just entering the Cambodian market.
Have your own company?
The process of applying for a work permit is quite straightforward. Company management must request a work permit and must be registered with the Labor Ministry. It is possible for companies that have established a Rep (Representative) Office or WFOE (Wholly Foreign Owned Enterprise) in Cambodia to arrange work permits. Long term business visas are known as E Visas are issued for 3, 6, or 12 month durations, however, recent crackdowns by the Government have rendered these insufficient and foreigners are now required to hold valid work permits.
There are two types of work permits available:
Temporary work permits
These are issued to staff and management specialists, technical staff, skilled workers, and service providers or other labourers.
Permanent work permits
These are issued to foreign immigrants duly recognised by the Minister Interior, and foreign investors, spouses, and other dependents who are recognised by the Council for the Development of Cambodia.
The most significant issue in applying for a work permit is that fees are not specified publicly by the Ministry of Interior. The steps can be considered as company level, and employee level information.
Apply for a Business Visa
This can be applied for in advance at the employee’s nearest Cambodian Embassy, and are also available upon arrival at Phnom Penh airport. The E Visa costs US $25.
Obtain approval from the Ministry of Labour and Vocational Training
The employer must first contact the Ministry of Labour and Vocational Training to obtain approval to employ a foreign worker. Unfortunately, public information is scarce as to the estimated time and cost of this step. In general, however, the information can be obtained from the local municipality or province police station, who are able to assist.
Provide all company level information
These documents are:
- The Certificate of Incorporation with company stamp
- Registered business address
- Tax patent with company stamp
- List of expatriate and local employees (ratio must not be below 9:1)
- MOC approval
- Articles of Incorporation of the company
Provide all employee level information
These include:
- Name, gender, date of birth and height
- Copy of an ID card and/or passport
- Copy of E Visas
- Current residential address
- Full names of mother and father
- Education
- Photo of employee
- Health certificate
- Starting date at company, function of the role, weekly hours worked, salary, and form of payment of salary (i.e. cash or EFT)
- Year in which expatriate received their first E Visa
Time: Around 1 month in total
Cost: US$100 annually
Types of visas in Cambodia
| Category | Description of Visa |
|---|---|
| Business Visa (E Visa) | E Visas may be obtained at at the employee’s nearest Cambodian Embassy, and are also available upon arrival at Phnom Penh airport. It costs USD 25. |
| Work Permit | Work permits are valid for a year, and can be renewed so long as they are not renewed beyond the period specified by the residence permit. They cost USD 100 and take approximately 1 month to process. |
Setting up a company in Cambodia
When setting up a company you may want to consider these factors:
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Business Factors
Business factors such as
- The industry and type of business
- Nationality of the headquarters/individual(s) and
- Presence of existing trade agreements or relationships
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Location
Location will be another factor. Separate cities and regions may have different rules, costs and availability. It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.
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Regional Language
Regional language may be an influence. Although Khmer is the official language, different locations in Cambodia use varying dialects, and some minority languages are also used, meaning some terminology may be different in various regions. Some Khmer businessmen will speak English, but sometimes not to the proficiency required to conduct business.
Shield GEO is not operating in Cambodia at this time. However, feel free to contact us and we’ll do our best to assist you with your employment needs or connect you with a trusted partner.
Cambodia imposes a significant number of procedures to be followed by entrepreneurs and those wishing to set up a business. It is complicated and expensive process, with notable start up capital requirements. Although the regulations are complex, the Cambodian government is progressively easing the difficulty to promote a pro-business nation.
Representative Office
This is one of the relatively faster and simpler ways to set up a company in Cambodia. ROs are prohibited from undertaking any profit-making activities including the buying or selling of goods, performance of services or engagement in manufacturing, processing or construction. The name of the RO must be the name of its principal.
Steps Required:
1. Apply for approval with the CDC – conditional registration certificate
2. Apply for approval with the CDC – final registration certificate
Time: Approximately 1 month
Cost: Varies
When a foreign company decides to try and sell to the Cambodian market, there are several options – working through an agency or distributor, or registering a Representative Office (RO). Whereas an agent or distributor may have limited loyalty or little interest in end-user satisfaction, an RO is an effective way for foreign investors to get a feel for the Cambodian market while demonstrating commitment to the market. Eligible foreign investors may choose this option to facilitate sourcing local goods and services and to collect information for its parent activity. It is the easiest type of foreign investment structure to set up and, unlike the wholly foreign-owned enterprise, has no registered capital requirements.
A point to note is that, even if you have set up a WFOE in a city where your manufacturing facility is based, you may want to consider having a representative office in your target sales cities to facilitate business operation. On the other hand, a good distribution partner with regional coverage can also help to rectify this problem.
In Cambodia, the MOC and CDC are the institutions responsible for overseeing all foreign direct investment and business development in Cambodia. FDI projects are known as Qualified Investment Projects (QIPs) and must be registered with the CDC. There are various schemes open to investors, including Build, Operate and Transfer (BOT), Build, Leaser & Transfer (BLT), Build, Own, Operate & Transfer (BOOT) and Build, Own & Operate (BOO).
The first step is to obtain a Conditional Registration Certificate from the CDC. Then, the investment project must obtain a Final Registration Certificate.
1. Apply for the Conditional Registration Certificate
The business must submit the following information to be granted a Conditional Registration Certificate:
- A list of all required approvals, authorisations, licenses, permits and registrations for the QIP approval
- The ministries, departments, or agencies responsible for issuing the permits
- The applicant’s choice of tax exemption
- Recognition of the status of the legal entity which will have the responsibility of the QIP
- Investment guidelines and assessment criteria for each of the approvals, authorisations, licenses, permits and registrations
Time: Within 3 days
2. Apply for the Final Registration Certificate
The CDC is required to obtain all the approvals, authorisations, licenses, permits and registrations on behalf of the applicant, as listed in Step 1, within 28 business days of the issuance of the Conditional Registration Certificate.
Time: 28 days
Wholly Foreign-Owned Enterprise (WFOE)
WFOEs are limited-liability corporations organized by foreign nationals and capitalized with foreign funds. WFOEs are often used to produce the foreign firm’s product in mainland Cambodia for later export to a foreign country. The WFOE must go through the entire registration and incorporation process, and is the most costly business structure to setup.
Steps Required:
- Deposit required capital
- Register company name
- Incorporate company with Business Registration Department
- Make company seal
- Submit registration documents
- Notify Ministry of Labour & receive approval
Time: 2-3 months
Cost: US 800
A Wholly Foreign-Owned Enterprise (WFOE, sometimes incorrectly written as WOFE) is a common investment vehicle for mainland Cambodia-based business wherein foreign parties (individuals or corporate entities) can incorporate a foreign-owned limited liability company.
WFOEs are limited-liability corporations organized by foreign nationals and capitalized with foreign funds. This can give greater control over the business venture in mainland Cambodia, and avoid a multitude of problematic issues which can potentially result from dealing with a domestic joint venture partner.
Such problems often include profit not being maximized, leakage of the foreign firm’s intellectual property and the potential for joint venture partners to set up in competition against the foreign firm after siphoning off knowledge and expertise.
The unique feature of a WFOE is that involvement of a Cambodian investor is not required, unlike most other investment vehicles.
The steps to set up a WFOE in Cambodia are as follows:
1. Deposit the legally required start up capital in a bank, and obtain deposit evidence.
Startup capital of KHR 4 million is required before registration with any authorised bank in Cambodia. The bank must provide a bank statement certifying the deposit. No time limit is imposed on the company to pay the entire amount.
Time: 1 day
Cost: None
2. Conduct initial check to confirm the company name is not already in use.
Under Prakas no. 063 MOC/SM2013 on the General Procedure of Providing Services related to the Commercial Registration dated February 27, 2013, the company search application may only be submitted to the Business Registration Department of the Ministry of Commerce through the side window. The uniqueness of the company name will also be checked and confirmed at the same Department. To apply for a company name, the following documents need to be submitted:
- Application for review of the name (1 copy)
- Application for registering the name of the enterprise in the commercial registry (3 copies)
- Copy of identification cards or passports of the owners (3 copies)
- Passport sized photo of the sole owner (3 copies)
- Receipt of payment fee (1 copy)
Time: 2-7 days
Cost: USD 10
3. Incorporate the company with the Business Registration Department, within the Ministry of Commerce.
The articles of association and memorandum of the company need to be prepared based on the company form and consistent with applicable law, regulations, and standards otherwise set out for such documents by the Cambodian Ministry of Commerce. Original copies must be submitted of the documents. The following information must be included:
- Company name
- Corporate form
- Business objectives
- Company duration
- Registered office
- Stated capital in Khmer currency and shareholding
- Name, address, and nationality of shareholders and the director
- Transfer and shares transfer
- Accounts
- Dissolution of company
- Change of company legal form
- Announcement of the company establishment
The following quantities are required of those documents:
- 3 sets of the registration forms
- 3 sets of the ID card or passport copies for each company member
- 3 sets of the passport photos of each company member
- 1 copy of the reference letter from a particular bank, clarifying the minimum KHR 4 million startup capital has been met
- 3 sets of the articles of incorporation
- 3 sets of the application for newspaper announcement
- 3 sets of the declaration of non-guilt by directors
The Ministry publishes the company’s formation notice in the Official Gazette. During the transitional period where the Kingdom of Cambodia does not have a functioning Commercial Court, the organisation and maintenance of the Commercial Register and governance of the capacity to conduct commerce, as stipulated by law, is entrusted to the Ministry of Commerce.
Time: On average, 3 weeks.
Cost: USD 420
4. Make a company seal.
The Ministry of Commerce will issue a seal to the company alongside the registration certificate.
Time: 1 day
Cost: USD 15
5. Have registration documents stamped and approved; register for TIN, Patent Tax and VAT.
The following documents must be provided to the General Tax Department:
- Memorandum and Articles of Association
- Ministry of Commerce Letter of Approval
- Certificate of Incorporation
This is obtained at one of the tax department branch offices at the Khan (district) level, of which there are 7 in each city.
Time: 30 days
Cost: USD 100
6. Notify the Ministry of Labour of the start of operations & hiring of employees.
Businesses are required to submit a written declaration to the Ministry of Labour before they may commence operations. All employers are required to submit a written declaration to the Ministry of Labour when an employee is hired or dismissed, within 15 days of the date of hiring or termination at the latest.
Businesses with at least 8 employees must have established internal regulations that adapt general provisions of the labour code as conditions of hiring and calculation and payment of wages and perquisites, inclusive of in-kind benefits, work hours, health and safety requirements, and personal leave, including holidays.
Internal regulations must be filed within 3 months of the business commencing operations. Businesses are required to maintain a payroll ledger, declaration of personnel, a book of establishment, and labour regulations, all in Khmer. Local employees are provided with a “labour book” upon completion of a physical health examination with the Labour Health Centre, at a cost of KHR 10,000 for each employee, usually covered by the employer.
The total cost of the procedure covers:
- Announcement of the opening of a new company and its registration with the Ministry of Labour
- Declaration of staff
- Development of internal regulations
- Obtaining the payroll ledger and book record of establishment
- Electing staff delegates
- Filing employment contracts
- Obtaining employee handbooks and work permits for foreign employees
- Registration with the National Social Security Fund
- Payment of contributions to staff for the NSSF and obtaining occuptational risk insurance cards
Time: 30 days
Cost: USD 250 (for 8-250 employees)
7. Receive inspection from the Labour Inspector.
The Labour Inspector from the Ministry of Labour will inspect all new businesses.
Time: Occurs at the same time as the previous step
Cost: Covered in the cost of the previous step.
Branch
This is the final business form that may be set up by a foreign investor in the Kingdom of Cambodia. Branches are allowed to perform the same acts as a commercial representative office.
Time: Approximately 1 month
Cost: Varies
Branches are allowed to perform the same acts as a commercial representative office in Cambodia. They are also allowed to regularly buy and sell goods & services and engage in manufacturing, processing & construction, as the local company would be able to, except any acts that are prohibited for natural or legal persons who are foreigners.
The assets of the branch are the assets of the principal, who is liable for any obligations of the branch.
In Cambodia, the MOC and CDC are the institutions responsible for overseeing all foreign direct investment and business development in Cambodia. FDI projects are known as Qualified Investment Projects (QIPs) and must be registered with the CDC. There are various schemes open to investors, including Build, Operate and Transfer (BOT), Build, Leaser & Transfer (BLT), Build, Own, Operate & Transfer (BOOT) and Build, Own & Operate (BOO).
The first step is to obtain a Conditional Registration Certificate from the CDC. Then, the investment project must obtain a Final Registration Certificate.
1. Apply for the Conditional Registration Certificate
The business must submit the following information to be granted a Conditional Registration Certificate:
- A list of all required approvals, authorisations, licenses, permits and registrations for the QIP approval
- The ministries, departments, or agencies responsible for issuing the permits
- The applicant’s choice of tax exemption
- Recognition of the status of the legal entity which will have the responsibility of the QIP
- Investment guidelines and assessment criteria for each of the approvals, authorisations, licenses, permits and registrations
Time: Within 3 days
2. Apply for the Final Registration Certificate
The CDC is required to obtain all the approvals, authorisations, licenses, permits and registrations on behalf of the applicant, as listed in Step 1, within 28 business days of the issuance of the Conditional Registration Certificate.
Time: 28 days
- Cambodia Employer of Record Overview
Cambodia
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