Is severance allowance required when terminating employment contract with employees who are entitled to receive retirement pension in Vietnam?

Is severance allowance required when terminating employment contract with employees who are entitled to receive retirement pension in Vietnam?

Pursuant to Clause 1, Article 46 of the 2019 Labor Code, severance allowance are prescribed as follows:

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.

In Clause 10, Article 34 of the 2019 Labor Code, cases of termination of an employment contract are prescribed:

10. The employer unilaterally terminates the employment contract in accordance with Article 36 of this Code.

According to Point dd, Clause 1, Article 36 of the 2019 Labor Code, an employer shall have the right to unilaterally terminate an employment contract in one of the following circumstances:

dd) The employee reaches the retirement age specified in Article 169 of this Labor Code, unless otherwise agreed by the parties;

Thus, you do not clearly state how long you have worked at the company. If you have worked continuously for the company for 12 months or more, the company terminates the employment contract with you when you reach retirement age, and according to law in Vietnam, the company is responsible for paying severance allowance.

Is severance allowance required when terminating employment contract with employees who are entitled to receive retirement pension in Vietnam? (Image from the Internet)

What is salary as the basis for calculation of severance allowance in Vietnam?

Pursuant to Clause 5, Article 8, Decree 145/2020/ND-CP stipulates salary as the basis for calculation of severance allowance as follows:

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.

Therefore, the salary used to calculate severance allowance for the employee is the average salary of the 6 consecutive months under the employment contract before the employee resigns his job. Your monthly salary is 12 million, so the salary to calculate severance allowance is (12x6)/6 = 12 million.

Best regards!