Severance Pay in Vietnam

Feb 18, 2025

HR & Payroll

Severance Pay in Vietnam

Severance pay is a monetary support that employers provide to employees after their termination or the conclusion of the labor contract.

According to Article 46 of the Labor Code 2019, employers must pay severance to employees who have worked regularly for at least 12 months in the following situations:

The labor contract expires.
The employee completes the work outlined in the contract.
The employer and employee mutually agree to terminate the contract.
A court sentences the employee to imprisonment or death, or prohibits them from performing the tasks in the labor contract.
The employee dies, is declared legally incapacitated, goes missing, or is presumed dead by a court.
The individual employer dies or is declared legally incapacitated or missing by a court; if the employer is a company, it ceases operations.
The employee unilaterally terminates the contract.
The employer unilaterally terminates the contract or lays off the employee due to changes in structure, technology, economic reasons, or mergers, consolidations, or splits of the business or cooperative.

Table of Contents

Calculation of Severance Pay

Eligible employees can calculate their severance based on Article 46 of the Labor Code 2019. For each year of employment, the employer will pay the employee half a month’s salary calculated for severance.

The formula for Calculating Severance Pay

Severance Pay = ½ * Salary for Severance Pay * Duration of Employment for Severance Pay

Where:

The salary for severance pay is the average salary based on the labor contract for the six months before the termination.
The duration of employment for severance pay equals the total time the employee worked for the employer, minus the time spent on voluntary insurance and any previously paid severance or redundancy compensation.

Actual Duration of Employment

The actual duration of employment includes:

The time the employee worked under the labor contract.
The time the employer sent the employee for training.
The time of leave covered by the Social Insurance Law.
The time of weekly leave.
The time of leave with full pay for cases such as annual leave, increased leave days based on seniority, public holidays, and personal leave with full pay as required by law.
The time of leave for trade union activities as prescribed by law.
The time of leave for civic duties that the employer pays for.
The time of leave not due to the employee’s fault.
The time of temporary suspension from work and any time in detention, which allows the employee to return to work if a competent authority finds no crime was committed.

Duration of Participation in Unemployment Insurance

The duration of unemployment insurance contributions includes two periods:

The time during which the employer contributed to unemployment insurance as mandated by law.
The time during which the employer paid an amount equivalent to the unemployment insurance contribution along with the employee’s salary as required by law.

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Legal Disclaimer: The information provided is for general informational purposes only and does not constitute legal advice. For specific legal advice on compliance in Vietnam, schedule a consultation with NetViet or consult legal counsel.

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