Is there a severance allowance upon the termination of labor contract in Vietnam?

Pursuant to Articles 36 and 48 of the 2012 Labor Code of Vietnam, the following cases are entitled to severance allowance:

- Expiration of the labor contract;

- Completed the work according to the labor contract;

- Both parties agree to terminate the labor contract;

- The employee is sentenced to prison, death or banned from doing the job specified in the labor contract under a legally effective judgment or decision of the Court;

- The employee dies, is declared by a court to have lost his/her civil act capacity, is missing or is dead;

- The employer being an individual dies, is declared by a court to have lost his/her civil act capacity, is missing or is dead; the employer who is not an individual terminates the operation;

- The employee unilaterally terminates the labor contract according to the provisions of Article 37 of the Labor Code;

- The employer unilaterally terminates the labor contract according to the provisions of Article 38 of the Labor Code;

Employers are responsible for paying severance allowance to employees who have worked regularly for full 12 months or more in the above cases. However, in reality, not all employees are fully paid severance allowance by their employers.

Typically, at the Judgment 02/2016/LD-ST dated October 21, 2016 of the People's Court of Lien Chieu District , Da Nang City to hear the dispute over the severance allowance between Mr. Tran Quang D and V Steel Structure Manufacturing Joint Stock Company. Specifically:

From February 1984 to June 2002, Mr. Tran Quang D was a construction worker of high voltage transmission line under Company X (now V Electricity Construction Joint Stock Corporation). On August 15, 2002, he was assigned by the director of Company X to take a job at the D steel structure factory under Company X (now V steel structure manufacturing joint stock company). On August 10, 2015, Mr. D terminated the labor contract at V Steel Structure Manufacturing Joint Stock Company. However, the Company only paid severance allowance for 6 years and 6 months from July 2002 to December 31, 2008 and did not pay severance allowance from February 1984 to June 2002

The People's Court of Lien Chieu District found that the move from D Steel Structure Factory to V Steel Structure Manufacturing Joint Stock Company is just a change in the operating model, so the employee is still working and has not yet received any benefits. V Steel Structure Manufacturing Joint Stock Company inherits, so it has to settle the severance allowance for Mr. D for the time Mr. D worked before at Company X, Steel Structure Fabrication Factory D is suitable for Mr. D accordance with Clause 3, Article 15 of Decree No. 05/2015/ND-CP dated January 12, 2015 of the Government and Article 48 of the Labor Code. Therefore, the Trial Panel forced V Steel Structure Manufacturing Joint Stock Company to pay severance allowance to Mr. D from February 1984 to June 2002 for a period of 18 years and 6 months.

In conclusion, it should be noted that, when terminating a labor contract with an enterprise that changes its operating model but this enterprise has not settled the previous subsidy regime, the employee has the right to request the employer to pay severance allowance for the actual working time at the enterprise before changing the model and ensure the rights and interests of employees.