Building a team in Cambodia requires careful navigation of local labor laws. To ensure compliance and manage your budget effectively, a clear understanding of the Employer of Record (EOR) service and the distinction between the two primary contract types – Fixed Duration Contracts (FDC) and Undetermined Duration Contracts (UDC) – is essential.
What is an Employer of Record (EOR)?
An EOR acts as the legal employer for your staff in Cambodia. They handle the heavy lifting-onboarding, payroll, tax filings, and benefits-while you manage the employee’s day-to-day work. Hence, you can hire locally without setting up a legal entity or subsidiary.
| Aspect | Fixed Duration Contract (FDC) | Undetermined Duration Contract (UDC) |
| Definition | A written contract with precise start and end dates | An open-ended contract (written or verbal) with no expiry date |
| Duration | Max 2 years initially. Can be renewed, but total duration cannot exceed 4 years | No limit—continues until terminated |
| ✅ Pro | Certainty: The contract ends automatically on the specific date | Flexibility: You can terminate the contract (with a valid reason) by giving the required notice, rather than paying out the remaining months of a fixed term |
| ❌Con (Cost) | You must pay Severance Pay of at least 5% of total wages at the end of the contract | You pay Seniority Indemnity equal to 15 days of wages per year, paid out semi-annually (June and December) |
| ⚠️ Risk | Early termination is expensive: If you terminate without a valid reason, you must pay the employee the wages they would have earned until the contract expired | Notice periods increase with tenure: Up to 3 months for employees with >10 years of service |
💡 Pro Tip: Watch the clock! If an FDC exceeds the 4-year limit, it automatically converts into a UDC.
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