Regime for Severance Allowance upon Termination of Labor Contracts

According to Article 48 of the Labor Code 2012 (LCC), it is stipulated that: “1. When the labor contract (LC) terminates according to the provisions of Clauses 1, 2, 3, 5, 6, 7, 9, and 10, Article 36 of this Code, the employer is responsible for paying severance allowance to employees who have regularly worked for 12 months or more. Each working year is entitled to a severance allowance equivalent to half a month’s salary; 2. The working period for calculating severance allowance is the total actual working time for the employer minus the time the employee has participated in unemployment insurance according to the provisions of the Social Insurance Law and the time the employer has paid severance allowance; 3. The salary for calculating the severance allowance is the average salary according to the LC of the six consecutive months before the employee leaves the job.”

Based on the above regulation, referring to your case, you have regularly worked under the LC from May 1, 2008, to September 2013 (5 years). Therefore, you are entitled to the severance allowance upon termination of the LC.

Although your actual monthly salary is 8,000,000 VND/month, the salary for calculating the severance allowance is the average salary according to the LC of the six consecutive months before the termination of the LC. Therefore, the salary for calculating your severance allowance is the salary according to the LC signed by both parties, which is 3,500,000 VND/month.

The working time for calculating your severance allowance is the total actual working time in the company minus the time you participated in unemployment insurance. Therefore, the working time for calculating your severance allowance is from May 1, 2008, to January 1, 2009 (the time when the employee started participating in unemployment insurance according to the Social Insurance Law). According to Clause 5, Article 14 of Decree No. 44/2003/ND-CP detailing and guiding the implementation of some articles of the LCC regarding the LC, the total working time at the enterprise for calculating severance allowance with odd months will be rounded: From 1 month to under 6 months will be rounded to 1/2 year; from 6 months to under 12 months will be rounded to 1 year. Therefore, the working time to calculate your severance allowance will be rounded to 1 year.

Based on the method of calculating severance allowance stipulated in Article 48 of the LCC: Severance allowance = Total actual working time at the enterprise for calculating severance allowance x salary for calculating the severance allowance x 1/2. Thus, your severance allowance is calculated as: 1 x (3,500,000 x 1/2) = 1,750,000 VND.

According to Labor Newspaper

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