Concerns rising over seniority pay in targeted industries

Gerald Flynn / Khmer Times No Comments Share:
Alex Larkin, VDB Loi senior legal advisor, briefed the crowd at Raffles on updates to labour law and taxation. KT/Chor Sokunthea

The issue of retroactive seniority payments (RSPs) to an estimated 800,000 people was raised once more at a tax and labour law briefing hosted by VDB Loi, an international tax, accounting and legal consultancy firm.

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While there was no change to the government’s plan to introduce RSPs for the majority of Cambodian business sectors until December 2021, backdated seniority payments are already being made in so-called targeted sectors such as garments, footwear and textiles, where the first instalments of RSPs were paid to employees in June this year.

For targeted sectors, employers will be forced to pay seniority payments reaching as far back as 2008 – so for employees who have worked with the same company for several years, millions of riel may be at stake.

However, as representatives of VDB Loi made clear, there have been issues relating to clarity – or the lack thereof – in the government directive 443 on RSPs. Specifically, there are fears that certain employers within the sector are attempting to skirt their legal duties through a range of means. Whether through presenting themselves as separate sectors, or through contractual changes for employees, it appears that the vague definition within the directive has emboldened employers to dodge issuing RSPs to eligible employees.

“The issue I think you are talking about is that government has said that all companies in the garment and footwear sector must pay seniority,” explains Sandra D’Amico, vice-president of Cambodian Federation of Employers and Business Associations.

“This means that all buyers and suppliers who work in majority or have in majority transactions with the garment sector are included in implementation under garment and footwear sectors,” she says, but notes that often these operations are small in scale and therefore shouldn’t be overly complicated with regards to guaranteeing retroactive seniority payments.

Deputy director of the Garment Manufacturers Association in Cambodia (GMAC), Kaing Monika, seeks to quash fears over unpaid RSPs and other benefits within targeted sectors.

“I think all employers in our sector have complied with this new legal requirement. Otherwise, there would have been a complaint by the worker-union already – this sector is heavily unionised,” he says, adding that while he was aware of disagreements stemming from a lack of clarity in the directive, he maintained that this falls within the purview of the Ministry of Labour and Vocational Training, not GMAC.

Spokesman for the Ministry of Labour, Heng Sour, could not be reached for comment on the matter.

The president of the Cambodia Labour Confederation, Ath Thorn, claims abuse within the system is more widespread.

“The conflict has happened regarding the unlimited contracts because the employers claim that the contracts are limited contracts,” he says, pointing out that only employees on limited or fixed duration contracts are ineligible for seniority payments.

Mr Thorn claims that only 30 percent of employers in the targeted sectors required to pay RSPs are doing so because they’re using the contractual loopholes in directive 443 to avoid making payments to long-serving employees.

“Mostly, the employers will try not to pay the seniority payment because they claimed that the contract with the workers is a limited contract, which stated only two years by law,” he argues. “Some factories do not have unions, they will not pay the seniority payment to the workers, because they said all workers have a certain contract. All in all, in the garment sector, they will pay the seniority payment when they use the unlimited contract, but for those employers that do not want to pay the seniority, they say that employee has a limited contract.”

However, for employers, directive 443 has created a range of headaches that some fear could damage Cambodia’s ability to compete in the low-cost production sectors. Anthony Galliano – chief executive officer of Cambodian Investment Management, a financial consultancy firm with more than a decade of experience – is one such critic.

Mr Galliano noted that the business community was opposed to directive 443 and that through coordinated efforts of various business chambers and challenges from interested parties, certain seniority payments have been delayed or elongated, but that the Ministry of Labour and Vocational Training will enforce the directive regardless.

“Directive 443 was unexpected and the business community was caught off-guard with unplanned and unbudgeted employment costs, substantial in nature,” he said.

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