Guide to Severance pay under Cambodian law

How does Cambodian law define severance pay? Are you entitled to severance pay if you resign? What should you review to find out the exact entitlements in regard to this?

Let’s get started.

severance pay under Cambodian law
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What is severance pay?

Cambodian labour law provides for two different plans for severance pay depending on the types of employment contracts. If you are employed under a fixed duration contract (FDC), the law calls it severance pay (article 73). If you’re employed under an undetermined duration contract (UDC), this pay is known as indemnity for dismissal (article 89-90).

For simplicity I will use severance pay here to mean both.

Severance pay under FDC must be at least 5% of the wages during the length of service. Severance pay under UDC differs depending on the length of service:

  • 7 days of wages and benefits if service is longer than six months but no longer than one year
  • 15 days of wages and benefits for each year of service if service is longer than one year. (The maximum 6 months of pay under the law has been removed with the 2018 amendment.)

Replacement of severance pay under UDC with seniority payment

Severance pay under UDC is no longer applicable. 

The labour law was amended in 2018, replacing severance pay under UDC with “seniority payment.” The amendment requires employers to make this payment to their employees under UDC twice a year: June and December.

However, the severance pay under FDC remains the same under article 73 of the Labour Law. The amendment affects only undetermined duration contracts.

Again for simplicity, I will continue to call this seniority payment a severance pay as the difference is mainly the time when it is paid.

Ok, let’s move on the next question.

Is an employee entitled to severance pay under the Cambodian law if they resign?

Simple answer. No… unless…

  • your employer forces you to resign
  • your employer gives it you out of their kind heart
  • your employer gives it to you out of a careless mistake

The third point now brings us to the last question.

What should you review to find out the exact entitlements?

I’d advise the following documents:

  • Employment contract
  • Bylaws
  • Internal work rules and policies
  • A layoff compensation policy, if any
  • Past practices of your company

I hope this is helpful. If you have any other questions about this, comment below.

About the Author

Over 12 years of legal experience working with both local and international organizations, plus law education from both Cambodia and Japan. Contact Samphy about your legal question: ysamphy@nitesastra.com

  • Phat says:

    Regarding FDC, if staff’s 1 year contract expires in Apr 2019, company renews contract another 1 year, meaning staff still works for company. Will the company pay 5% as severance to staff in June or not?

    • admin says:

      The amendment applies only to UDC. So short answer is, no, commpany does NOT have to pay the 5% severance pay in June and December as set out by the government directive. But this applies only if the contract (with its total period of renewals) remains classified as FDC.

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