Cambodian Journalists Alliance Association

Government kicks off pension scheme for private sector

Garment workers buy food for their lunch in front of a factory on the outskirts of Phnom Penh, Picture taken January 14, 2022. CamboJA/ Pring Samrang
Garment workers buy food for their lunch in front of a factory on the outskirts of Phnom Penh, Picture taken January 14, 2022. CamboJA/ Pring Samrang

The government has launched a social security pension fund aimed at providing retirement benefits to private sector employees, in a move applauded by civil society groups and workers.

The Labor Ministry and the Ministry of Finance issued a joint proclamation, noting that the new fund will launch July 1, 2022, though companies will have several months to begin implementation. 

​​Heng Sophannarith, Deputy Director General of the National Social Security Fund, told CamboJA that the implementation of the contribution pension scheme will be carried out on October 1, 2022.

“When [the employees] reach the age of 60, [the NSSF] calculates their last six months’ salary [to set the pension].” Sophannarith said. If an employee dies before the age of 60, the family will receive the pension for one year.

Those who already have an NSSF card are paying into occupational accident and health care. On October 1st, 2022, they will automatically be enrolled in the social security system for pensions, he said.

Sophannarith explained that this pension is different from the two current social security systems: occupational accidents and health care. In both cases, the employers pay 100 percent for the workers.

“As for the pension, workers are required to pay a 2 percent contribution of wages and the employers [add another] 2 percent,” he said.

Ath Thorn, president of the Cambodian Labor Confederation, welcomed the pension scheme, but said it comes too late to help many older employees.

“The late implementation of the social security pension fund will make citizens or workers, employees who are older, have less chance to donate, and they will get less percentage from pension funds,” he said.

However, he noted that they won’t be entirely cut out as the law makes provisions for those who signed up at an older age to backdate their pension contributions.

Mr. Thorn said that employees will be eligible to receive their pension upon retirement, or, if they retire early, at the age of 60. The pension will be 50 percent of a worker’s wages.

According to sub-decree 32, the social security pension scheme states that employees who have the right to a pension are required to register by at least the age of 60, and donate pension funds for 12 months.

The sub-decree also states that the companies that have not registered with the NSSF must do so by the end of the month and their employees must be registered within three days of starting the employment.

Mr. Sophannarith, the government had planned to implement the pension scheme in 2019, but it was postponed due the outbreak of Covid-19 and its impacts on the private sector.

“If we leave it for a long time, it will affect the old workers, which means that at the age of 60, they lose their rights. So, we have to start implementing it so that they can get this pension system,” he said.

A 54-year-old reporter at VOD, Nhim Sokhorn, said that while he would be missing out on some benefits of the pension, it was a good move.

“It is too late, not just for me to lose the benefits but those who are of a similar age as me, will lose the same,” he said.

“[But] it is right that the government has a willingness to do this, and I think the government has its own responsibility of collecting tax and paying back that money to people to support their livelihood.”

Ky Saroeun, 52, who works as a private security guard in Takeo province’s Bati district, wasn’t aware of the new pension scheme.

“If the proclamation was issued a little earlier, it is a very good thing because I am able to receive more benefits, but I am now older, and benefits will not be much,” he said.

Transparency International Cambodia executive director Pech Pisey, said that there are public doubts over the management of funds — which the government can alleviate by making any investments transparent.

“It would be good for the nation that the government is able to raise funds for them to invest from other incomes and save for the people after retirement,” he said.

“People are still worried that if they pay two percent of their salary, what will be the management?” he asked. 

“Can we guarantee transparency and high accountability in managing the budget…? If we give the private sector to civil society organizations or all ministries, the government will be able to raise a lot of capital for the common good, but can the state guarantee?”

According to the sub-decree, the contribution rates will be done in three stages. In the first stage, the pension will be built up through four percent of the contributable wage — two from the employer and two from employee.

In five years, that figure will be raised to a total of eight percent, for five more years. After that, there will be subsequent increases of 2.75 percent every 10 years.

Participants who lose their job before the age of 60 will still be able to contribute to their pension and will receive pension payments upon turning 60. (Additional reporting by Try Thaney, and Kheang Sokmean)