New Cambodia seniority payments cause controversy - Just Style
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New Cambodia seniority payments cause controversy

By admin-demo 15 Jul 2019

New Cambodia seniority payments cause controversy

Garment industry associations in Cambodia are accusing factory owners of dismissing experienced workers without paying due compensation, claiming this is a breach of recently introduced legally mandated seniority payments.

Pav Sina, president of Cambodia’s Collective Union of Movement of Workers (CUMW) told just-style that an unnamed “factory located in Damnakthom village, in the capital Phnom Penh, has dismissed workers controversially without paying them compensation,” claiming the supplier wanted to evade additional costs from the new payments. 

One person sacked, according to Sina, was In Suphorn, the president of a local trade union branch. He has written to the factory’s international brand client Tesco to investigate the problem. 

However, a spokesperson from Tesco press office Infonova in the UK told just-style a “legally required compensation has been settled” regarding when Sophorn’s contract was terminated by the Damnakthom factory in August last year. 

Speaking more generally, the spokesperson says “Tesco takes workers’ rights very seriously across our global supply chain,” adding that the company “monitors legal frameworks in all our major sourcing countries.” 

More importantly as a founder member of the Ethical Trading Initiative (ETI), Tesco says it expects suppliers to “meet the highest international standards, including on fair dismissal and compensation.” 

The Tesco spokesperson accepted that from 2019 onwards, workers under unspecified duration contracts (UDC) shall be entitled to employment seniority payments in Cambodia and that this seniority payment must be paid two times per year.

Labour law amendment

In July 2018, Cambodia passed an amendment to its labour law that “eliminated ‘indemnity for dismissal’ – a local legal concept equivalent to a severance payment – for undetermined duration contracts, for example employment contracts without a fixed expiration date,” according to a note from Thailand-based law firm Tilleke and Gibbins. 

Instead, with the new amendment, which came into effect last month, mean an employer must now offer periodic payments every six months to workers on Undetermined Duration Contracts (UDCs). 

On an annual basis, “the total amount of the seniority payment is equal to 15 days of an employee’s wages and other fringe benefits, such as commissions and gratuities,” the Tilleke and Gibbins note adds. 

Meanwhile, PricewaterhouseCoopers’ Cambodia office says the “employment seniority payment as stated in Article 89 (new) of the Labour Law shall apply to workers/employees who have unspecified duration contracts (UDC) only.”  

And for workers who have fixed duration contracts, the employer shall provide the worker with severance pay proportional to both the wages and the length of the contract, it adds.

Regarding claims that these duties are being shirked, Ken Loo, general secretary of the Garment Manufacturers Association in Cambodia (GMAC), told just-style he was “unaware of such accusations” by unions. Moreover, he claims: “If factories dismiss the workers now, the indemnity payments and damages due are much greater than the new payments required.”

Also, for any current claims that factories are evading their duty to pay the increased rates, he says “payments are only due end of the month and it would be premature for any worker or union to accuse any factory of non-payment.”

Export receipts

Foreign apparel and footwear receipts account for nearly 80% of Cambodia’s total exports. Cambodia exported US$8.5bn worth of garment and footwear exports to Europe and the US last year, according to data from the National Union Alliance Chamber of Cambodia.

European and international business associations representing apparel and footwear buyers have been closely watching the labour and human rights situation in Cambodia, after the European Union in February started the process that could temporarily suspend Cambodia’s duty-free trade benefits under the Everything But Arms (EBA) trade scheme

Separately, Cambodian unions earlier this year wrote to global clothing firms urging them to sign up to the ACT (Action, Collaboration, Transformation) living wage initiative and collectively link their international purchasing practices to the development of national industry-wide collective agreements.

However, Cambodia’s garment and footwear industry has seen an improvement in labour standards, according to a recent assessment from the International Labor Organization (ILO), with violations falling and compliance on the rise. In addition, the country’s new minimum monthly wage of US$182 took effect on 1 January this year, although garment and textile sector unions remain unhappy, saying this is well below their goal of US$200 per month.