Regulations on Severance Allowance and Job Loss Allowance upon Termination of Labor Contracts

Job loss allowance and severance allowance are stipulated in Article 48 and Article 49 of the Labor Code 2012 and Article 14 of Decree 05/2015/ND-CP. The similarities and differences between the policies for severance allowance and job loss allowance as prescribed by law are as follows:

Similarities:

+ Both severance and job loss lead to the same legal consequence, which is the termination of the labor contract.

+ Both severance allowance and job loss allowance are to be paid by the employer to employees who have worked regularly for the employer for a period of 12 months or more.

+ The working time used to calculate severance and job loss allowances is the total actual working time for the employer, minus the time the employee has participated in unemployment insurance as per legal regulations and the working time for which the employer has already paid severance allowance. (According to Decree 05/2015/ND-CP, the working time is calculated by years (full 12 months); for odd months, from 01 to less than 06 months is calculated as 1/2 year; from 06 months to less than 12 months is calculated as 01 working year).

+ The salary used to calculate these allowances is the average salary based on the labor contract of the 06 consecutive months before the employee resigns or loses the job.

Differences between the two policies are:

Severance allowance regime stipulated in Article 48 of the Labor Code: The following cases shall be entitled to severance allowance when the labor contract is terminated:

+ The labor contract expires, except for the case specified in Clause 6, Article 192 of this Code.

+ The work in the labor contract has been completed.

+ Both parties agree to terminate the labor contract.

+ The employee is sentenced to imprisonment, the death penalty, or is prohibited from performing the job stated in the labor contract as per a legally effective court judgment or decision.

+ The employee dies, is declared by the court to have lost civil act capacity, is missing, or is deceased.

+ The employer who is an individual dies, is declared by the court to have lost civil act capacity, is missing, or is deceased; the employer who is not an individual ceases operations.

+ The employee unilaterally terminates the labor contract as prescribed in Article 37 of this Code.

+ The employer unilaterally terminates the labor contract as prescribed in Article 38 of this Code; the employer terminates the labor contract due to structural, technological changes, economic reasons, or due to the merger, consolidation, division, or separation of enterprises or cooperatives.

Severance allowance amount: Each working year is entitled to a severance allowance of half a month’s salary.

Job loss allowance policies stipulated in Article 49 of the Labor Code: The following cases shall be entitled to job loss allowance when the labor contract is terminated:

+ In the case of structural, technological changes, or due to economic reasons.

+ In the case of job loss due to merger, consolidation, division, or separation of enterprises or cooperatives.

Job loss allowance amount: Employers shall pay job loss allowance to employees who have regularly worked for them for 12 months or more and lose their job in the two aforementioned cases; for each working year, the employer shall pay one month's salary but at least two months' salary.

Based on the above regulations, if you move to a new place and wish to resign, it falls under the case of an employee unilaterally terminating the labor contract with the employer. Therefore, upon termination of the labor contract, you will be entitled to severance allowance as stipulated in Article 48 of the above Law. For the allowance amount, you can refer to the aforementioned regulations.

According to the Vietnam Law Newspaper

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