Hire employees in Cambodia using an Employer of Record

You need someone in Cambodia by next quarter. Your lawyer just said entity setup takes 6 months minimum. The math doesn't work.

Cambodia's growing tech scene and lower labor costs look great on paper. But the legal setup? It's complicated. You'll need Ministry of Commerce registration, tax registration with the General Department of Taxation, and Labor Ministry compliance. Miss any step and you're facing delays that kill your hiring timeline.

Most companies hit this wall after they've already found the right person. You've done the interviews, negotiated the offer, and now you need to actually employ them legally. That's when the entity setup timeline becomes your biggest problem.

Option 1: Set up your own entity

• Cost: $15,000-40,000 upfront, $8,000-15,000 annual maintenance
• Timeline: 4-6 months minimum
• Complexity: Full tax registration, payroll system, legal compliance, HR infrastructure
• Makes sense when: Hiring 20+ people long-term, permanent market presence

Option 2: Hire contractors

• Cost: None upfront, but limited control
• Timeline: Immediate
• Risks: Misclassification fines ($5,000+), back taxes, legal disputes
• Makes sense when: Short projects (< 6 months), specialized skills
• Note: Hire with Columbus also handles contractor agreements and payments

Option 3: Use an employer of record (Recommended for most)

• Cost: $179/month per employee
• Timeline: 2-3 days to hire
• Complexity: None - we handle everything
• Makes sense when: 1-50 employees, testing markets, multi-country teams

If you're hiring 1-10 people, entity setup costs more than 3-4 years of EOR fees. That's $179/month ($2,148/year per employee) versus $25,000+ for entity setup. An EOR like Hire with Columbus handles employment contracts, payroll, taxes, benefits, and compliance updates while you focus on managing your team.

Ready to hire in Cambodia without the legal headaches? Get started with Hire with Columbus.

What employment types can you use?

You found the perfect candidate in Cambodia. Now comes the fun part: figuring out how to actually employ them legally. You've got three paths, and the costs might surprise you.

How can you hire in Cambodia?

Here's the reality check most companies need. Setting up your own entity sounds official, but it'll cost you $15,000-25,000 upfront and take 4-6 months. Using contractors feels fast and cheap until Cambodia's labor ministry hits you with misclassification penalties that can reach $50,000 per employee.

That's why 78% of companies hiring their first employees in Cambodia use an employer of record instead.

Setting up your own entity

Cambodia requires a minimum registered capital of $50,000 for foreign companies, though you don't need to deposit it all immediately. You'll spend months getting business licenses, tax registrations, and work permit approvals.

The ongoing costs hurt more than the setup. Expect $3,000-5,000 monthly for accounting, payroll processing, HR compliance, and legal fees. Plus you'll need local directors and a registered office.

This makes sense if you're planning 20+ employees and a permanent market presence. Otherwise, you're burning cash on infrastructure instead of growth.

Hiring contractors and freelancers

Cambodia's labor laws don't mess around with contractor misclassification. If someone works regular hours, uses your equipment, or follows your direct supervision, they're legally an employee regardless of what your contract says.

The penalties are brutal: back taxes, social security contributions, plus fines up to $50,000 per misclassified worker. We've seen companies get hit with $200,000+ bills for teams they thought were contractors.

Real contractors work on specific projects, set their own schedules, and provide their own tools. Think graphic design projects or one-off consulting, not your daily operations team.

Using an employer of record

Here's how it works: Hire with Columbus becomes the legal employer in Cambodia while you manage the day-to-day work. We handle employment contracts, payroll, taxes, benefits, and compliance so you can focus on actually running your business.

Cost breakdown for our Cambodia EOR:

• $179/month per employee
• No setup fees or minimum commitments
• Includes all statutory benefits and compliance
• Hire in 2-3 days instead of months

The math is simple. Five employees through an EOR costs $895/month. Setting up your own entity costs $20,000+ upfront plus $4,000/month ongoing. You'd need to run for over two years just to break even, assuming nothing goes wrong.

Employment contract types in Cambodia

Once you've decided on EOR (smart choice), you need to pick the right employment contract type. Cambodia recognizes four main types, and getting this wrong can trigger automatic conversions or termination complications.

Permanent contracts (Undetermined duration)

This is your go-to for core team members. No end date, full benefits, and the most job security for employees. Cambodia assumes all employment is permanent unless you specifically justify otherwise.

Use permanent contracts for:

• Full-time roles you expect to last over a year
• Key positions like developers, managers, or sales staff
• Any role where you want maximum control and integration

Termination requires proper cause or notice periods up to 3 months depending on tenure. But you get the most flexibility for performance management and role changes.

Fixed-term contracts (Determined duration)

Cambodia limits these to 2 years maximum, with one possible renewal. After that, they automatically convert to permanent contracts whether you want it or not.

You need legitimate business reasons like:

• Covering maternity leave or sick leave
• Seasonal work or specific projects
• Temporary increased workload

Don't use fixed-term contracts to avoid permanent employment obligations. Cambodia's labor inspectors catch this quickly, and the penalties include automatic conversion plus fines.

Part-time contracts

Part-time employees get the same rights as full-timers, just prorated. This includes vacation days, sick leave, and severance calculations based on their actual hours worked.

Cambodia defines part-time as less than 48 hours per week (the standard full-time schedule). You'll still pay social security contributions, but some benefits like overtime calculations work differently.

Great for:

• Roles that genuinely don't need full-time hours
• Testing out new positions or markets
• Specialized skills you need occasionally

Probationary periods

Every employment contract can include a probationary period up to 3 months. During probation, either side can terminate with just 7 days' notice instead of the standard 1-3 months.

Use this time wisely. After probation ends, termination becomes much more complex and expensive. Document performance issues clearly if you're considering not confirming someone after probation.

How Hire with Columbus handles contracts

We draft all employment contracts to comply with Cambodia's labor code and your specific needs. This includes:

• Proper contract type selection based on your role requirements
• Compliant probationary period terms
• Clear job descriptions and performance expectations
• All required statutory clauses and employee protections

You tell us the role details, work schedule, and performance expectations. We handle the legal language and ensure everything meets Cambodia's employment standards. No law degree required on your end.

The best part? If regulations change or you need contract amendments, we update everything automatically. Your employment contracts stay compliant without you tracking every legal update.

How does payroll and taxation work?

Your €60,000 employee actually costs €78,600 per year in Cambodia. Here's the breakdown.

Cambodia's payroll system hits you with multiple layers: income tax, social security contributions, and mandatory year-end bonuses. The tax brackets start low but climb fast, and employer contributions add another 31% on top of base salary.

Tax brackets and income tax

Cambodia uses a progressive tax system with rates that jump quickly. Here's what your employees pay in 2025:

The good news? Most international salaries fall into the 10-15% brackets. The annoying part? You need to calculate this monthly, not annually like some countries.

Social security contributions

This is where costs add up fast. Cambodia splits social security between employer and employee, but guess who pays the bigger share?

The rates look reasonable until you realize there's no cap. A €5,000 monthly salary means €170 in employer contributions every month.

Mandatory bonuses and payments

Cambodia requires a 13th-month salary paid during Khmer New Year (April). This isn't optional or performance-based - it's legally required for all employees who've worked the full year.

Employees working less than 12 months get a prorated amount. So budget an extra 8.3% annually for this bonus alone.

Total employment cost breakdown

Let's use that €60,000 annual salary example:

• Base salary: €60,000
• Employer social security (3.4%): €2,040
• 13th month bonus: €5,000
• Total annual cost: €67,040

That's 11.7% more than base salary - and this assumes your employee handles their own income tax (which they do in Cambodia).

Payroll cycle and deadlines

Cambodia runs on monthly payroll cycles with strict deadlines. Employees expect payment by the last working day of each month.

Tax filings happen monthly too. You have until the 15th of the following month to submit withholding tax returns. Miss this deadline and penalties start at $50 USD plus 2% monthly interest.

Social security contributions are due by the 8th of the following month. Late payments trigger a 2% penalty immediately.

Common payroll mistakes

The biggest mistake? Forgetting about the 13th-month bonus when budgeting. We see companies scramble every April when this hits their cash flow.

Second most common: miscalculating social security on benefits. Bonuses, overtime, and allowances all count toward the contribution base. Miss this and you'll face back-payments with penalties.

Third: using the wrong exchange rates for USD salaries. Cambodia's National Bank publishes official rates that you must use for tax calculations, not market rates.

Setting up payroll in Cambodia yourself:

• Local accounting firm: €300-500/month
• Payroll software: €150/month
• Compliance risk: Fines up to €2,000 for errors
• HR expertise needed: €45k+ salary

With Hire with Columbus: $179/month per employee, fully compliant, zero risk.

We handle all the tax calculations, social security filings, and bonus payments automatically. Your employee gets paid on time, every time, and you never worry about missing a deadline or miscalculating contributions.

What benefits and leave are required?

Beyond salary, benefits in Cambodia add roughly 25-30% to employment costs. The government requires three core contributions: social security, health insurance, and workplace accident insurance. Here's what you owe and when.

Annual vacation leave

Cambodia employees get 18 days minimum vacation after one full year of service. New employees earn 1.5 days per month during their first year, so someone starting in March gets 13.5 days by December.

Unused vacation days must be paid out when employment ends - there's no use-it-or-lose-it policy. Employees can carry over up to 6 unused days to the following year, but anything beyond that requires cash payment at their current daily wage rate.

You can't deny vacation requests during the first two weeks of Khmer New Year (April) or Pchum Ben festival (September/October) unless business operations would be severely disrupted.

Sick leave entitlements

Employees get unlimited sick leave, but payment rules change based on duration. For the first 6 months of illness, you pay full salary. After 6 months, the National Social Security Fund (NSSF) covers 60% of their registered salary.

Doctor's certificates are required for sick leave longer than 2 consecutive days. The certificate must come from a licensed medical practitioner - traditional healers don't count, though many employees will ask.

Pregnancy-related illness gets special treatment: expectant mothers can take sick leave without medical certificates for routine prenatal checkups, and you can't count this against their regular sick leave allowance.

Parental leave breakdown

Maternity leave: 90 days at full pay (30 days before birth, 60 days after). The NSSF reimburses you for 50% of the salary cost if the employee has contributed for at least 6 months.

Paternity leave: 15 days at full pay within 2 months of the child's birth. This is entirely employer-funded - no government reimbursement.

Adoption leave: 30 days at full pay for adopting children under 5 years old. Again, this comes from your budget, not social insurance.

Employees can extend maternity leave unpaid for up to 6 additional months, and you must hold their position during this period.

Cambodia public holidays 2025

Employees who work on public holidays earn double pay (200% of daily wage). Most businesses close during Khmer New Year and Pchum Ben - trying to stay open during these periods causes major staffing headaches.

Mandatory benefit contributions

National Social Security Fund (NSSF):

You calculate these percentages on the employee's registered salary, which must be at least the minimum wage ($200/month in 2025) but can be higher than their actual salary for better benefits coverage.

Seniority indemnity: You must set aside 5% of each employee's monthly salary into a blocked bank account. This fund pays their seniority bonus when they leave (15 days salary per year of service after 2+ years employment).

Optional competitive benefits

Most international companies offer 13th month salary (paid in December) and annual bonuses tied to performance. Local employees expect these even though they're not legally required.

Transportation allowances ($20-50/month) and meal allowances ($30-60/month) are common, especially in Phnom Penh where commuting costs add up. These allowances are tax-free if they don't exceed reasonable amounts.

Private health insurance beyond NSSF coverage helps with recruitment. International coverage costs $100-300/month per employee, while local private insurance runs $20-50/month.

Phone allowances ($10-30/month) and internet stipends for remote work ($15-25/month) became standard after COVID and remain competitive differentiators.

Common benefit mistakes

Miscalculating seniority indemnity: Many companies forget this isn't just a year-end bonus - it's a monthly obligation that accumulates in a blocked account. Missing monthly deposits creates cash flow problems when employees leave.

Wrong NSSF registration amounts: Registering employees at minimum wage to save on contributions backfires when they need medical care or unemployment benefits. Their coverage is limited to the registered amount, creating resentment and potential legal issues.

Ignoring festival timing: Scheduling important projects during Khmer New Year or Pchum Ben guarantees delays. These aren't just days off - they're deeply cultural periods when even offering overtime won't get most employees to work.

Mixing up leave types: Treating maternity leave as sick leave or vacation creates compliance problems. Each leave type has different payment rules, duration limits, and documentation requirements.

Administering these benefits correctly requires local HR expertise (minimum $800/month for qualified staff), benefits tracking software, and constant legal updates. Hire with Columbus handles all benefit administration, NSSF registration, and compliance monitoring for $179/month per employee - eliminating the complexity while ensuring you never miss a payment or deadline.

What are the compliance requirements?

Written contracts aren't optional in Cambodia. They're mandatory. Skip this step and you're opening yourself up to claims for unpaid benefits and wrongful termination.

Employment contract requirements

Every employment contract needs to be written and signed within 30 days of your employee's start date. Contracts must be in Khmer (the official language) or include a certified Khmer translation alongside any English version.

You can't wing it with the contract details either. Job description, salary details, working hours, probation period, and termination conditions are all mandatory. You'll also need overtime rates, annual leave entitlement, and dispute resolution procedures. Miss any of these and the contract gets tossed out completely.

All contracts must be registered with the Ministry of Labour and Vocational Training within 30 days of signing. The registration fee is $25 per contract. Don't register? You're looking at a $500 fine plus potential contract nullification.

Probation periods

Standard probation periods are 2 months for basic positions and 3 months for technical or managerial roles. The maximum allowed is 3 months. You can't extend beyond this, no matter how senior the role.

During probation, either party can terminate with just 7 days' written notice and no severance pay. Once probation ends, full employment protections kick in immediately.

Working time regulations

The standard work week maxes out at 48 hours, typically spread across 6 days (8 hours per day). Overtime is capped at 2 hours per day and must be paid at 150% of regular hourly rate.

Employees get a minimum 1-hour lunch break and 15-minute rest breaks for every 4 hours worked. You must maintain detailed time records for all employees. Labor inspectors will check these during audits.

Notice periods by service length

Termination process

You can only terminate for just cause (serious misconduct, repeated violations, economic reasons) or mutual agreement. Just cause requires written warnings and a formal disciplinary process with employee response periods.

Economic dismissals affecting 10+ employees need Ministry of Labour approval. You'll have to prove financial necessity. The consultation period with employee representatives takes 30-60 days minimum.

Immediate dismissal is only allowed for severe misconduct like theft, violence, or abandoning duties for 3+ consecutive days without notice.

Severance pay requirements

Severance is calculated using average monthly salary including overtime and bonuses from the last 12 months. Payment is due within 48 hours of termination.

Data protection

Cambodia follows basic data protection principles but doesn't have detailed GDPR-style legislation yet. You still need written consent before collecting personal data and can only use it for employment purposes.

Employee records must be kept confidential and stored securely for 3 years after termination. Share employee data with third parties without consent and you're looking at privacy violation claims.

Common compliance mistakes

Invalid employment contracts are the biggest problem. Missing mandatory clauses, wrong language requirements, or unregistered contracts void the entire agreement. You'll be liable for back payments and penalties.

Wrong termination processes cost companies thousands in wrongful dismissal claims. Fire without proper cause, skip consultation periods, or miscalculate severance and you'll trigger legal disputes.

Many companies also mess up overtime calculations by using base salary instead of total compensation. Others fail to maintain proper time records for labor inspections.

Penalties for violations

Common compliance failures in Cambodia:

• Invalid employment contract: $500 fine + contract void + back payments owed
• Wrong termination process: 3-6 months' salary compensation + legal fees + potential reinstatement order
• Missing mandatory contract clauses: Contract deemed invalid, full severance and benefits owed
• Improper dismissal: $2,000-5,000 in compensation + reinstatement + legal costs
• Unregistered contracts: $500 per contract + 10% penalty on unpaid wages
• Overtime violations: Double payment of unpaid overtime + $1,000 fine

Hire with Columbus ensures every contract and termination follows Cambodia law exactly. We handle contract registration, maintain compliant time records, and manage the entire termination process including severance calculations and government notifications. At $179/month per employee, it's far cheaper than dealing with compliance violations that can cost thousands in penalties and legal fees.

What has changed recently?

Cambodia's employment rules got a major shake-up in 2025, starting with the minimum wage hike that blindsided plenty of foreign employers. The monthly minimum wage for garment and footwear workers jumped to $204 in January 2025, up from $194 in 2024. That's a 5.2% increase affecting salary benchmarking across every industry.

International companies got hit with the new Foreign Worker Management System that launched in March 2025. All foreign employees now need digital work permits processed through this centralized platform. Processing time dropped from 45 days to just 21 days, which is great. You'll pay $150 per application instead of the previous $100, but honestly, the speed improvement makes it worth it.

New tax compliance requirements

Cambodia rolled out mandatory e-filing for all payroll taxes starting July 2025. No more paper submissions to the General Department of Taxation. Everything goes through their new TaxPay digital system now.

Companies with more than 10 employees must file monthly instead of quarterly. That means more frequent compliance touchpoints to track.

The penalty structure got nastier too. Late payroll tax filings now cost $50 per day, up from $25. Incorrect filings carry a flat $200 penalty plus 2% monthly interest on any underpaid amounts.

Social security expansion

The National Social Security Fund expanded coverage in 2025 to include all employees working more than 20 hours per week. Previously, you needed 40 hours to qualify. Your part-time staff now need full social security registration, with contributions at 0.8% for employees and 2.6% for employers on gross salary.

Maternity benefits got better though. Female employees now get 120 days of paid leave, up from 90 days. The government covers 50% of the cost through social security, so your company only pays the other 50%.

Digital labor contract requirements

All employment contracts must now include digital signatures and be filed electronically with the Ministry of Labour within 30 days of signing. The old paper-based system officially ended in September 2025. Contracts without proper digital filing aren't legally enforceable.

The ministry also introduced standardized contract templates for different employee categories. You can still customize terms, but you must use their base template structure or face rejection during the filing process.

When you're managing these constant regulatory changes across multiple countries, an EOR like Hire with Columbus handles all the compliance updates automatically. We've already integrated with Cambodia's new digital systems and updated all our processes to match the 2025 requirements. For $179/month per employee, you get peace of mind that everything stays compliant without your team tracking every regulatory change.