Cambodia Payroll and Benefits Guide

What global businesses need to know about payroll in Cambodia

Cambodia is relatively underdeveloped compared to many of its neighbors in south-east Asia, but that doesn’t mean it should be overlooked as an opportunity for international business expansion.

Textiles and tourism underpin Cambodia’s economy, but it is still very reliant on agriculture to help feed its population of around 16.5 million. After a highly turbulent past, through the Khmer Rouge in the 1970s and the coup d’etat of the late 1990s, Cambodia has found relative stability, although it remains in effect a one-party state.

However, Cambodia is far more welcoming to foreign investment than its history might suggest. Its tax rates are low, its workforce is youthful and hard-working, and its low wage and cost base means it’s an excellent place to outsource many industries and services. This guide explains the key facts around running payroll in Cambodia, and the employment requirements in the country.

Getting Started

Most incoming businesses will set up in Cambodia as limited-liability companies, which come with a minimum share capital requirement of KHR 4 million (approx. £775; $985; €910). You should also expect to pay around KHR 2.2 million (approx. £430; $540; €500) in registration fees along the way.

The first step is to register with the CamDX system, the online platform run by the Ministry of Economy and Finance. From this, you can reserve your company name (Khmer name mandatory, additional English name optional) for two weeks, then register your business activities, submit the lease agreement for your office, and provide shareholder and director information. 

After this, a Certificate of Registration can be issued, with which further registrations can be completed for income tax, social security and VAT. The process should normally take 2-3 weeks, but has been known to take longer. Opening an in-country bank account is required, and depositing capital into it is required within 15 days of the Certificate of Incorporation being issued, but this is a fairly quick and easy process.

Employment Considerations

Employee contracts must be in writing and need to state the full details of employer responsibilities and employee expectations. Collective bargaining is practiced in Cambodia, though it may have stronger influences in certain industries than others.

Cambodia’s standard working week is 40 hours, typically worked in five shifts of eight hours each. Work beyond this is classed as overtime, which is limited to two hours per day. Overtime should be paid at 150% of the regular rate, 130% if between 10 pm and 5 am, and 200% on Sundays and public holidays. Individual negotiation and collective bargaining can sometimes revise these rates upwards by mutual agreement.

Notice periods start at seven days, rising to 15 days after six months of service, one month after two years, two months after five years, and three months after ten years. Probation periods are one month for unskilled workers, two months for skilled workers, and three months for other types of employees.

Compensation, Bonuses & Severance

Previous steep increases in the Cambodian minimum wage have tailed off in recent years, but there are still raises occurring year-on-year. As of the start of 2024, it now stands at KHR 818,800 per month (approx. £160; $200; €185). This rate only applies to the textiles, clothing, footwear and travel industries, but as these are the backbones of the Cambodian economy, they apply to a large number of businesses and employees.

Most employees are also entitled to additional benefits for meal allowances and travel expenses, while there are also small bonuses awarded for good attendance and for seniority. The payment of a 13th-month bonus is mandatory, and should be split across two payments, one in June and one in December.

Severance pay is seven days of salary for employees with at least six months of service. Employees with at least one year’s service should receive 15 days of salary per year worked, up to a maximum of six months of salary.

Tax and Social Security

Income tax in Cambodia is levied progressively, but at fairly low rates across the board. The first KHR 18 million (approx. £3500; $4400; €4100) earned per year is exempt, after which a rate of 5% kicks in. Higher rates of 10% and 15% apply on earnings above KHR 24 million (approx. £4700; $5900; €5400) and KHR 102 million (approx. £19,800; $25,100; €23,100) respectively. The highest rate of 20% applies to all earnings over KHR 150 million per year (approx. £29,100; $36,900; €34,000).

Corporation tax is 20%, although sole traders and partnerships pay lower rates. The standard VAT rate is 10%, with strict record-keeping needed and monthly remittances required.

Social security contributions are relatively small in Cambodia. Employers contribute 2.6% to health insurance, and 0.8% to national social security. Employers and employees contribute 2% into the pension. National social security and pension contributions are capped at KHR 1.2 million per year (approx. £235; $295; €270).

Holidays and Leave

Employees in Cambodia receive 18 days of paid leave per year (accruing 1.5 days per month) once they have at least one year of service. After four years of service, employees receive one further day for every three years they have worked. There are 22 public holidays in Cambodia each year, although employers aren’t always required to give all of them as time off, and holidays at weekends are often lost as far as time off is concerned.

Maternity leave is 90 days, and is paid by the employer at half-salary. There is no entitlement for paternity leave, but it’s common for new fathers to use up to seven days of their annual leave entitlement immediately post-birth.

Sick leave can run for a maximum of six months. Employers pay full salary for the first month, and 60% of salary for the second and third months. Any sick leave longer than three months is unpaid, and employers can dismiss employees who have been off sick for more than six months.

Employees receive seven days’ leave if they are getting married, or in the event of a death in their immediate family, but neither of these are paid.

In Summary

Like most countries in Southeast Asia, there are many cultural and industry-specific characteristics to Cambodia’s payroll requirements, while speaking English is less than universal. A low tax and social security take also means that employers are required to pay a range of benefits and entitlements to employees on top of regular salary. That’s why it’s especially important to access local expertise when planning your Cambodian expansion, including the up-to-date information that a global payroll partner can provide.

This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.

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