Vietnam - termination and work regulations

Vietnam - termination and work regulations

Terminating an employee in Vietnam is a sensitive matter that must be handled carefully by employers to avoid legal risks and reputational damage.
It is important to follow the legal procedures and grounds for termination, as well as to provide fair compensation to the employee. Employers should also ensure that their actions are in line with their company values and maintain good communication with their employees throughout the process.

Termination Process
The termination process is standard in Vietnam and is based on the Labor Law requirements unless an employer can provide sufficient cause for dismissal without notice (due to misconduct, etc.)

The Labor Code of Vietnam requires employers to have a valid reason for terminating an employee, such as a serious violation of company rules or a failure to meet job requirements. Employers must follow the proper procedures for termination as outlined in the Labor Code.  

Notice of termination must be in writing and sent to the relevant governmental authorities. 

Mass Layoff Rules
Mass layoff rules apply in case of termination of employment due to restructuring, change of technology or change of economic reasons. The employer must pay severance to those employees. The employer must have discussions with the organization representing the labor collective at the at the grassroots level and provide 30 days’ advance notice to the provincial state administrative body for labor and to the impacted employees.

Notice Period
Notice periods within Vietnam are generally between 30 and 45 days, but differ based on the type of contract: 
3 working days for the seasonal contract (contract of less than one year);
30 days for a definite labor contract (between 1-3 years)
45 days for an indefinite labor contract. 
 
Severance Pay
In Vietnam, severance pay is mandatory if applicable and determined by the employee’s contract terms and length of service.   
Statutory severance pay is calculated at 50.00% of an employee’s regular monthly salary rate for each year of service. However, suppose the severance payment is due to changes in the company structure, technology, or economic reasons. In that case, the severance pay is calculated at one month’s salary for each year of service. 

“Salary” for purpose of calculating severance, refer to the average salary including:
1. Wage rates
2. Allowances
3. Other additional items specified in the contract which are regulary paid each pay period in 6 months immediately preceding termination.

Probation Period
For permanent employees, the probation period in Vietnam is generally based on the complexity and skill required to do the role and varies between 6 to 60 days. The wage for an employee during the probation period must be agreed upon in writing but cannot be less than 85.00% of the full-time permanent salary for the role. 
Employees working under seasonal labor contracts are not subject to probation. 

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