Regulations on severance pay in Vietnam

Regulations on severance pay in Vietnam

Cases of severance pay in Vietnam are specified in Article 46 of the Labor Code dated November 20, 2019 and Article 8 of Decree No. 145/2020/ND-CP dated December 14the 2020, effective from February 1st ,2021

1. Regulations on cases of severance pay in Vietnam

Employers in Vietnam are responsible for offering severance pay to employees upon termination of employment contracts in the following cases:

a) The labor contract expires.

b) The tasks stated in the labour contract have been completed.

c) Both parties agree to terminate the labor contract.

d) The employee is sentenced to imprisonment without being eligible for suspension or release as prescribed in Clause 5 Article 328 of the Criminal Procedure Code, capital punishment or is prohibited from performing the work stated in the employment contract by an effective verdict or judgment of the court.

e) The employee dies; is declared by the court as a legally incapacitated person, missing or dead.

f) The employer that is a natural person dies; is declared by the court as a legally incapacitated person, missing or dead. The employer that is not a natural person ceases to operate, or a business registration authority affiliated to the provincial business registration authority issues a notice that the employer does not have a legal representative or a person authorized to exercise the legal representative’s rights and obligations.

g) The employee unilaterally terminates the employment contract in accordance with Article 35 of this Code.

h) The employer unilaterally terminates the employment contract in accordance with Article 36 of this Code.

2. Cases not entitled to severance pay in Vietnam

a) Employees are eligible for pension under the provisions of Article 169 of the Labor Code and the law on social insurance;

b) The employee quits his/her  job without a legitimate reason for 05 consecutive working days or more as specified at Point e, Clause 1, Article 36 of the Labor Code. The case is considered to have a legitimate reason as prescribed in Clause 4, Article 125 of the Labor Code.

c) The employee unilaterally terminates the labor contract illegally as prescribed in Article 40 of this Code;

d) The foreign employee working in Vietnam is expelled by an effective verdict or judgment of the court or a decision of a competent authority.

e) The employee is dismissed for disciplinary reasons.

f) The employer  dismisses the employee in case of change of structure, technology or economic reasons and upon division, separation, consolidation or merger; sale, lease, change the type of business; transfer ownership and right to use assets of enterprises or cooperatives as prescribed in Articles 42 and 43 of this Code.

g) The work permit is invalid for foreign employees working in Vietnam as prescribed in Article 156 of this Code.

3. Regulations on conditions and levels of severance pay in Vietnam

- The employer is responsible for offering severance pay to the employee who has worked on a regular basis for a period of at least 12 months.

- Each year of work will be worth half a month’s salary. The qualified period of work as the basis for calculation of severance allowance is by year (full 12 months); in case of months less than or equal to 06 months, it is equal to 1/2 year, over 06 months is counted as 01 working year.

4. Regulations on the qualified period of work as the basis for calculation of severance allowance in Vietnam.

The qualified period of work as the basis for calculation of severance allowance shall be the total period during which the employee actually worked for the employer minus the period over which the employee participated in the unemployment insurance in accordance with unemployment insurance laws and the period for which severance allowance or redundancy allowance has been paid by the employer, in which:

a)The total period during which the employee actually worked for the employer including: the period the employee has directly worked; probationary period; period being sent by the employer to attend school; the period of leave to enjoy the sickness and maternity benefits in accordance with the law on social insurance; sick leaves for treatment, occupational rehabilitation in case of occupational accident or occupational disease, which is paid by the employer in accordance with the law on occupational safety and sanitation; time off from work to perform civic duties in accordance with the law, which is paid by the employer; the time off work is not due to the fault of the employee; weekly leave according to Article 111, leave with full salary under Article 112, Article 113, Article 114, Clause 1 Article 115; the time for performing the tasks of the representative organization of employees as prescribed in Clauses 2 and 3 of Article 176 and the time of being temporarily suspended from work according to Article 128 of the Labor Code.

b)The period over which the employee participated in the unemployment insurance includes: the time the employee has participated in unemployment insurance according to the provisions of law and the period the employee is not required to participate in unemployment insurance as prescribed by law, but is paid by the employer together with the employee”s salary an amount equivalent to the level of unemployment insurance premium paid by the employer in accordance with the labor and unemployment insurance laws.

5. The salary as the basis for calculation of severance allowance is prescribed as follows:

a) The salary as the basis for calculation of severance allowance shall be the average salary of the last 06 months under the employment contract before the termination.

b) In case the employee works for the employer under many successive labor contracts as prescribed in Clause 2, Article 20 of the Labor Code, the salary used for calculation of severance allowance shall be the average salary of 06 consecutive months under the labor contract before the termination of the last labor contract. In case the last labor contract is declared invalid because the content of the salary is lower than the regional minimum wage announced by the Government or the salary stated in the collective labor agreement, the salary used as the basis for calculation of severance allowance shall be agreed upon by the two parties but must not be lower than the regional minimum wage or the salary stated in the collective labor agreement.

LAWYER VIETNAM LAW FIRM- Vietnamese Lawyers