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Employer of Record (EOR) in Cambodia

Expanding into new markets often involves navigating complex employment laws and regulatory frameworks, and Cambodia is no exception. Companies hiring employees in Cambodia without establishing a local legal entity can utilize Employer of Record (EOR) services as a streamlined solution. An EOR in Cambodia acts as the legal employer on behalf of the foreign company, handling all HR responsibilities, including payroll, tax compliance, and employee benefits, while the employees carry out their jobs for the foreign company effectively.

Key Takeaways

  • EOR services provide a compliant solution for hiring in Cambodia without establishing a local entity.
  • These services handle HR responsibilities, aligning with Cambodia’s legal and regulatory employment frameworks.
  • An EOR can facilitate a company’s global expansion into the Cambodian market.

Understanding Employer of Record in Cambodia

An Employer of Record (EOR) in Cambodia allows businesses to hire employees with adherence to local employment laws and regulations. This entity manages human resources, payroll, and tax compliance on behalf of the company, facilitating a smooth entry into the Cambodian market.

Legal Employer and Compliance

In Cambodia, the Employer of Record becomes the legal employer for tax and HR purposes. This structure ensures compliance with Cambodia’s employment laws, which is integral to maintaining a lawful and ethical work environment. Businesses must navigate intricate tax requirements, health insurance, and benefits governed by Cambodian legislation. The EOR mitigates risks associated with non-compliance, including legal penalties and reputational damage.

EOR Services and Their Benefits

EOR services in Cambodia offer a range of benefits for companies looking to employ local or international talent. These services typically include:

  • Payroll administration: Accurate calculation and disbursement of salaries.
  • Benefits management: Provision of statutory and additional employee benefits.
  • HR services: Handling of day-to-day human resources tasks and employee relations.

Outsourcing these functions to an EOR allows companies to hire employees quickly without establishing a local entity, significantly reducing the time and cost of market entry. This strategic advantage is particularly significant for companies that capitalize on the Cambodian economy’s resilience and growth trajectory.

Employment Framework and Regulations

Navigating the employment landscape in Cambodia requires an understanding of its legal framework, which is governed by labor laws, royal decrees, and ministerial regulations. Employers and employees must adhere to these statutory requirements to ensure compliance and fairness in the workplace.

Contracts and Employment Terms

In Cambodia, employment agreements are vital in defining the relationship between employer and employee. These Employment Contracts should clearly state terms regarding Probationary Periods, duties, Minimum Wage, Working Hours, and Termination conditions. Indefinite Contracts are standard, but fixed-term contracts must not exceed two years and can be renewed. It is usual for contracts to include a probation period, typically not exceeding three months for regular employees.

Statutory Requirements dictate that contracts be in writing when employing foreigners and recommended for locals. Contracts should be comprehensive and include specifics on Payroll, Social Security contributions, Sick Leave, and other entitlements, such as maternity and Paternity Leave.

Working Hours, Leave, and Public Holidays

Cambodia’s standard workweek is 40 hours per week, spread over 8 hours a day. Employers must adhere to these regulations or consider any time beyond this as Overtime, which is subject to additional pay.

Employees are entitled to at least one day off per week, typically on Sunday, and have the right to take leave on Public Holidays. Special provisions are made for Maternity Leave, allowing up to 90 days off, with job security and partial pay from the Social Security fund. Paternity Leave is also recognized, allowing fathers time off to support their families.

Workers are granted Special Leave for personal events, and laws are in place to protect against Discrimination in the workplace. Severance Pay and Termination Notice are other aspects strictly regulated, with specifics depending on the contract and duration of employment. Employers must remit contributions to the national social security fund to cover healthcare and welfare benefits.

By observing these regulations, employers and employees can contribute to a fair and just working environment.

Managing Employment and Payroll Processes

Managing employment and payroll in Cambodia requires careful attention to the country’s labor laws and financial regulations. Employers must navigate the complexities of onboarding new staff, managing payroll, handling taxes, and ensuring compliance with social security mandates.

Onboarding and Payroll Management

When an entity onboards a new employee in Cambodia, they must adhere to local employment contracts and regulations. This includes issuing an employment card and setting up payroll in the Cambodian Riel. Payroll management encompasses the regular payroll cycle, including calculating wages, overtime, benefits, and deductions. Maintaining compliance with Cambodian labor laws is critical throughout the employment period, from hiring through potential severance.

  • Key Steps in Onboarding:

    • Sign an employment contract that complies with local laws.
    • Issue an employment card as proof of the right to work.
    • Register the employee with local tax and social security bodies.
  • Payroll Cycle:

    • Calculate gross salary, benefits, and statutory deductions.
    • Distribute pay via an approved payment method aligned with employee expectations and legal requirements.

Taxation and Social Security Contributions

Employers are responsible for withholding the correct amount of payroll tax and making contributions to social security on behalf of their employees. This includes taxes on income and any applicable severance pay. Employers in Cambodia must ensure that all taxation and social security contributions are accurately calculated, withheld, and paid to the relevant authorities. Companies must also manage paid leave balances and process payments according to the national labor law guidelines.

  • Tax and Social Security:

    • Withhold personal income tax according to the employee’s earnings bracket.
    • Contribute to the National Social Security Fund (NSSF) as the law stipulates.
  • Severance and Paid Leave:

    • Calculate and pay severance when the employment contract ends, if applicable.
    • Track and remunerate for paid leave according to the employment agreement and local labor laws.
At RemotePad, Lech draws on his professional experience to write about employment taxes and payroll (both remote, and in-office). Lech holds a Bachelors’ degree from the University of Kent, a Master of Arts (MA) from Kings College London, and professional payroll and tax qualifications. He has 20 years experience advising on all manner of tax and business planning matters.