1. Cases that employers must pay severance allowance to employees
According to Article 46 of Labour Code 2019, the employers are responsible for paying severance allowance to the employees if two following conditions are met:
(i) When labour contract is terminated according to the provisions of Clauses 1, 2, 3, 4, 6, 7, 9 and 10, Article 34 Labour Code 2019, particularly:
• The labour contract is expired, except for the case specified in Clause 4, Article 177 Labor Code 2019;
• Works is completed, according to the labour contract;
• Two parties agree to terminate the labor contract;
• The employee is sentenced to prison but is not entitled to a suspended sentence or is not in the case of release, death penalty or is prohibited from doing the work specified in the labour contract according to the legally effective judgment or decision of the Court;
• The employee dies; has been declared by the Court to have lost his/her civil act capacity, is missing or has died;
• The employer is an individual who dies; has been declared by the Court that lost his civil act capacity, is missing or has died. The employer who is not an individual terminates its operation or is notified by the specialized business registration agency of the provincial People's Committee that there is no legal representative or authorized person to perform the rights and obligations of the legal representative;
• The employee unilaterally terminates the labour contract under Article 35 Labour Code 2019;
• The employer unilaterally terminates the labour contract according to Article 36 Labor Code 2019;
(ii) The employee has worked for the employer for 12 months or more.
Note: The above provisions do not apply in case the employee is eligible for pension under the Law on social insurance and when the employee intentionally quits without a good reason from five working days or more.
2. Cases that the employers have to pay job-loss allowance to the employees
According to Article 47 Labour Code 2019, the employers are responsible for paying job-loss allowance to employees who have worked regularly for them for full 12 months or more but lose their jobs due to:
• Structural, technological or economic changes;
• Division, separation, consolidation, merger; sale, lease, change of enterprise type; transfer of ownership and right to use assets of enterprises or cooperatives.
3. Level of severance and job-loss allowance for the employees
Articles 46, 47 Civil Code 2015 clearly stipulates how to determine as well as the level of severance and job loss allowances for employees, particularly:
• Severance allowance: half-month salary for per working year;
• Job-loss allowance: 01-month salary for per working year, but it is, at least, equal to 02-month salary.
In there:
Working time is the total time that the employees have actually worked for the employer minus the time the employee has participated in unemployment insurance under the Law on unemployment insurance and the working time which has been paid the severance allowance or job-loss allowance by the employer.
Salary for calculation of severance or job-loss allowance is average salary of six consecutive months under the labour contract before the employee resigns or loses his/her jobs.
ADK & Co Vietnam Lawyers Law Firm