Payroll in Cambodia: a restricted activity

Cambodia has a monetary feature few countries share: the riel is the national currency, yet the US dollar circulates widely and many salaries are denominated in it. Regulation encourages greater use of the riel, so the currency in which pay is expressed and the currency in which it is actually settled must be treated as a contractual question in their own right.

Social protection is administered by the National Social Security Fund (NSSF), with which every employer of at least one worker must register. Salary tax is withheld by the employer and remitted to the General Department of Taxation.

Khmer is the official language and the language of documents filed with the labour administration, with English common in international businesses in Phnom Penh. Finally, and this is decisive when selecting a partner, supplying accounting services to third parties requires a licence from the Accounting and Auditing Regulator (ACAR): practising without one is unlawful.

Employer registration with the NSSF must be completed promptly after the first hire, with enrolment of the employee following immediately afterwards rather than at the first payroll run.

Upstream, the entity and its authorisations are secured: registration with the Ministry of Commerce, tax registration and payment of the annual patent tax, whose certificate serves in practice as proof of good standing and is asked for in most dealings.

The Ministry of Labour then occupies a place foreign employers tend to underestimate. Declaration of the establishment, maintenance of registers and notification of staff movements are owed to it, as is, for foreign employees, a work permit subject to ratios against local headcount.

The classification of the contract matters as much as its existence. Cambodian law distinguishes fixed-term from indefinite engagements with markedly different consequences at the end of the relationship, particularly for compensation; writing is required.

The payslip must show salary tax withheld, whose scale varies with the employee's residence, together with NSSF contributions.

Seniority indemnity, finally, is not a matter to leave until last: it is paid on a schedule peculiar to Cambodian law, which calls for tracking throughout the contract rather than a single calculation on exit, and a provision that moves with each period worked.

Dual currency use is the most structural feature. A contract drafted in dollars, pay settled in riels and contributions computed on a converted base create three opportunities for divergence. Fix in the contract itself the reference currency, the source of the conversion rate and the date on which it is taken.

Seniority indemnity is paid in instalments during the contract rather than on departure. That mechanism disconcerts foreign groups and frequently results in badly calibrated provisions carried in the accounts for years.

Commercial registration, which every company holds, is not to be confused with the sector licence issued by ACAR, held only by accounting firms. The second is what separates a professional from an administrative provider, and the list of licensed firms is published periodically, which allows a direct check.