Posted 6.08. 2019 by Cekindo / Last update on 5.11. 2020
Terminating an employee is one of the most challenging issues that foreign investors have to deal with in Vietnam. In addition to communicating the performance issues, you have to handle the termination with care and in accordance with Vietnam labour law to prevent any legal repercussions.
Vietnam labour law is more geared towards the benefits of the employees when it comes to termination. Therefore, foreign investors must follow all termination process faithfully according to the enforced regulations.
The labour law related to termination applies to all workers under employment contracts in Vietnam, regardless of whether they are foreign employees or local employees. In other words, this law does not apply to foreigners working in Vietnam under overseas labour contracts.
Here’s a quick guide from Cekindo to help you plan your termination process in advance. Mitigate the legal risks, even when the termination is inevitable.
In accordance with Vietnam Labour Law, some of the triggers for the termination of contract in Vietnam are:
Employers need to pay attention to unilateral termination more carefully. This is to maximise staffing and protect the company’s operations from employee’s turnover.
Notice of Termination
Employer or employee must give a notice of termination in the event of termination. The notice’s length of period is different between the employee and the employer. It depends much on the contract type both parties have agreed and signed.
In the event of termination, an employer needs to give the employee a minimum of 15 days. It starts from the day the employee is officially unemployed. The employer needs to make all payments, including severance and unemployment benefits, in the following 7 days.
Employer may be responsible for the severance payment of the terminated employee. The legibility and the amount of severance payment depends a lot on many factors. These factors include salary, employment time for current position, and how long they have had the social insurance.
All employees are eligible for severance payment as long as they have been working for at least 12 months. The termination must be caused by one of the above-mentioned factors.
The amount of severance payment is 50% of the employee’s monthly wage times the number of years the employee has served at the company.
Calculation of employee wage is based on the payments in the previous six months.
Deductions of Social Insurance
Employers may be able to deduct the social insurance payment from the severance payment to employees.
Employee termination is undoubtedly one of the most daunting tasks for foreign investors in Vietnam. Knowing how to navigate the labour law will help your business move forward more rapidly and at the same time is important for your business reputation.
For more detailed information regarding employee termination, please seek professional consultation at Cekindo. You can rely on Cekindo’s expertise to help you get through those appalling, challenging and yet inevitable situations.
Get in touch with us by filling in the form below.