According to Article 46 of the 2019 Labor Code, the following situations are qualified for severance pay:
“Article 46: Severance allowance
- The employer is liable for providing the severance when the labor contract is ended in accordance with Clauses 1, 2, 3, 4, 6, 7, 9 and 10 of Article 34 of this Code. Employees who have been employed by them regularly for a full year or longer are entitled to a half-month salary allowance each working year, with the exception of situations where they are eligible for a pension under the terms of the law on social insurance and the case specified at Point e, Clause 1, Article 36 of this Code.”
Severance allowance is calculated as follows: 1/2 x Years worked for calculating severance pay x The average monthly wage for the last six months of the labor contract.
The Labor Code of 2019’s Article 34’s Clauses 1, 2, 3, 4, 6, 7, 9 and 10 outline the following situations in which employment contracts may be terminated:
“Article 34. Cases of termination of labor contracts
- The employment contract expires, except for the case specified in Clause 4, Article 177 of this Code.
- The work has been completed in accordance with the labor contract.
- The two parties agree to terminate the labor contract.
- The employee is sentenced to prison but is not eligible for a suspended sentence, is not released under Clause 5 of Article 328 of the Criminal Procedure Code, is given the death sentence, or is forbidden from performing the job specified in the labor contract as a result of a court’s ruling that has been given legal effect.
- The employee passes away, is reported missing, or has been deemed by the Court to no longer be capable of performing civil acts.
- If the employer is an individual, he or she passes away, is reported missing, or the court has determined that he or she is no longer capable of performing civil acts. The employer who is not an individual terminates its operation or is notified by the specialized business registration agency of the People’s Committee of the province that there is no legal representative or authorized person to do the rights and obligations of the legal representative.
- The employee unilaterally terminates the labor contract in accordance with the guidelines in Article 35 of this Code.
- The labor contract is unilaterally terminated by the employer in accordance with the guidelines in Article 36 of this Code.
=> Accordingly, employees who have been employed regularly by the company for a 12 months or more and whose labor contracts are terminated in one of the aforementioned situations are entitled to severance allowance.
* With regard to the working hours used to determine severance allowance:
The working time for the purpose of calculating severance allowance or job loss allowance is the whole amount of time the employee has actually worked for the employer, as per the instructions in Clause 3, Article 8 of Decree No. 145/2020/ND-CP, minus any time the employee participated in unemployment benefits in accordance with the terms of the unemployment insurance law and any time the employer paid severance allowance or job loss allowance, in which:
– The total time the employee has actually worked for the employer includes: the time the employee has directly worked; probationary period; time the employer sent the employee to study; period of leave to enjoy the sickness and maternity benefits in accordance with the law on social insurance; and time off work for treatment, occupational rehabilitation in case of occupational accident or occupational disease, which is paid by the employer in accordance with the law on occupational safety and sanitation; time off from work that is paid by the employer and used to fulfill legally mandated civic obligations; the absence is not the employee’s fault; Weekly leave under Article 111, paid leave under Articles 112, 113, 114, and Clause 1 of Article 115; time spent carrying out the duties of the employee representative organization as outlined in Clauses 2 and 3 of Article 176; and time spent temporarily being suspended from work under Article 128 of the Labor Code.
– The time the employee has participated in unemployment insurance includes: the time the employee has participated in unemployment insurance according to the provisions of law and the time the employee is not required to participate in unemployment insurance as prescribed by law, but is paid by the employer along with the employee’s salary an amount equivalent to the level of unemployment insurance premium paid by the employer in accordance with the law on labor and unemployment insurance.
– The working year (full 12 months) is used to compute an employee’s severance allowance or job loss allowance; odd months that are less than or equal to 6 months are considered as half a year, over 06 months are counted as 1 working year.
Thus, in the most usual case, if the period from the start of probation to the date of contract termination is full 12 months or more, the employer is required to give the employee a severance allowance. For instance, the company has fully paid for unemployment insurance, but not for two-month probationary period. Then the company must determine and provide related severance allowance for those two months of the probationary period.