January 1, 2021 is the official effective date of the 2019 Labor Code in Vietnam, which introduces several new regulations regarding severance pay. Notably, a new provision has been added that specifies a period of time which will not be included when calculating severance pay.
Article table of contents
Labor Code 2019 in Vietnam: Additional period excluded from severance allowance calculation (Illustrative Image)
According to the provisions in Clause 2, Article 48 of the Labor Code 2012, the working time used to calculate severance allowance and job-loss allowance is the total actual working time that the employee has worked for the employer minus the time the employee has participated in unemployment insurance as prescribed by law and the time the employer has paid severance allowance. Specifically:
- Actual working time the employee has worked includes: The actual working time worked for the employer under the labor contract; time sent for training; time off for policies on sickness, maternity; time off for treatment, labor rehabilitation for occupational accidents, occupational diseases when salary is paid by the employer; weekly rest time, paid leave; time off for union activities as prescribed by union law; time off to fulfill civic duties as prescribed by law while being paid by the employer; idle time, leave not due to the employee's fault; and period of temporary work suspension. (Point a, Clause 5, Article 1 of Decree 148/2018/ND-CP)
- Time the employee has participated in unemployment insurance includes: The time the employer has paid unemployment insurance, the time the employer has paid an amount equivalent to the unemployment insurance premium along with the employee's salary payment as prescribed by law on labor and unemployment insurance. (Point b, Clause 5, Article 1 of Decree 148/2018/ND-CP)
Note: The working time used to calculate severance allowance, job-loss allowance for the employee is calculated by the year (full 12 months); In case there are odd months, from 01 month to less than 06 months is counted as 1/2 year; from 06 months or more is counted as 01 year of working time.
Thus, according to the provisions of the Labor Code 2012, there are 02 periods not used to calculate severance allowance: the time the employee has participated in unemployment insurance and the time the employer has paid severance allowance. However, from January 01, 2021, the Labor Code 2019 will add another period not used to calculate severance allowance.
In Clause 2, Article 46 of the Labor Code 2019, it is stipulated that the working time to calculate severance allowance is the total actual working time that the employee has worked for the employer minus the time the employee has participated in unemployment insurance as prescribed by law on unemployment insurance and the time the employer has paid severance allowance, job-loss allowance.
Practically, the period that the employer has paid job-loss allowance not used to calculate severance allowance has already been mentioned in Clause 5, Article 1 of Decree 148/2018/ND-CP. And by 2021, this provision has been officially codified in the Labor Code 2019.
Moreover, the Labor Code 2019 also adds 02 cases where employees are not entitled to severance allowance, including:
- Employees who voluntarily quit without a justifiable reason for 05 consecutive working days or more;
- Foreign employees working in Vietnam who are expelled according to an effective court judgment, decision, or a decision of a competent state agency.
Ty Na
- Key word:
- Severance Allowance
- Vietnam
