Severance allowance is the amount of money that an employer must pay to an employee upon termination of the labor contract. According to the Labor Code 2019, there are 10 cases in which employees are entitled to receive severance allowance after the termination of the labor contract.
Article table of contents
10 cases where employees are entitled to severance allowance (Illustration)
1. 10 cases where employees are entitled to severance allowance
According to the provisions of Clause 1, Article 46 of the Labor Code 2019, employees are entitled to a severance allowance in the following 10 cases:
- Expiry of the labor contract.- Completion of the work stipulated by the labor contract.- Both parties agree to terminate the labor contract.- The employee is sentenced to prison without probation, or not in the cases of being released as stipulated in Clause 5, Article 328 of the Criminal Procedure Code, or sentenced to death or prohibited from performing the work stated in the labor contract under a legally effective judgment or decision of the Court.- The employee dies; is declared by the Court to have lost civil act capacity, missing or deceased.- The employer who is an individual dies; is declared by the Court to have lost civil act capacity, missing or deceased.- The employer, who is not an individual, ceases operations or is notified by the department responsible for business registration of the provincial People's Committee that there is no legal representative or authorized person to perform the rights and obligations of the legal representative.- The employee unilaterally terminates the labor contract.- The employer unilaterally terminates the labor contract.- The employer dismisses the employee.
Thus, when a labor contract is terminated under the above circumstances, the employer is responsible for paying severance allowance to the employee. For other termination cases, the employee will not receive severance allowance, as termination in these instances typically results from the employee's fault leading to the contract's end, hence the employer does not bear the responsibility to pay the allowance.
Overall, compared to the Labor Code 2012, the Labor Code 2019 does not change the cases in which employees are entitled to severance allowance, although there might be a change in the way the cases are stipulated.
2. Conditions for receiving severance allowance
To be eligible for severance allowance, employees must meet the following conditions:
- Fall under the cases of labor contract termination eligible for severance allowance mentioned above.- Have worked regularly for the employer for 12 months or more.
The condition of working for 12 months or more ensures that each year of the employee's service is compensated with half a month's salary. This is the minimum working period that the employee must meet to be entitled to severance allowance.
3. Calculation of severance allowance
According to the provisions of Article 46 of the Labor Code 2019, each year of the employee's service is compensated with half a month's salary.
Formula for calculating severance allowance:
Severance allowance = 1/2 x Salary for calculating severance allowance x Working time for calculating severance allowance
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- The working time for calculating severance allowance = Σ Actual working time of the employee for the employer - (Time the employee participated in unemployment insurance + Time already compensated by the employer with severance, job loss allowance);- The salary for calculating severance allowance is the average salary of the 6 consecutive months under the labor contract before the employee's termination.
4. Payment deadline for severance allowance
Within 14 working days from the date of labor contract termination, the employer is responsible for fully paying the severance allowance to the employee, except in the following cases where it can be extended but not more than 30 days:
- The employer, who is not an individual, ceases operations;- Due to natural disasters, fire, enemy sabotage, or dangerous epidemics.
Regarding this deadline, the Labor Code 2012 stipulates that within 7 working days from the date of labor contract termination, the employer must fully pay the severance allowance to the employee; in cases where the employer, who is not an individual, ceases operations or due to natural disasters, fire, enemy sabotage, or dangerous infectious epidemics, it can be extended but not more than 30 days.
It can be seen that the Labor Code 2019 extends the time for the employer to facilitate proper and complete severance payments to the employee.
5. Cases where employees are not entitled to severance allowance
The following cases disqualify employees from severance allowance:
- Termination of the labor contract but not falling under the cases eligible for severance allowance mentioned in Section 1.- Employees eligible for retirement benefits as stipulated by the social insurance law.- Employees whose labor contract is unilaterally terminated by the employer due to unauthorized leave for 5 consecutive working days without legitimate reasons.
Thus, severance allowance is one of the support policies for employees after labor contract termination. However, not all cases qualify the employee for severance allowance. This is because terminations resulting from the employee's fault leading to the contract end but requiring the employer to pay severance allowance would be unreasonable.
Details can be found in Labor Code 2019, effective from January 1, 2021.
Thuy Tram
