ASEAN Regulatory Brief: Cambodian Labor Law, Thai Worker Restrictions, and Indonesian Pay Increases

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In this edition of ASEAN Regulatory Brief, ASEAN Briefing takes a closer look at Cambodia’s new labor regulations, Thai restrictions on Vietnamese laborers, and Indonesia’s pay rise limits.

Cambodia: New law on labor unions

Cambodia’s cabinet recently approved a new bill on labor unions. Prime Minister Hun Sen said the ruling party is committed to adopt the new Trade Union Law. The new draft law states that a minimum of 10 workers can establish a local union at a company. The new bill also states that any union, which has the support of greater than 30 percent of the employees at a worksite, will get ‘Most Representative Status’ and associated exclusive bargaining rights. The threshold for dissolving a union will be 50 percent under the new law.

Dezan Shira and Associates believes that employers in Cambodia should track the legislation and be prepared to implement the new law. Companies that ensure such preparation for the new law will be able to avoid associated labour disputes and ensure regulatory compliance. Earlier, the President of the Collective Union of Movement of Workers (CUMW) and the opposition Cambodia National Rescue Party had expressed concerns about the pro-employer nature of the bill. However, the new draft will assuage such concerns as the new bill gives employees greater rights.

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Thailand: New regulations for workers from Vietnam

The Thai cabinet recently approved a proposal, which will allow 3,000 Vietnamese workers to work legally in Thailand for one year. The new regulation states that Vietnamese nationals entering the country with a travel visa before 10 February 2015 will now be able to register and legally work in Thailand.

The visa fees for Vietnamese workers will be reduced to US $57, which is on par with workers from Myanmar, Laos and Cambodia. The Vietnamese workers are permitted to work in restaurants, as laborers, domestic help and in the fishing sector. The workers also need to have health checks and procure health insurance to work in Thailand.

The new regulation will add to the labour supply and subsequently reduce labour prices. Employers looking to hire such casual labour stand to benefit from the move as it would be more cost effective. The regulation comes after Thailand’s Ministry of Labour and MOL and Vietnam’s Ministry of Labour, Invalids and Social Affairs signed a Memorandum of Understanding earlier in the year.

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Indonesia: New regulation to limit pay increases

The government recently issued a regulation to limit pay increases. Government Regulation No.78/2015 on wages will base the annual wage increases by pegging it to the current financial year’s inflation rate and the gross domestic products (GDP) growth rate. Earlier, the salary increase was based on the basic cost of living survey of 84 commodities and on the other necessities for the worker.

The government expects the new regulation to make Indonesia an attractive destination for prospective investors due to the lower wages. In addition, the lower wages are reportedly a check against mass layoffs as it economically protects businesses that are struggling currently. Corporations can utilize the new regulation to capitalize on the new regulation and make larger profits.

However, local experts believe that the lower wage may also translate into lower productivity of labor and thus lower profit margins. The new regulation has also faced significant opposition from labor unions, who state that the new law will only allow a maximum increase in monthly salaries of 10 percent. The controversial nature of the new law necessitates that corporations adopt a cautious approach if they are planning to invest in Indonesia.


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