This paper explores the potential effective policy inputs to promote formal employment in the Cambodian service sector labor market. It is argued that the current literature places much emphasis on the support policies to stimulate job creation. Since employment is determined by the labor transaction of demand and supply, this paper brings the wage and productivity factors into consideration and demonstrates a combined effect from all the factors in determining the employment rate. Five models of multiple regressions are run by subsequently inserting variables of various factors drawn from literature into a regression equation. Using data in Cambodia Enterprise Survey 2007, it is found that employment is positively and significantly determined by the growth in labor cost(including wage, bonuses, and social payments). As a recommendation, this paper brings more attention to the benefits of a minimum wage policy in promoting formal employment in the Cambodian service sector.