Will employees receive severance allowance when terminating employment contracts in Vietnam? How to calculate the severance allowance?
Will employees receive severance allowance when terminating employment contracts in Vietnam?
Pursuant to Article 46 of the 2019 Labor Code, regulations on severance allowance are as follows:
Severance allowance
1. In case an employment contract is terminated as prescribed in Clauses 1, 2, 3, 4, 6, 7, 9 and 10, Article 34 of this Code, the employer is responsible for paying severance allowance to the employee who has worked on a regular basis for a period of at least 12 months. Each year of work will be worth half a month’s salary, except for the cases in which the employee is entitled to receive retirement pension as prescribed by social insurance laws, and the cases specified in Point e Clause 1 Article 36 of this Labor Code.
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Accordingly, the condition to receive severance pay is when the employee terminates the employment contract in the following cases:
- The employment contract expires, except for the case the employment contract with an employee is a member of the management board of the internal employee representative organization expires before the end of his/her term of office, the existing contract shall be extended until the end of the term of office.
- The tasks stated in the employment contract have been completed.
- Both parties agree to terminate the employment contract.
- The employee is sentenced to imprisonment without being eligible for suspension or release as prescribed in Clause 5 Article 328 of the Criminal Procedure Code, capital punishment or is prohibited from performing the work stated in the employment contract by an effective verdict or judgment of the court.
- The employee dies; is declared by the court as a legally incapacitated person, missing or dead.
- The employer that is a natural person dies; is declared by the court as a legally incapacitated person, missing or dead. The employer that is not a natural person ceases to operate, or a business registration authority affiliated to the People’s Committee of the province (hereinafter referred to as “provincial business registration authority”) issues a notice that the employer does not have a legal representative or a person authorized to exercise the legal representative’s rights and obligations.
- The employee unilaterally terminates the employment contract in accordance with Article 35 of 2019 Labor Code.
- The employer unilaterally terminates the employment contract in accordance with Article 36 of 2019 Labor Code.
According to Article 40 of the 2019 Labor Code, the obligations of the employee upon illegal unilateral termination of the employment contract are as follows:
Obligations of the employee upon illegal unilateral termination of the employment contract
The employee who illegally unilaterally terminates his/her employment contract shall:
1. Not receive the severance allowance.
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Accordingly, when an employee resigns due to the expiration of the employment contract without re-signing or unilaterally terminating the employment contract in accordance with the law or completing the work according to the employment contract, he or she will receive severance allowance
However, if the employee unilaterally terminates the employment contract illegally, he or she will not receive severance pay.
In addition, the condition to receive severance pay is that the employee must have worked for one employer for 12 months or more.
Will employees receive severance allowance when terminating employment contracts in Vietnam? How to calculate the severance allowance?
When will the unilateral termination of an employment contract be illegal in Vietnam?
Pursuant to Article 39 of the 2019 Labor Code, regulations on illegal unilateral termination of employment contracts are as follows:
Illegal unilateral termination of employment contracts
The unilateral termination of an employment contract will be illegal if it does not comply with regulations of Article 35, 36 and 37 of this Labor Code.
Accordingly, the unilateral termination of an employment contract will be illegal if :
- Violation of the notice period for terminating the contract with the employer;
- Terminaton of the employment contract without complying with the cases where the right to unilaterally terminate the employment contract is permitted.
How to calculate severance allowance in Vietnam?
Pursuant to Clause 5, Article 8 of Decree 145/2020/ND-CP regulations on Severance allowance and redundancy allowance as follows:
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.
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Accordingly, the calculation of severance allowance is 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, 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.
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