Payroll Guide for Cambodia

Introduction

Managing payroll in Cambodia requires compliance with salary regulations, social security contributions, and tax obligations. This guide will provide essential details for ensuring payroll compliance.

Payroll Regulations in Cambodia

Payroll in Cambodia is governed by labor laws and regulations that outline how employees should be compensated. Employers are required to follow these guidelines to ensure that their workforce is paid accurately and on time, while also meeting tax and social security obligations.

Salary Payment Cycles and Deadlines

Under Cambodian labor law, employers are required to pay wages to their employees at least once a month. The payment schedule, however, can vary depending on the employment contract, with some businesses opting for bi-weekly or weekly payroll cycles. Regardless of the payment frequency, it is crucial that employers meet the deadlines set out in the employment contract.

Late salary payments can lead to fines and employee grievances, which could escalate into labor disputes. Employers should implement robust payroll systems to ensure that salaries are processed and paid on time, in full, and with the correct deductions applied.

Overtime and Bonuses

Overtime in Cambodia must be paid when employees work beyond their standard working hours, which is typically 8 hours per day or 48 hours per week. The labor law mandates that overtime be compensated at a rate of 1.5 times the regular hourly rate on regular workdays and at 2 times the hourly rate on public holidays or rest days.

While bonuses are not legally required, they are a common practice in Cambodia, especially in the form of the 13th-month salary or annual bonuses. If bonuses are outlined in an employee’s contract, employers must ensure they are paid as agreed.

Social Security Contributions

Cambodia’s social security system, managed by the National Social Security Fund (NSSF), is designed to provide employees with benefits such as healthcare, employment injury insurance, and pensions. Both employers and employees are required to contribute to the NSSF based on the employee’s earnings.

Employer and Employee Contribution Rates

As of 2024, the NSSF requires employers to contribute 3.4% of an employee’s gross salary towards employment injury insurance and healthcare coverage. Employees are not required to contribute directly to the NSSF; however, the employer is responsible for making the full contribution on behalf of their employees.

Employers must calculate these contributions based on the employee’s gross salary, ensuring that all required payments are made to the NSSF. Non-compliance with social security regulations can lead to penalties and loss of benefits for employees.

Contribution Deadlines and Compliance

Social security contributions in Cambodia must be submitted to the NSSF by the 15th of each month. Employers who fail to meet this deadline may be subject to penalties, including fines and interest charges on overdue contributions. To avoid non-compliance, it is essential that employers implement automated payroll systems that accurately calculate contributions and ensure timely submission.

Income Tax Withholding

Employers in Cambodia are also responsible for withholding personal income tax from employees’ salaries and remitting these amounts to the General Department of Taxation (GDT). Proper management of income tax is critical for ensuring that employees’ taxes are paid accurately and on time.

Tax Reporting Requirements for Employers

Employers must calculate and withhold income tax from employees’ salaries based on Cambodia’s progressive tax system. Tax must be deducted at source, meaning it is taken directly from the employee’s salary before payment. Employers must then remit these taxes to the GDT on a monthly basis.

Employers are also required to provide employees with a detailed payslip that shows gross salary, tax deductions, social security contributions, and net salary. This ensures transparency and compliance with Cambodian tax laws.

Tax Brackets and Withholding Obligations

Cambodia follows a progressive income tax system, where the amount of tax an employee owes depends on their salary. As of 2024, the personal income tax rates are as follows:

• 0% for monthly income up to KHR 1.3 million
• 5% for income between KHR 1.3 million and KHR 2 million
• 10% for income between KHR 2 million and KHR 8.5 million
• 15% for income between KHR 8.5 million and KHR 12.5 million
• 20% for income exceeding KHR 12.5 million

Employers must calculate the correct amount of tax based on each employee’s salary and ensure that the appropriate amount is withheld each month. Incorrect tax withholding or failure to report taxes can lead to penalties from the Cambodian tax authorities.

Employee Benefits and Deductions

In addition to salaries and taxes, employers in Cambodia are required to provide certain statutory benefits to employees, such as leave entitlements and social security deductions. Understanding these benefits is essential for ensuring payroll compliance.

Leave Entitlements and Benefits

Cambodian labor law provides employees with several types of leave entitlements, including:

• Annual leave: Employees are entitled to 18 days of paid annual leave per year. This accrues at a rate of 1.5 days per month for employees who have worked at least one year.
• Sick leave: Employees are entitled to sick leave, which may be paid or unpaid, depending on the terms of the employment contract.
• Maternity leave: Female employees are entitled to 90 days of paid maternity leave, during which time they receive 50% of their regular salary.

Employers must ensure that employees receive the correct amount of leave as per Cambodian labor law and that this leave is documented properly in payroll records.

Social Security and Other Mandatory Deductions

Employers in Cambodia must also make mandatory social security contributions on behalf of their employees, as discussed in the Social Security Contributions section. Additionally, employers may be required to make other deductions, such as for union fees or voluntary pension contributions, if applicable. These deductions must be clearly outlined on the employee’s payslip and comply with labor regulations.