What Severance Pay Rules Must Employers Follow in Cambodia?

Which Employees Qualify for Severance Pay?

• Employees on fixed-duration contracts (FDCs) who complete their term or are terminated before the end date (except for serious misconduct).
• Employees on undetermined-duration contracts (UDCs) who are terminated by the employer for reasons other than serious misconduct.
• Workers with at least six months of continuous service under a UDC.
• Employees terminated due to company closure, downsizing, or economic reasons.
• Employees who resign for just cause (e.g., employer misconduct) may also be entitled to partial severance.

What Are the Legal Timelines for Paying Severance?

Employers in Cambodia are required to pay severance or seniority indemnity immediately upon termination or within the next payroll cycle, depending on company practice and contract terms. For fixed-duration contracts, payment must be made at the end of the contract term. For ongoing (indefinite) contracts, seniority payments are due twice a year—typically in June and December—covering the preceding six months of service.

If employment ends before a scheduled seniority payment, the employer must settle the outstanding amount in full on the termination date. Timely payment ensures compliance with the Cambodian Labour Law and avoids disputes with the Ministry of Labour and Vocational Training (MLVT).

What Penalties Apply if Severance Is Not Paid Correctly?

Failure to pay severance or seniority indemnities correctly can lead to serious legal and financial repercussions for employers in Cambodia, including:

• Administrative fines imposed by the MLVT.
• Legal claims by the employee for unpaid entitlements, including back pay and damages.
• Accrued interest or penalties for late payment.
• Reputational risk and potential suspension of operating licenses in repeated or severe cases.

Ensuring accurate and timely severance payments is therefore both a compliance requirement and a best practice for maintaining positive employee relations.

Does Outsourcing Employment via an EOR Change Severance Liability?

Yes. When an employer partners with an Employer of Record (EOR) in Cambodia, the EOR becomes the legal employer of record, meaning it holds responsibility for payroll, taxes, and compliance—including severance obligations. The client company (the organization using the EOR) does not bear direct liability for severance payments; instead, it funds the EOR, which then ensures compliance with local employment laws.

This setup shields the client from potential compliance risks, miscalculations, or payment delays, as the EOR handles all statutory entitlements and termination payments under Cambodian law.

Be 100% Compliant in Offering Severance with Playroll

Navigating Cambodia’s severance pay rules can be complex, especially with the dual system for fixed and indefinite contracts and semi-annual seniority payments. Playroll simplifies the process by ensuring every severance payment is calculated accurately, disbursed on time, and fully compliant with Cambodian labor laws.

With Playroll, employers can confidently hire, manage, and offboard team members in Cambodia without worrying about missed payments or legal missteps. Our platform automates compliance tracking, applies up-to-date local regulations, and integrates severance payments directly into payroll—so your global team stays protected and your business stays compliant.