What are the regulations on salary as the basis for calculation of severance allowance for employees working under many consecutive employment contracts in VIetnam?
Vietnam: Is it necessary to pay severance allowance in case an employee is laid off due to an economic crisis?
In Article 42 of the Labor Code 2019, there are provisions as follows:
Obligations of the employer in case of changes in structure, technology or changes due to economic reasons
1. Changes in structure and technology include:
a) Changes in the organizational structure, personnel rearrangement;
b) Changes in processes, technology, equipment associated with the employer’s business lines;
c) Changes in products or product structure.
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.
3. If the change affects the employment of a large number of employees, the employer shall develop and implement a labor utilization plan prescribed in Article 44 of this Labor Code. In case of new vacancies, priority shall be given to retraining of the existing employees for continued employment.
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 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.
6. The dismissal of employees in the cases mentioned in this Article shall only be implemented after a discussion with the representative organization of employees (if any) and after giving prior notice of 30 days to the People’s Committee of the province and the employees.
Accordingly, economic crises are considered cases due to economic reasons.
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.
In case the employer is unable to create provide employment and has to resort to dismissing employees, the employer shall pay them redundancy allowances.
What are the regulations on salary as the basis for calculation of severance allowance for employees working under many consecutive employment contracts in VIetnam?
What are the regulations on salary as the basis for calculation of severance allowance for employees working under many consecutive employment contracts in VIetnam?
In Clause 5, Article 8, Decree 145/2020/ND-CP has the following provisions:
Severance allowance, redundancy allowance
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5. Salary as the basis for calculation of severance allowance and redundancy allowance:
a) 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.
b) 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 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.
6. Expenditures on payment of severance allowance and redundancy allowance shall be recorded as production and business costs or operating costs of the employer.
Thus, when the employee works for the employer under many consecutive labor contracts, the salary used to calculate unemployment benefits is the average salary of the 6 consecutive months under the previous labor contract. upon termination of the final employment contract.
How much is the redundancy allowance for employees in Vietnam?
In Clause 1, Article 47 of the Labor Code 2019, there are provisions 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.
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At the same time, Clause 2, Article 8 of Decree 145/2020/ND-CP stipulates:
Severance pay, job loss allowance
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2. The employer shall pay redundancy allowance in accordance with Article 47 of the Labor Code to the employee who has work on a regular basis for at least 12 months when he/she loses his/her job in the cases specified in Clause 11 Article 34 of the Labor Code.
If the employees has work for the employer on a regular basis for at least 12 months but the employment period as the basis for calculation of redundancy allowance mentioned in Clause 3 of this Article is shorter than 24 months, the employer shall pay a redundancy allowance of at least 02 months’ salary.
Thus, to calculate the level of redundancy allowance, employees can apply the following formula:
Redundancy allowance level = Working time to calculate allowance level x Monthly salary to calculate allowance level
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