Is Severance Pay Available for Employees Who Resign without Meeting Retirement Conditions?

Question: When an employee reaches the retirement age but has not yet accumulated 20 years of social insurance contributions upon leaving their job, are they entitled to severance pay from their employer? If so, which provision in the Labor Code applies?

Are those not eligible for a pension still entitled to severance pay? - Illustrative photo.

Thank you for submitting your question to the Consultation page of the Life & Law newspaper. In response to your query, we would like to offer our advisory opinion as follows:

Issue of Severance Pay

Pursuant to Article 45 of the Law on Public Employees 2010, the policies on severance benefits are as follows:

"Article 45. Severance Regime

1. Upon termination of the employment contract, public employees are entitled to severance pay, redundancy allowance, or unemployment insurance benefits as stipulated by labor law and social insurance law, except for the cases specified in Clause 2 of this Article.

2. Public employees are not entitled to severance pay if they fall into one of the following categories:

a) Being dismissed;

b) Unilaterally terminating the employment contract in violation of the provisions in Clauses 4, 5, and 6 of Article 29 of this Law;

c) Terminating the employment contract in accordance with Clause 5 of Article 28 of this Law."

Thus, if you leave your job in compliance with Clauses 4, 5, and 6 of Article 29 of the Law on Public Employees 2010, you are entitled to severance pay in accordance with labor law.

According to Article 48 of the 2012 Labor Code, the duration for calculating severance pay is the total actual working time for the employer, minus the time during which the employee participated in unemployment insurance as prescribed in the Social Insurance Law and the time for which the employer has paid severance pay. Each year of service is entitled to a half-month's salary. The salary for calculating severance pay is the average salary of the last 6 months before the employee leaves.

The formula for calculating severance pay is as follows:

Severance Pay = Total Time Eligible for Severance Calculation X Salary Base for Severance Calculation X 1/2.

Retirement Benefits

According to Point a, Clause 1, Article 54 of the Law on Social Insurance 2014, the conditions for pension entitlement for men from age 60 and women from age 55 who have at least 20 years of social insurance contributions are as follows:

First condition, regarding the age of pension entitlement, you have met the age requirement to be eligible for a pension.

Second condition, regarding the duration of social insurance contributions, you have only contributed for 19 years and 6 months. According to Clause 4, Article 15 of Circular 59/2015/TT-BLDTBXH, "Employees who meet the age condition for pension entitlement but lack up to 6 months of compulsory social insurance contributions can opt to pay a lump sum for the remaining months. The monthly contribution rate will be based on the total contribution of both the employee and employer, using the monthly salary of the social insurance contribution just before retirement to the retirement and survivorship fund to qualify for a pension. Employees qualify for the pension in the month they meet the age requirement and have paid sufficient social insurance for the missing months."

Therefore, you can make a one-time social insurance payment for the 6 months as stipulated by law to qualify for the pension. The time for calculating pension eligibility is the month in which you complete the 6-month social insurance payment.

Article 56 of the Law on Social Insurance 2014 specifies the monthly pension calculation and is guided by Article 7 of Decree 115/2015/ND-CP. Accordingly, the monthly pension of an employee is calculated by multiplying the retirement benefit ratio by the average monthly salary basis for social insurance contributions.

The monthly retirement benefit ratio of employees eligible for a pension, as specified in Article 54 of the Law on Social Insurance 2014, is calculated as follows:

a) For employees retiring from January 1, 2016, to before January 1, 2018, the monthly retirement benefit ratio is 45%, equivalent to 15 years of social insurance contributions. Each additional year of social insurance contribution adds 2% for men and 3% for women, with a maximum of 75%.

b) For female employees retiring from January 1, 2018, onwards, the monthly retirement benefit ratio is 45%, equivalent to 15 years of social insurance contributions. Each additional year of social insurance contribution adds 2%, with a maximum of 75%.

c) For male employees retiring from January 1, 2018, onwards, the monthly retirement benefit ratio is 45%, corresponding to the following years of social insurance contributions: 16 years in 2018, 17 years in 2019, 18 years in 2020, 19 years in 2021, and from 2022 onwards, 20 years. Each additional year of social insurance contribution adds 2%, with a maximum of 75%.

In the case of individual labor disputes

If the employer refuses to pay severance, you can request a labor conciliator to mediate the dispute, or if mediation is not required, you can proceed by filing a lawsuit for the Court to resolve the dispute.

According to Article 202 of the Labor Code, the statute of limitations for requesting a labor conciliator to mediate an individual labor dispute is 6 months from the date the party who perceives their legitimate rights and interests were violated.

The statute of limitations for requesting the Court to resolve an individual labor dispute is 1 year from the date the party perceives their legitimate rights and interests were violated.

We hope our advice will assist you in selecting the most appropriate solution to address your concerns. If you have any further questions, please send them to the Life & Law newspaper.

Legal Expert Dong Xuan Thuan

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