Navigating employment termination in Vietnam requires a thorough understanding of the country's labor laws to ensure compliance and avoid potential disputes. The legal framework, primarily governed by the Labor Code, sets out specific procedures, notice periods, and entitlements that employers must adhere to when ending an employment relationship. Failure to follow these regulations can lead to significant legal and financial consequences for businesses.
Understanding the nuances of lawful termination, including valid grounds, required documentation, and employee rights, is crucial for companies operating in Vietnam. This includes distinguishing between termination initiated by the employer based on employee conduct or business needs, and termination initiated by the employee. Adhering strictly to the procedural requirements is just as important as having a valid reason for termination.
Notice Period Requirements
Vietnamese labor law mandates specific notice periods depending on the type of employment contract and the reason for termination. These periods are designed to provide employees with reasonable time to seek new employment.
| Contract Type | Minimum Notice Period (Employer Initiated Termination) |
|---|---|
| Indefinite-term contract | At least 45 days |
| Fixed-term contract (12 to 36 months) | At least 30 days |
| Fixed-term contract (under 12 months) | At least 3 working days |
| Specific cases (e.g., employee illness/injury) | Varies based on duration of treatment |
Note that longer notice periods may be stipulated in the employment contract or collective labor agreement, in which case those terms prevail. Employees also have notice period requirements when resigning, typically shorter than those for employer-initiated termination.
Severance Pay Calculations and Entitlements
Employees who have worked for an employer for 12 months or more are generally entitled to severance pay upon termination, unless the termination is due to specific reasons like the employee's own fault leading to disciplinary dismissal or the employee's resignation.
Severance pay is calculated based on the employee's years of service and their average monthly wage.
- Years of Service: Calculated from the first day the employee started working for the employer until the termination date. Any period for which unemployment insurance contributions were paid is deducted from the total years of service for severance calculation purposes, as unemployment insurance covers a portion of post-employment income.
- Average Monthly Wage: This is typically the average wage of the six months preceding the termination date, as stipulated in the employment contract.
The severance pay amount is calculated as half a month's wage for each year of service.
Formula: Severance Pay = (Years of Service - Period covered by Unemployment Insurance) * (Average Monthly Wage / 2)
For example, an employee with 5 years of service and an average monthly wage of VND 10,000,000, who has contributed to unemployment insurance for the entire period, would be entitled to severance pay for 5 years. The calculation would be 5 * (VND 10,000,000 / 2) = VND 25,000,000.
Grounds for Termination
Vietnamese law specifies the valid grounds upon which an employer can lawfully terminate an employment contract. These grounds are generally categorized as either "with cause" (due to employee conduct or performance) or "without cause" (due to business reasons).
Termination With Cause (Employer Initiated):
- Employee repeatedly fails to perform their job according to the contract after being warned in writing.
- Employee is dishonest in the workplace.
- Employee commits theft, embezzlement, gambling, intentional injury, or uses illegal drugs within the workplace.
- Employee reveals business or technology secrets or infringes on the employer's intellectual property.
- Employee causes serious damage or threatens to cause serious damage to the employer's assets or interests.
- Employee is absent from work without a valid reason for a specified number of days within a month or year (the specific number depends on internal labor regulations).
- Employee reaches the retirement age.
- Employee is ill or injured and remains unable to work after a specified period (depending on contract type and duration of treatment).
- Force majeure events preventing the employer from fulfilling the contract.
Termination Without Cause (Employer Initiated):
- Restructuring, technological changes, or economic reasons leading to workforce reduction.
- Merger, consolidation, division, or separation of the enterprise.
It is crucial that the employer can provide clear evidence supporting the chosen ground for termination.
Procedural Requirements for Lawful Termination
Strict adherence to procedural requirements is essential for a lawful termination in Vietnam. Skipping steps or failing to properly document the process can render an otherwise valid termination unlawful.
Key procedural steps typically include:
- Identifying a Valid Ground: Ensure the reason for termination is one of the legally recognized grounds.
- Gathering Evidence: Collect documentation supporting the ground for termination (e.g., performance reviews, warning letters, evidence of misconduct, business plans for restructuring).
- Consultation with Employee Representative Organization: For most terminations initiated by the employer (especially those related to employee performance, conduct, or business reasons), consultation with the grassroots employee representative organization (e.g., trade union) is mandatory. The employer must notify the organization and potentially hold a meeting to discuss the proposed termination.
- Issuing a Termination Notice: Provide the employee with written notice of termination, adhering to the statutory notice periods. The notice should clearly state the reason for termination and the effective date.
- Holding a Meeting (for disciplinary dismissals): If terminating for disciplinary reasons, a disciplinary meeting must be held with the presence of the employee, a representative from the employee representative organization, and potentially witnesses. Minutes of this meeting must be recorded.
- Issuing the Termination Decision: Provide the employee with a formal written decision or resolution confirming the termination, the effective date, and details regarding final payments and entitlements.
- Settling Final Payments: Pay the employee all outstanding wages, accrued annual leave, severance pay (if applicable), and any other benefits or allowances stipulated in the contract or collective agreement. This must be done within a specified timeframe (typically within 14 working days of termination, or up to 30 days in special circumstances).
- Returning Documents: Return the employee's social insurance book and other personal documents held by the employer.
Employee Protections Against Wrongful Dismissal
Vietnamese law provides significant protections to employees against wrongful dismissal. A termination is considered wrongful if it is done without a valid legal ground or without following the correct procedures.
If an employer is found to have wrongfully dismissed an employee, the consequences can include:
- Reinstatement: The employer may be ordered to reinstate the employee to their previous position.
- Back Pay: The employer must pay the employee back wages for the period they were unlawfully unemployed, plus at least two months' wages.
- Compensation: The employer may have to pay additional compensation depending on the circumstances.
- Severance Pay: If the employee is reinstated, the period of wrongful dismissal is counted towards their years of service for future severance calculations. If the employee does not wish to be reinstated, the employer must pay severance pay in addition to the back pay and compensation.
- Public Apology: In some cases, the employer may be required to issue a public apology to the employee.
Certain employees receive enhanced protection, such as pregnant employees, employees on maternity leave, employees on sick leave or under treatment (within legal limits), and employees who are trade union officials acting in their capacity. Terminating these employees requires even stricter adherence to specific legal provisions. Employers must exercise caution and ensure full compliance when considering termination in Vietnam.
