Under what circumstances can employees receive severance allowance in Vietnam? What is time limit for severance allowance payment for employees in Vietnam?

What is time limit for severance allowance payment for employees in Vietnam?

On our side, there are employees who terminate their labor contract in the case of having to pay severance allowance to them. So how long do we have to pay this allowance for them?

In Clause 1, Article 48 of the Labor Code 2019, the time for paying severance allowance to employees is as follows:

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:

a) Shutdown of business operation of the employer that is not a natural person;

b) Changes in the organizational structure, technology or changes due to economic reasons;

c) 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;

d) Natural disasters, fire, hostility or major epidemics.

Normally, within 14 working days from the date of termination of the labor contract, the two parties are responsible for paying in full all amounts related to each party's interests. Therefore, within 14 working days from the date of termination of the labor contract, your party must pay the severance allowance as an employee, and at the same time fully pay other relevant amounts.

Under what circumstances can employees receive severance allowance in Vietnam?

Let me ask, if an employee of my company terminates labor contract, do we have to pay severance allowance for this person?

Article 46 of the Labor Code 2019 stipulates who receive severance allowance 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.

2. The qualified period of work as the basis for calculation of severance 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 calculation of severance 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, if the above conditions are met, the severance allowance will be received. According to this Article, it will be calculated as follows:

Working time to calculate severance allowance is the total time the employee has actually worked for the employer minus the time the employee has participated in unemployment insurance in accordance with the law on unemployment insurance. Unemployment insurance and working time have been paid severance allowance and redundancy allowance by the employer.

(A) Working time for calculation of severance allowance = (1) Total working time in fact - (2) Time participating in UI

Severance pay = (A) Working time for which severance allowance is calculated * Average salary of 06 consecutive months according to the labor contract before leaving * 1/2.

Instructions on calculating severance allowance after leaving work in Vietnam

Please advise me how to calculate severance allowance for employees after leaving. Thank you.

Conditions for enjoying severance allowance will be specified in Article 46 of the Labor Code 2019. If new conditions are met, the following instructions shall be followed:

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.

2. The qualified period of work as the basis for calculation of severance 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 calculation of severance 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.

(A) Working time for calculation of severance allowance = (1) Total working time in fact - (2) Time participating in UI

Severance pay = (A) Working time for which severance allowance is calculated * Average salary of the preceding 06 months according to the labor contract before quitting * 1/2

In which: (Article 8 Decree 145/2020/ND-CP)

3. The employment period as the basis for calculation of severance allowance or redundancy allowance is the total period over which the employee has worked for the employer in reality (hereinafter referred to as “actual work period”) minus (-) the period over which the employee participates in unemployment insurance and the period over which the employer pays severance allowance or redundancy allowance. Where:

a) The actual work period includes: actual work period; probation period; employer-provided training period; sick leave and maternal leave according to social insurance laws; paid recovery period after an occupational accident or disease according to occupational hygiene and safety laws; paid leave period for fulfillment of citizen’s duties; work suspension period through no fault of the employee; weekly breaks prescribed in Article 111, paid leave prescribed in Article 112, Article 113, Article 114, Clause 1 Article 115; period over which the employee has to perform duties of the employee representative organization prescribed in Clause 2 and Clause 3 Article 176; and work suspension period prescribed in Article 128 of the Labor Code.

b) The period over which the employee participates in unemployment insurance includes: the period over which the employee participates in unemployment insurance and the period over which participation in unemployment insurance is not mandatory but the employer has paid in addition to salary an extra amount equal to the unemployment insurance premium according to labor and unemployment insurance laws.

c) The work period as the basis for calculation of severance allowance or redundancy allowance shall be expressed as years (full 12 months); If the number of months of an incomplete year is 06 months or less, it will be considered ½ year; if the number of months of an incomplete year is more than 06 months, it will be considered 01 year.

Best Regards!