Legal Grounds for Termination
Termination of employment in Vietnam can occur for various reasons, including:
- Expiration of the Contract: The contract period ends.
- Mutual Agreement: Both parties agree to terminate the contract.
- Completion of Work: The work specified in the contract is completed.
- Retirement Age: The employee reaches retirement age.
- Misconduct or Poor Performance: The employee fails to perform their job.
- Health Reasons: The employee is unable to work after 12 months of treatment.
- Economic or Structural Changes: Layoffs due to company restructuring.
Termination Notice Requirements
Notice periods vary depending on the type of contract:
- Indefinite Contracts: Minimum 45 days’ notice.
- Fixed-term Contracts: Minimum 30 days’ notice.
- Contracts Under 12 Months: Minimum 3 working days’ notice.
Severance Pay
Under Clauses 1, 2, 3, 4, 6, 7, 9, and 10 of Article 34, Labour Law, an employer must pay severance allowance to employees who have worked on a regular basis for at least 12 months, if the employment contract is terminated in accordance with the law.
- (*) Formula: Severance allowance = Average basic salary & recurring allowance(s) of 6 months preceding the termination month * 0.5 * Length of service years for severance calculation.
- (*) Rounding rule for the length of service for severance allowance payment:
- Up to 6 months: round up to ½ year
- Over 6 months: round up to 1 year
- (*) In case employer pays severance allowance higher than the requirement by Laws, the amount in excess will be taxable.
Leave Encashment
Annual leave (AL) balance by termination date and based on employee’s quota minus the annual leave used per company’s leave policy.
Formula:
- (*) Average 6 months of basic salary & recurring allowance/ standard working days (SWD) * Unused AL
- (*) SWD used is SWD of the month preceding the payment date instead of termination date formula is according to Decree No. 145/2020/ND-CP
Employee Rights Upon Termination
Terminated employees are entitled to severance pay and notice. Additionally, they are entitled to payment for unused annual leave and other benefits.
Compliance and Best Practices
Employers must ensure compliance with all legal requirements to avoid disputes. Best practices include maintaining proper documentation, clear communication, and fair treatment.
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Understanding and complying with Vietnam’s labor law termination guidelines is crucial for maintaining a fair and compliant workplace. By following legal procedures and ensuring fair treatment, employers can minimize legal risks and maintain a positive work environment.
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Please note that all the information listed below are to be used as a general guideline. For more detailed accounts of Vietnam employment laws and regulations, please visit the official governmental websites.
Updated on: August 2025
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