Severance Allowance Calculated Based on the Average Salary of the Last 6 Consecutive Months

Severance allowance for duration of employment at… Calculation of severance allowance according to which salary level? Conditions for receiving severance allowance at the enterprise

The Saigon Construction Joint Stock Company has a case where an officer worked at the Company from April 1982 and applied to resign in July 2017 to settle abroad.

The salary and allowances this officer was receiving according to the Company's salary scale was VND 43,000,000/month. The salary used as the basis for paying social insurance (SI) and health insurance (HI) was VND 24,200,000/month (max 20 times statutory pay rate). The salary used as the basis for paying unemployment insurance (UI) was VND 43,000,0000/month (max 20 times regional minimum wage but not yet paid to the maximum level).

The company's salary scale was self-built and has been submitted to the competent authorities as required. In addition to the salary mentioned above, this officer also received an additional meal and housing allowance of VND 2,000,000/month.

Through the System for receiving and responding to enterprises' petitions on the Government of Vietnam's Online Portal, the Company requested the competent authorities to clarify which salary level should be used to calculate the severance allowance for the mentioned officer.

Regarding this issue, the Ho Chi Minh City Department of Labor, War Invalids, and Social Affairs responds as follows:

According to the provisions of Clause 3, Article 48 of the Labor Code 2012 on severance allowance, "The salary used to calculate the severance allowance is the average salary according to the labor contract of the 6 consecutive months before the employee's resignation."

According to the provisions of Article 4 of Circular No. 47/2015/TT-BLDTBXH dated November 16, 2015, of the Ministry of Labor, War Invalids, and Social Affairs regulating salaries and other policies and benefits recorded in labor contracts, salaries, salary allowances, and other additional amounts agreed upon and recorded in labor contracts as stipulated in Point a, Clause 5, Article 4 of Decree No. 05/2015/ND-CP include:

Salary

The salary records the time-based salary level for the job or position according to the salary scale built by the employer in accordance with labor law, which both parties have agreed upon. For employees who receive product-based or task-based wages, the time-based salary level is recorded to determine the product price or task-based pay.

Salary allowances

The salary allowances record the salary allowances that both parties have agreed upon, specifically:

- Salary allowances to compensate for job complexities, working conditions, living conditions, and the level of labor attraction that the agreed salary in the labor contract has not accounted for or fully accounted for.- Salary allowances associated with the working process and job performance of the employee.

Other additional amounts

Other additional amounts record other additional amounts that both parties have agreed upon, specifically:

- Additional amounts with specific monetary levels along with the agreed salary in the labor contract and paid regularly in each salary period.- Additional amounts without specific monetary levels along with the agreed salary in the labor contract, paid regularly or irregularly in each salary period related to the working process and job performance of the employee.

Regarding other policies and benefits, such as bonuses as regulated in Article 103 of the Labor Code 2012, innovation bonuses, mid-shift meal allowances, and subsidies for transportation, communication, travel, housing, childcare, support when an employee has a deceased relative, an employee who gets married, the employee's birthday, support for employees in difficult circumstances due to occupational accidents or diseases, and other supports and allowances, these are recorded in a separate section in the labor contract according to Clause 11, Article 4 of Decree No. 05/2015/ND-CP.

Salary used as the basis for calculating severance allowance

According to the provisions of Clause 1, Article 8 of Circular No. 47/2015/TT-BLDTBXH, "The salary used as the basis for calculating severance allowance or job loss allowance is the average salary according to the labor contract stipulated in Clause 1, Point a, Clause 2, and Point a, Clause 3, Article 4 of this Circular of the 6 consecutive months before the employee's resignation or job loss."

The Social Insurance Law 2014, detailed guidance in Decree No. 115/2015/ND-CP dated November 11, 2015, of the Government of Vietnam and Circular No. 59/2015/ND-CP dated December 29, 2015, of the Ministry of Labor, War Invalids, and Social Affairs stipulate that the monthly salary for social insurance contribution is the salary and salary allowances according to labor law. From January 1, 2018, onwards, the monthly salary for social insurance contribution is the salary, salary allowances, and other additional amounts as regulated.

Based on the above regulations, Saigon Construction Joint Stock Company should use the average salary recorded in the labor contract of the 6 consecutive months before the employee's resignation to calculate the severance allowance for the employee according to current legal regulations.

(Note: In 2017, the monthly salary for compulsory social insurance contribution is the salary and salary allowances. From January 1, 2018, onwards, the monthly salary for compulsory social insurance contribution is the salary, salary allowances, and other additional amounts. Mid-shift meal and housing allowances are not considered salary allowances but belong to other policies and benefits).

According to the Government of Vietnam's Online Newspaper

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE