Asia-Pacific employment law bulletin 2024

Cambodia

Foreign Nationals 

Generally, foreign nationals conducting business or working in Cambodia must obtain a work permit issued by the Ministry of Labour and Vocational Training (MLVT). Employers are obliged to assist their employees in obtaining the work permit, which is valid for a maximum of one year. However, the expiration date of any work permit is 31 December, regardless of when the MLVT issues it.

On 28 December 2023, the MLVT issued a new instruction which clarifies which categories of foreign nationals need a work permit. The new instruction confirms that foreign national employers, employees and self-employed individuals require a work permit.

A foreign national who is a shareholder or a member of a company’s board of directors under the company’s articles of incorporation (even if the individual does not hold a Cambodia visa) is not required to apply for a work permit.  However, a foreign national who is a shareholder or director and whose name appears on the patent tax certificate must apply for a work permit, even if they do not hold a Cambodian visa or work in Cambodia.

It is not uncommon for foreign nationals who appear on a patent tax certificate not to be contracted as employees of the local entity. While they may apply for a work permit as a self-employed person, there is uncertainty as to whether that application may give rise to a tax risk.

Under the labour law, there is no clear definition of ‘self-employed’ and who is therefore able (or required) to apply for a work permit in that category. As such, the MLVT may consider issuing detailed guidance to further clarify the use of the ‘self-employed’ and ‘employee’ options in obtaining a work permit for foreign individuals.

Increase in fines and enforcement

The MVLT has also increased the relevant penalties payable on a breach of the labour law and related regulations. 

• The daily wage, which is used to calculate the penalty for violating the provisions of the labour law, has been doubled from KHR 40,000 (approximately USD 10) to KHR 80,000 (approximately USD 20). Penalties for breach of the labour law are calculated by multiplying the daily wage by the relevant number of days the MLVT imposes as penalty in the relevant regulation.
• The penalties related to work permit and foreign national approval have also been clarified. If a company fails to obtain the requisite approval for the number of foreign nationals it employs, the company may be subject to a fine of up to KHR 12.6 million (approximately USD 3,150) by the MLVT or KHR 18 million (approximately USD 4,500) by the court. The labour law also includes further sanctions, including imprisonment for a period of six days to one month.
• Failure to comply with work permit requirements can lead to a fine of up to KHR 12.6 million (approximately USD 3,150) by the MLVT and up to KHR 18 million (approximately USD 4,500) by the court. If a labour inspector finds foreign national employees working without work permits in an enterprise, the labour inspector may impose administrative fines based on the actual number of foreign national employees without valid work permits, up to a maximum of KHR 63 million (approximately USD 15,750), which is five times the normal fine, if there are five or more foreign national employees working without a work permit.

Going forward, we expect that there will be active labour inspection and enforcement on labour compliance across all sectors, including the garment, textile and footwear manufacturing sector.

Looking ahead

The Cambodian government is working on the draft Law on Personal Data Protection (Draft LPDP). The Draft LPDP aims to safeguard personal data and govern such data being used, accessed, and disclosed without consent. This is the first legislation in Cambodia which seeks to protect personal data.

The enactment date of the Draft LPDP is still unclear, so employers should stay up-to-date with any developments, as the Draft LPDP is likely to include additional obligations for employers concerning the use, collection, transfer and disclosure of employees’ personal data.

DFDL: Raksa Chan, Vansok Khem, Chris Robinson, and Chaknineath Chhim