The 2012 Labor Code stipulates that when terminating employment, the employee is entitled to severance pay from the company. However, is the company obligated to pay this amount in every case?
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Is the company required to pay severance pay to the employee? (Illustrative photo)
Article 48 Labor Code 2012 specifies:
Article 48. Severance Pay
When the labor contract terminates as stipulated in clauses 1, 2, 3, 5, 6, 7, 9, and 10 of Article 36 of this Code, the employer is responsible for paying severance pay to the employee who has worked regularly for 12 months or more, with each year of work compensated by half a month's salary.
The duration of work used to calculate severance pay is the total actual working time for the employer minus the time the employee participated in unemployment insurance according to the Social Insurance Law and the period the employer has paid severance pay.
The salary used to calculate severance pay is the average salary of the last 6 consecutive months before the employee leaves.
Additionally, according to Clause 1, Article 14 of Decree 05/2015/ND-CP guiding the implementation of certain contents of the Labor Code:
Article 14. Severance Pay, Job Loss Allowance
- The employer is responsible for paying severance pay according to Article 48 of the Labor Code to the employee who has regularly worked for 12 months or more when the labor contract terminates according to Clauses 1, 2, 3, 5, 6, 7, 9 of Article 36, and the employer unilaterally terminates the labor contract according to Article 38 of the Labor Code.
Not every case of employee departure qualifies for severance pay from the company; specific conditions must be met:
First, regarding the labor contract, the subject entitled to severance pay must fall under one of two cases:
- The labor 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:
The labor contract expires except as stipulated in Clause 6 of Article 192 of this Code.
The work stipulated in the labor contract has been completed.
Both parties agree to terminate the labor contract.
...
The employee is sentenced to imprisonment, the death penalty, or is prohibited from carrying out the work specified in the labor contract according to a legally effective court verdict or decision.
The employee dies, is declared by the court as missing, legally incapacitated, or deceased.
The employer who is an individual dies, is declared by the court as missing, legally incapacitated, or deceased; the non-individual employer ceases to operate.
...
The employee unilaterally terminates the labor contract as stipulated in Article 37 of this Code.
The employer unilaterally terminates the labor contract as stipulated in Article 38 of this Code; the employer lets the employee go due to structural changes, economic reasons, or merger, consolidation, division, separation of the enterprise, cooperative.
- The employer unilaterally terminates the labor contract as stipulated in Article 38 of this Code.
Second, regarding the work duration: The employee has worked regularly for 12 months or more. The duration used to calculate severance pay, job loss allowance is the total actual working time for the employer minus the time the employee participated in unemployment insurance according to the law and the period the employer has paid severance, job loss allowance previously (if any).
Nguyen Phu
