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Overview of Terminating Employees in VietnamTerminating employees can be a complicated process, par

Updated: Oct 6, 2023



Overview of Terminating Employees in Vietnam

Terminating employees can be a complicated process, particularly in a foreign country with different labor laws and regulations. Vietnam’s labor laws are employee-friendly, and employers must follow strict procedures and requirements when terminating employment contracts. In this article, we will discuss the statutory grounds for termination, formal requirements and procedures, financial obligations, and other relevant information that employers should be aware of when terminating employees in Vietnam.


Introduction

Vietnam has a complex labor market, and terminating an employee is not a simple process. Employers must comply with Vietnam’s Labor Code, which is the primary source of labor law in the country. The Labor Code governs the employer-employee relationship and sets out the rights and obligations of both parties. When it comes to termination, employers must follow strict procedures to avoid potential legal disputes.


Statutory Grounds for Termination

Under Vietnam’s Labor Code, employers may terminate an employment contract in the following circumstances:

  1. The employee reaches the age of retirement, as defined by law.

  2. The employee dies or is declared missing.

  3. The employee is no longer able to perform their job due to illness or injury.

  4. The employee is sentenced to imprisonment or forced labor.

  5. The employer is restructuring, merging, or changing ownership, resulting in staff reductions.

  6. The employee is no longer needed due to technological changes or automation.

  7. The employee has violated their employment contract or labor laws.


Formal Requirements and Procedures

Vietnam’s labor laws require employers to follow specific procedures and requirements when terminating an employee. These include:

  1. Giving written notice to the employee at least 45 days in advance of the termination date.

  2. Holding a meeting with the employee to discuss the termination and reasons for it.

  3. Providing the employee with a written explanation of the reasons for the termination.

  4. Obtaining approval from the trade union, if one exists.

  5. Making the necessary social insurance, health insurance, and unemployment insurance payments to the employee.


Financial Obligations

Employers in Vietnam may be liable for financial obligations when terminating an employee, depending on the circumstances. These include:

  1. Severance pay: Employers must pay severance to employees who have been terminated due to the employer’s fault, such as restructuring or downsizing. The amount of severance pay depends on the employee’s length of service.

  2. Payment in lieu of notice: If an employer terminates an employee without providing the required notice period, they may be liable to pay the employee a sum of money in lieu of notice.

  3. Unpaid wages and benefits: Employers must pay all outstanding wages and benefits to the employee, including any unused annual leave, sick leave, or other entitlements.

  4. Other compensation: Depending on the circumstances of the termination, employers may be liable for other compensation, such as compensation for unfair dismissal or discrimination.


Other Relevant Information

  1. Internal company transfer: If an employee is a foreign national working in Vietnam via an internal company transfer under a foreign labor contract, the Labor Code does not apply to them. However, employers should still follow any contractual obligations and international labor standards that may apply.

  2. Trade union: If a trade union exists in the workplace, employers must consult with them before terminating an employee.

  3. Retrenchment: Employers must have a valid reason for retrenchment, such as restructuring or downsizing, and must follow strict procedures to avoid potential legal disputes.


FAQs

  1. Can an employer terminate an employee without a valid reason? No, an employer cannot terminate an employee without a valid reason. 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.

  2. What are the formal requirements for termination of employment contracts in Vietnam? The Labor Code of Vietnam requires employers to follow formal requirements when terminating an employment contract, including providing written notice to the employee and a copy of the decision to terminate the contract. The employer must also provide the employee with a severance payment and any other benefits owed under the contract.

  3. Can an employer terminate an employee during a probationary period? Yes, an employer can terminate an employee during a probationary period without a specific reason, as long as the termination is not discriminatory or in violation of the Labor Code. However, the employer must provide written notice to the employee and follow the formal requirements for termination.

  4. What are the consequences for employers who terminate employees without a valid reason? Employers who terminate employees without a valid reason may be subject to legal action and penalties under the Labor Code of Vietnam. The employee may file a complaint with the labor dispute settlement authority or file a lawsuit against the employer for wrongful termination. The employer may be required to pay compensation to the employee, including back pay, damages, and other costs.

  5. How can employers mitigate the risks of terminating employees in Vietnam? Employers can mitigate the risks of terminating employees in Vietnam by ensuring they have a valid reason for termination, following the proper procedures and formal requirements, and providing the employee with severance pay and other benefits owed under the contract. Employers should also seek legal advice and consult with experts to ensure they are complying with Vietnamese labor laws and regulations.


Conclusion

In conclusion, 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. By understanding the legal framework and seeking professional advice when necessary, employers can successfully navigate the termination process and minimize potential negative impacts on their business operations.


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