Responsibilities of the parties upon termination of an employment contract in Vietnam

What is a employment contract?

An employment contract is an agreement between an employee and an employer on a paid job, salary, working conditions, and the rights and obligations of each party in the labor relations.

A document with a different name is also considered an employment contract if it contains the agreement on the paid job, salary, management and supervision of a party.

Before recruiting an employee, the employer shall enter into an employment contract with such employee.

Responsibilities of the parties upon termination of an employment contract in Vietnam (Internet image)

Responsibilities of the parties upon termination of an employment contract in Vietnam

Pursuant to Article 48 of the Labor Code 2019, within 14 working days following the termination of an employment contract, both parties shall settle all payments in respect of the rights and interests of each party. Such period may be extended, but shall not exceed 30 days:

Priority shall be given to payment of the employees’ salaries, social insurance, health insurance, unemployment insurance, severance allowance and other benefits under the collective bargaining agreement and employment contracts in case of shutdown, dissolution or bankruptcy of an enterprise or cooperative.

The employer has the responsibility to:

- Complete the procedures for verification of duration of participation in social insurance and unemployment insurance, return them and original copies of the employee’s other documents (if any);

- Provide copies of the documents relevant to the employee’s work if requested by the employee. The employer shall pay the cost of copying and sending the documents.

Obligations of the employer upon illegal unilateral termination of the employment contract in Vietnam

Pursuant to Article 41 of the Labor Code 2019, obligations of the employer upon illegal unilateral termination of the employment contract are as follows:

(i) The employer that illegally unilaterally terminates an employment contract with an employee shall reinstate the employee in accordance with the original employment contract, and pay the salary, social insurance, health insurance and unemployment insurance premiums for the period during which the employee was not allowed to work, plus at least 02 months’ salary specified in the employment contract.

After the reinstatement, the employee must return the severance allowance or redundancy allowance (if any) to the employer.

Where there is no longer a vacancy for the position or work as agreed in the employment contract and the employee still wishes to work, the employer shall negotiate revisions to the employment contract.

Where the employer fails to comply with the provisions on notice period in Clause 2 Article 36 of the Labor Code 2019, the employer shall pay a compensation that is worth the employee’s salary for the remaining notice period from the termination date.

(ii) In case the employee does not wish to return to work, in addition to the compensation prescribed in Clause (i), the employer shall pay a severance allowance in accordance with Article 46 of the Labor Code 2019 in order to terminate the employment contract.

(iii)  Where the employer does not wish to reinstate the employee and the employee agrees, in addition to the compensation mentioned in Clause (i) and the severance allowance mentioned in Article 46 of the Labor Code 2019, both parties shall negotiate an additional compensation which shall be at least 2 months’ salary under the employment contract in order to terminate the employment contract.

Mai Thanh Loi

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