Are employers in Vietnam required to pay redundancy allowances to employees who have worked for 2 years until they are laid off due to the economic recession?
- Are employers in Vietnam required to pay redundancy allowances to employees who have worked for 2 years until they are laid off due to the economic recession?
- In Vietnam, what is the salary as the basis for calculating redundancy allowances paid to employees due to economic recession resulting in unilaterally terminating employment contracts by employers?
- What are the responsibilities of employers and employees upon termination of an employment contract in Vietnam?
Are employers in Vietnam required to pay redundancy allowances to employees who have worked for 2 years until they are laid off due to the economic recession?
Under Article 42 of the Labor Code 2019:
Obligations of the employer in case of changes in structure, technology or changes due to economic reasons
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2. Changes due to economic reasons include:
a) Economic crisis or economic depression;
b) Changes in law and state policies upon restructuring of the economy or implementation of international commitments.
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4. If a change due to economic reasons threatens to cause a large number of employees to lose their jobs, the employer shall develop and implement a labor utilization plan as prescribed in Article 44 of this Code.
5. In case the employer is unable to create and provide employment and has to resort to dismissing employees, the employer shall pay them redundancy allowances in accordance with Article 47 of this Labor Code.
According to regulations, if the employer is unable to create and provide employment and has to resort to dismissing employees, the employer shall pay them redundancy allowances.
At the same time, Article 47 of the Labor Code 2019 stipulates redundancy allowance as follows:
Redundancy allowance
1. Where an employment contract is terminated according to Clause 11 Article 34 of this Labor Code and the employee has worked on a regular basis for the employer for at least 12 months, the employer shall pay a redundancy allowance to the employee. Each year of work will be worth 01 month’s salary and the total redundancy allowance shall not be smaller than 02 month’s salary.
2. The qualified period of work as the basis for calculation of redundancy 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.
3. The salary as the basis for the calculation of redundancy allowance shall be the average salary of the last 06 months under the employment contract before the termination.
4. The Government shall elaborate this Article.
Thus, according to regulations, employers in Vietnam must pay redundancy allowances to employees who have worked for 2 years until they are laid off due to the economic recession. Each year of work will be worth 01 month’s salary and the total redundancy allowance shall not be smaller than 02 month’s salary.
In Vietnam, what is the salary as the basis for calculating redundancy allowances paid to employees due to economic recession resulting in unilaterally terminating employment contracts by employers?
Under Clause 5, Article 8 of Decree 145/2020/ND-CP, salary as the basis for calculation of redundancy allowances paid to employees due to economic recession is specified as follows:
- The salary as the basis for calculation of severance allowance and redundancy allowance is the average salary of the last 06 months before the employee resigns or loses the job.
- In case the employee works for the employer under consecutive employment contracts as prescribed in Clause 2 Article 20 of the Labor Code, the salary as the basis for calculation of severance allowance and redundancy allowance is the average salary of the last 06 months before the last employment contract is terminated.
In case the last employment contract is invalidated due to a lower salary than the region-based minimum wage announced by the Government or lower than the salary specified in the collective bargaining agreement, the salary as the basis for calculation of severance allowance and redundancy allowance shall be negotiated by both parties but must not be lower than the region-based minimum wage or the salary specified in the collective bargaining agreement.
What are the responsibilities of employers and employees upon termination of an employment contract in Vietnam?
Under Article 48 of the Labor Code 2019 on the responsibilities of employers and employees upon termination of an employment contract:
(1) Within 14 working days following the termination of an employment contract, both parties shall settle all payments in respect of the rights and interests of each party. In the following cases, such period may be extended, but shall not exceed 30 days:
- Shutdown of business operation of the employer that is not a natural person;
- Changes in the organizational structure, technology or changes due to economic reasons;
- Full division, partial division, consolidation, merger of the enterprise; sale, lease, conversion of the enterprise; transfer of the right to ownership or right to enjoyment of assets of the enterprise or cooperative;
- Natural disasters, fire, hostility or major epidemics.
(2) Priority shall be given to payment of the employees’ salaries, social insurance, health insurance, unemployment insurance, severance allowance and other benefits under the collective bargaining agreement and employment contracts in case of shutdown, dissolution or bankruptcy of an enterprise or cooperative.
(3) The employer has the responsibility to:
- Complete the procedures for verification of duration of participation in social insurance and unemployment insurance, return them and original copies of the employee’s other documents (if any);
- Provide copies of the documents relevant to the employee’s work if requested by the employee. The employer shall pay the cost of copying and sending the documents.
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