The Labor Code 2012 stipulates that when resignment, the employee is entitled to a severance allowance paid by the employer. Are employers in Vietnam obliged to pay severance allowance to employees in any case?
Article table of contents
.jpg)
Are employers in Vietnam obliged to pay severance allowance to employees? (Illustrative photo)
Article 48 Labor Code 2012 specifies:
Severance allowance
1. In case an employment contract terminates in accordance with Clause 1, 2, 3, 5, 6, 7, 9 or 10, Article 36 of this Code, the employer shall pay a severance allowance to the employee who has worked regularly for full 12 months or longer at the rate of half of a month’s wage for each working year.
2. The working period used for the calculation of severance allowance is the total period during which the employee actually works for the employer minus the period during which the employee benefits from unemployment insurance in accordance with the Law on Social Insurance, and the working period for which the employee has received severance allowance from the employer.
3. The wage used for the calculation of severance allowance is the average wage in accordance with the employment contract during 6 months preceding the time the employee loses his/her work.
Additionally, according to Clause 1, Article 14 of Decree 05/2015/ND-CP on the elaboration of the Labor Code:
Severance allowance and redundancy allowance
1. The employer shall pay severance allowance as prescribed in Article 48 of the Labor Code to employees regularly working for 12 months or more if employment contracts are terminated as specified in Clauses 1, 2, 3, 5, 6, 7, 9 of Article 36 and the employers shall unilaterally terminate the employment contract in accordance with the provisions of Article 38 of the Labor Code.
Thus, employers in Vietnam are not obliged to pay severance allowance to employees in any case, specific conditions for receiving the severance allowance must be met:
Firstly, regarding the employment contract, the employee entitled to severance allowance must fall under one of two cases:
- The employment contract terminates in accordance with Clauses 1, 2, 3, 5, 6, 7, 9 of Article 36 of this Code. Article 36 specifies these cases as follows:
Cases of termination of an employment contract
1. The employment contract expires, except the case specified in Clause 6, Article 192 of this Code.
2. The work stated in the employment contract has been completed.
3. Both parties agree to terminate the employment contract.
..
5. The employee is sentenced to imprisonment or death or is prohibited from performing the job stated in the employment contract under a legally effective judgment or ruling of a court.
6. The employee dies or is declared by a court to have lost civil act capacity, be missing or dead.
7. The individual employer dies or is declared by a court to have lost civil act capacity, be missing or dead; the institutional employer terminates operation.
...
9. The employee unilaterally terminates the employment contract under Article 37 of this Code.
10. The employer unilaterally terminates the employment contract under Article 38 of this Code; the employer lays off the employee due to structural or technological changes or because of economic reasons, merger, consolidation or division of the enterprise or cooperative.
- The employer unilaterally terminates the employment contract as stipulated in Article 38 of this Code.
Secondly, regarding the work period: The employee has worked regularly for 12 months or more. The period used to calculate severance allowance and redundancy allowance is the total actual working time for the employer minus the period of unemployment insurance premium payment of the employee according to the law and the period covered by severance allowance and redundancy allowance paid previously by the employer (if any).
Nguyen Phu
