Cambodia Legal Alert: Revised Seniority Payments Regime Announced

Further to our update on Prakas 443 on Seniority Payments (“Prakas 443”) issued by the Ministry of Labour and Vocational Training (“MLVT”) on 21 September 2018 in this link, the MLVT issued Guideline 042/19 on Payment of Back Pay of Seniority Pay prior to 2019 (“Back Pay”) for Enterprises outside of the Garment, Textile and Footwear Manufacturing Sectors on 22 March 2019 (“Guideline”).

The obligation for payment of Back Pay for enterprises outside of the garment, textile and footwear manufacturing sectors has been delayed to December 2021 and the number of days of Back Pay to be paid has been reduced from 15 days to six days per year, being three days in June and three days in December.   

During the period of postponement, if an employee is terminated for any reason other than serious misconduct, retirement or death, the employer is required to provide all Back Pay. The Guideline clarifies that an employee who resigns or is terminated due to serious misconduct is not entitled to Back Pay.

While the Guideline confirms the delay in the payment of Back Pay, certain issues regarding the calculation of Back Pay remain unsettled, specifically the calculation of average daily actual wages prior to 2019, the inclusion of the probationary period in the calculation and the application of seniority payments to employees who convert from a fixed duration contract to an unfixed duration contract.

Notwithstanding the postponement of the obligation to provide Back Pay, there is no change to the regime for payment of new seniority pay from 1 January 2019.  Employers outside of the garment, textile and footwear manufacturing sectors must comply with Prakas 443, meaning the 7.5 days of new seniority pay must be paid in each of June and December (being a total of 15 days per year).

As a follow up to our Master Class in January 2019, we will hold the second Master Class after Khmer New Year, during which we will work through a series of updated calculations.

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