As in other countries, legal compliance is an important consideration when conducting day-to-day business activities in Cambodia and there are a wide range of laws and regulations in force that govern as such. The Labour Law remains one of the most scrutinised, yet, with respect to compliance, has traditionally been largely neglected.
But while many businesses continue to attempt to “fly under the radar” of the Labour Law, hoping to go unnoticed and unregulated, its scope, application and reach is extensive and its enforcement has increased greatly over the past two years. For these reasons, Labour Law compliance and the resultant advantages must – from legal, business and human resources perspectives – be recognised and understood by owners and managers in Cambodia more than ever before.
Sophal has knowledge of Cambodian labour law and labor dispute resolution. Sophal earned her Bachelor’s and Master’s degrees in Law from Transnational Law and Business University, South Korea. She is currently heading the Labor Practice Group and is an associate at Sciaroni & Associates.
Both civil and criminal penalties apply to various Labour Law violations, and jail time is possible. Chapter 16 of the law deals with applicable penalties, and says “those guilty of violating the provisions of the Articles in Chapter 16 of this law shall be fined or imprisoned or both.”
Fines are determined by using a multiple of the “daily base wage” for calculation. In accordance with Joint Prakas No. 377, recently issued by the Ministry of Labour and Vocational Training and the Ministry of Justice, the daily base wage was raised from 8,000 to 40,000 Riels (approximately $2 to $10). By way of example, according to Article 369 of the Labour Law, breaches of certain articles may result in a fine of “sixty-one to ninety days of the base daily wage or to imprisonment of six days to one month.”
From a business perspective, breaching Cambodia’s labour laws may significantly impact upon the reputation of a company and will be viewed as a failure to meet corporate responsibilities, an increasingly relevant component of a company’s public image in Cambodia. Serious violators of labour rights will likely see their sales impacted upon negatively and buyers or clients may boycott products and/or services.
Compliance also saves costs and time for business operations. The cost of rectifying and/or compensating for a breach of the Labour Law (including resolving labour-related disputes with employees) can be significantly higher when compared to the cost of being compliant in the first place. The time required for rectifying non-compliance issues or resolving labour-related disputes in particular could instead be used for the purpose of enhancing a business. A compliant employer avoids fines and potential costly lawsuits.
Compliance Over Conflict
Finally, a compliant, worker-friendly, working environment will likely lead to improved productivity. As Virgin Group founder Richard Branson puts it, “take care of your employees, and they will take care of your customers.” Compliance will mitigate potential conflicts that prove stressful to both employers and employees, and it will reduce the potential for conflict or misunderstanding between your employees and your customers.
People work more productively in compliant companies and, with a more a dynamic and competitive business environment evolving in Cambodia, companies that meet their compliance obligations will attract a better labour force for the growth of their businesses.
Contribution by Yun Sophal