How to Terminate Employees in Cambodia: A Complete HR Guide
Key Takeaways:
- Types of termination scenarios in Cambodia
- Legal reasons for termination
- Notice periods and severance pay explained
Introduction
Employee termination in Cambodia is governed by the Labor Law. This guide helps employers ensure that all legal requirements are met.
Types of Termination Scenarios in Cambodia
In Cambodia, employers can terminate employees for a variety of reasons. The most common scenarios include redundancy, misconduct, and poor performance, each of which requires adherence to specific legal procedures to ensure compliance with the Labor Law.
1. Redundancy
Redundancy occurs when an employee’s position is no longer required due to business restructuring, downsizing, or automation. In cases of redundancy, it’s essential to follow the correct procedures, including providing proper notice and severance pay. Employers should also explore alternatives such as redeploying the employee before terminating the role. Documentation must be kept to demonstrate that the redundancy is genuine and that the employee is not being dismissed unfairly.
2. Misconduct
Misconduct involves serious violations of workplace rules or standards, such as theft, fraud, or harassment. For termination to be legally valid, the employer must provide evidence of the misconduct, conduct a fair investigation, and allow the employee an opportunity to respond. Misconduct terminations can be immediate, but only if the employer has adhered to due process.
3. Poor Performance
Terminating an employee due to poor performance should be the last resort. Employers must first provide feedback, offer additional training, and set performance improvement goals for the employee. Only after these steps have been documented and the employee continues to underperform should termination be considered.
Each of these termination scenarios requires careful documentation and adherence to the law to protect the employer from wrongful dismissal claims.
Grounds for Lawful Termination
In Cambodia, the Labor Law specifies valid reasons for termination. Employers must provide a legitimate cause for dismissal to comply with local regulations. The most common lawful grounds include:
- Serious Misconduct: When an employee has violated company policies or the law in a serious manner.
- Redundancy: When the role is no longer needed due to economic reasons or business restructuring.
- Poor Performance: After documented efforts to improve performance have failed.
- Contract Expiry: Termination of employment at the end of a fixed-term contract if it is not renewed.
Terminating an employee for reasons outside these grounds could expose the employer to legal action and wrongful dismissal claims.
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Wrongful Dismissal Avoidance
Wrongful dismissal claims in Cambodia can arise if an employee is terminated without valid cause or if the employer fails to follow the proper legal process. To avoid these claims, employers must ensure that they follow the steps below:
How to Avoid Wrongful Dismissal Claims:
1. Document Everything:
Keep thorough records of all performance reviews, warnings, and disciplinary actions. Proper documentation provides evidence that the termination was justified.
2. Provide Due Process:
If termination is due to misconduct or poor performance, ensure the employee is given an opportunity to improve or defend themselves. Conducting a fair investigation and allowing the employee to present their side is critical to protecting the employer.
3. Adhere to Notice Periods:
Failure to provide adequate notice or pay in lieu can result in claims of wrongful dismissal.
4. Non-Discrimination:
Ensure that the termination is not based on discriminatory reasons, such as race, gender, religion, or union activities.
By following these steps, employers can significantly reduce the risk of legal disputes arising from wrongful dismissals.
Notice Periods and Pay in Lieu
Employers in Cambodia must provide a notice period before terminating an employee unless the dismissal is for gross misconduct. The notice period varies depending on the employee’s length of service:
- 7 days’ notice for employees with less than 6 months of service.
- 15 days’ notice for employees with 6 months to 2 years of service.
- 1 month’s notice for employees with more than 2 years of service.
Pay in Lieu of Notice:
If immediate termination is necessary, employers may provide pay in lieu of notice, which compensates the employee for the notice period they would have otherwise received. This option ensures that the termination is compliant with the Labor Law while allowing the employer to proceed with the dismissal promptly.
Employers must adhere to these notice periods or offer pay in lieu to avoid legal disputes or claims of unfair termination.
Severance Pay and Long Service Payment
In Cambodia, severance pay is required for employees who are terminated after a certain period of service. The severance pay amount depends on the employee’s tenure and the reason for termination.
Severance Pay Calculation:
- 6 months to 1 year: One month’s wages.
- 1 to 2 years: One and a half months’ wages.
- 2 to 5 years: Two months’ wages.
- 5 to 10 years: Three months’ wages.
- 10+ years: Four to six months’ wages, depending on the tenure.
Long service payments may also apply to employees who have served for a considerable period. These payments are intended to provide financial compensation for the loss of employment after years of service. Employers must calculate severance pay and long service payments accurately to avoid potential disputes.
Steps in the Termination Process
To comply with Cambodia’s Labor Law, employers must follow a structured process when terminating employees. The key steps are as follows:
1. Document the Reason for Termination:
Before initiating the termination process, ensure that you have clearly documented the reason for the dismissal. This documentation is essential for proving that the termination is justified, particularly if it involves poor performance or misconduct.
2. Issue Formal Notice:
Provide the employee with a formal written notice of termination, adhering to the notice period required by law. If immediate termination is required, ensure pay in lieu of notice is provided.
3. Conduct an Exit Interview:
Although not legally required, conducting an exit interview can help clarify any outstanding issues and provide the employee with feedback. It also helps ensure that the termination process is handled professionally.
4. Calculate Severance and Final Compensation:
Employers must calculate the employee’s severance pay, accrued leave, and any other outstanding payments. These payments should be made promptly to avoid any legal disputes.
5. Ensure Compliance with Legal Obligations:
Throughout the termination process, ensure that all legal obligations are met, including notice periods, severance pay, and documenting the reason for dismissal. Failure to comply with legal requirements can result in claims of wrongful dismissal.
By following these steps, employers can ensure that terminations are handled fairly, legally, and with minimal risk of disputes.
How AYP Can Help
Terminating employees in Cambodia can be a complex process due to the various legal requirements. AYP’s Professional Employer Organisation (PEO) and Employer of Record (EOR) services help businesses navigate the complexities of employee termination, ensuring compliance with local labor laws. Our services include:
- Managing Terminations: We handle all aspects of employee termination, including issuing formal notice, calculating severance pay, and ensuring compliance with Cambodia’s labor laws.
- Minimizing Legal Risks: By ensuring adherence to labor regulations and best practices, AYP helps employers avoid wrongful dismissal claims and other legal disputes.
- Handling Employment Contracts: Our team ensures that employment contracts are compliant with local laws and clearly outline the termination procedures.
With AYP’s expert support, employers can confidently manage employee terminations while minimizing legal risks. Contact us today to learn how we can assist with your HR and compliance needs in Cambodia.
