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Vietnamese Labour Laws are drafted with a core concept of protecting employees, and the ability to cease employment relationships in Vietnam is not always straight forward (or even permissible) in many cases. However, employers and employees can follow the regulations and to achieve their desired outcomes.

 

Options and Obligations for Terminating Labour Contracts in Vietnam

 

Labour Contracts in Vietnam

Contract Type Details
Definite Contract Contract for a period of up to 36 months
Indefinite Contract Contract that is indefinite (no expiry date)
Seasonal or Project Specific Contract Contract that is for a period of up to 12 months

 

When a definite term contract is to expire, employers or employees are to give notice that they will not be renewing the contract, otherwise it will deemed to become a new contract – either definite or indefinite, depending on the previous contracts. Note that representatives of an internal Trade Union must have their contracts renewed without exception.

After the 2nd definite term Labour Contract, or after 36 months, Labour Contracts will become an indefinite term Labour Contract.

 

Although it is generally encouraged that any termination of Labour Contracts are mutually agreed by all parties, thus allowing flexibility with terms and payments, this is not always a scenario that is possible.

 

General Contract Finalisation

Labour Contracts come to an end when:

  • A Labour Contract expires, and either party notifies that they will not be renewing the contract
  • The specific tasks stated in the Labour Contract have been completed
  • Mutual agreement on the termination of the contract
  • Employee is sentenced to a prison term, prevented from working by a court, dies or is declared missing by a court.

There are no specific periods before the above take effect, but specific processes must nonetheless be followed.

Severance allowances will also arise where employees have not been part of contributions to the Unemployment Insurance scheme.

 

Employer Termination of Labour Contracts

Reason for Termination

Requirements

Trade Union Consent/DoLISA Notification required?

Employees fail to undertake or complete work in accordance with the terms of the Labour contract, collective labour agreement or internal rules

2 written warnings are required to be issued in within 1 month.

Yes

Disciplinary reasons

·      Where severe or gross misconduct has occurred, including theft or repeated violations of company regulations.

·      An employee absent for a total of 5 days per month, or 20 days per year, without appropriate reasons

Yes

Prolonged Illness

An employee that has been on leave due to sickness or accident can be terminated where they have been absent: 12 months for an indefinite contract, 6 months for a definite term contract, and half the contract term in a seasonal contract.

Yes

“Force Majure” events

Where fire, natural disasters or similar events results in a company reducing staff due to reduction in production capacity  

No

Organisational Changes or Technological Restructuring

A labour usage plan must be developed and issued for Trade Union and DoLISA discussion/approval, with justifications for the changes.

Yes

Mergers, Acquisitions or Corporate Restructuring Events

A labour usage plan must be developed and issued for Trade Union and DoLISA discussion/approval, with justifications for the changes.

Yes

Company Ceasing Operations

Labour Contracts are terminated upon the cessation of operations.

No

 

 (“DoLISA” – Department of Labour, Invalids and Social Affairs)

Where the above events arise, employers are generally required to give 30 days notice (45 days for indefinite period contracts) as well as pay severance pay and/or termination pay. Immediate termination options may arise for acts of “gross misconduct”, however caution should be taken as specific process must still be followed and which can take time.

Termination pay is not less than 2 months salary, plus 1 month for each additional year worked, based upon the average monthly salary received for the previous 6 months.

Involvement of the Trade Union (internal Trade Union of the Employer or the District-level Trade Union) and DoLISA in the termination process require specific meetings, minutes and approvals to be followed. Although the processes may not specifically require Trade Union consent to gain final DoLISA approval, it is certainly encouraged to avoid protracted disputes.

 

Employee Termination of Labour Contracts

Employees can unilaterally terminate their employment by providing notice in writing to their employer. This requires:

  • Not less than 45 days’ notice for indefinite contracts
  • Not less than 30 days notice for definite term contracts
  • Not less than 3 days notice for seasonal contracts

Employees who fail to provide the above notice periods to employers may be required to compensate their employers for the failure to provide appropriate notice periods. Lesser periods can apply during periods of extended illness.

 

 

This advice is general in nature, and is based upon laws and regulations in place at the time of publication. Vietnamese Labour Laws are very specific in nature and application, and employers and employees are encouraged to fully research and understand their specific options and courses of actions before making decisions.

 

Domicile Corporate Services provides payroll outsourcing and professional HR advisory and assistance for employers in Vietnam, with a focus on foreign invested companies and those companies seeking to operate at international best practice in Vietnam.

 

For further assistance or any inquiries, contact:

Matthew Lourey, Managing Partner

email: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Tran Huynh, Head of Payroll & HR Consulting

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