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.
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Severance pay under UDC is no longer applicable.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
- 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.