Differences between severance allowance and unemployment allowance according to the new regulations of Vietnam

Severance allowance

Unemployment allowance

Requirements 

Employee who has worked on a regular basis for a period of at least 12 months in case an employment contract is terminated in the following cases:

- The employment contract expires, except for the case the employment contract with an employee that is a member of the management board of the internal employee representative organization expires before the end of his/her term of office, the existing contract shall be extended until the end of the term of office.

- The tasks stated in the employment contract have been completed.

- Both parties agree to terminate the employment contract.

- The employee is sentenced to imprisonment without being eligible for suspension or release as prescribed in Clause 5 Article 328 of the Criminal Procedure Code of Vietnam, capital punishment or is prohibited from performing the work stated in the employment contract by an effective verdict or judgment of the court.

- The employee dies; is declared by the court as a legally incapacitated person, missing or dead.

- The employer that is a natural person dies; is declared by the court as a legally incapacitated person, missing or dead. The employer that is not a natural person ceases to operate, or a business registration authority affiliated to the People’s Committee of the province issues a notice that the employer does not have a legal representative or a person authorized to exercise the legal representative’s rights and obligations.

- The employee unilaterally terminates the employment contract in accordance with Article 35 of this Code.

- The employer unilaterally terminates the employment contract in accordance with Article 36 of this Code.

(Article 34, Article 46 of the Labor Code 2019 of Vietnam; Article 8 of the Decree No. 145/2020/NĐ-CP)

- Terminating the labor contract or working contract, except the following cases:

+ He/she unilaterally terminates the labor contract or working contract in contravention of law.

+ He/she receives a monthly pension or working capacity loss allowance.

- Having paid unemployment insurance premiums for at least full 12 months within 24 months before terminating the labor contract or working contract; or having paid unemployment insurance premiums for at least full 12 months within 36 months before terminating the labor contract, for the case of seasonal or job-based working contracts with a term of between full 3 months and under 12 months.

- Having submitted a dossier for receipt of unemployment allowance to an employment service center according to provisions. 

- Having not yet found any job after 15 days from the date of submission of the dossier for receipt of unemployment allowance, except the following cases:

+ He/she performs the military or public security obligation;

+ He/she attends a training course of full 12 months or longer;

+ He/she serves a decision on application of the measure to send him/her to a reformatory, compulsory education institution or compulsory detoxification establishment;

+ He/she is kept in temporary detention or serves a prison sentence;

+ He/she goes abroad for settlement or as guest worker;

+ He/she dies.

(Article 49 of the Law on Employment 2013 of Vietnam) 

Subsidy payment organization

Employer

Social Security agency

Mức hưởng trợ cấp

- Entitled to an amount corresponding to the number of working years of the employee. Each year of work will be worth half a month’s salary.

(The salary as the basis for calculation of severance allowance shall be the average salary of the last 06 months under the employment contract before the termination).

(Article 46 of the Labor Code 2019 of Vietnam)

The monthly unemployment allowance level equals 60% of the average monthly wage of 6 consecutive months before the worker becomes unemployed on which unemployment insurance premiums are based, but must not exceed 5 times the basic wage level, for workers receiving wages under the State-prescribed regime, or must not exceed 5 times the region-based minimum wage level.

(Clause 1 Article 50 of the Law on Employment 2013 of Vietnam)

Duration

The total period during which the employee actually worked for the employer minus the period over which the employee participated in the unemployment insurance in accordance with unemployment insurance laws and the period for which severance allowance or redundancy allowance has been paid by the employer.

(Clause 2 Article 46 of the Labor Code 2019 of Vietnam)

Based on the number of months of payment of unemployment insurance premiums. This duration is 3 months if the period of payment of unemployment insurance premiums is between full 12 months and full 36 months, which is added with 1 month for each additional period of payment of full 12 months, but must not exceed 12 months.

(Clause 2 Article 50 of the Law on Employment 2013 of Vietnam)

Example

A worked for Company X from June 2005 to the end of June 2021 will be dismissed according to his own wishes. While working at X, A is entitled to fully participate in social insurance and unemployment insurance payment from January 1, 2009. Thus, when quitting, A will receive severance allowance for the working period from June 2005 to January 2009. The remaining period (from January 2009 to June 2021) will be the period for calculating unemployment benefits for A after quitting his job.