Employment termination occurs when the working relationship between an employer and an employee ends. This can happen for various reasons, including contract expiration, poor performance, restructuring, or mutual agreement. The Vietnamese Labor Code provides clear guidelines on lawful termination, ensuring that both parties’ rights are protected.
Types of Labor Contracts in Vietnam
Vietnam’s Labor Code recognizes three main types of labor contracts, each with specific stipulations on termination:
- Indefinite-term contracts: No fixed expiration date.
- Definite-term contracts: Duration of 12 to 36 months.
- Seasonal or project-based contracts: Not exceeding 12 months.
Each type of contract requires different termination procedures, particularly in terms of notice periods and severance payments.
Lawful Grounds for Termination
1. Contract Expiry
When a definite-term or seasonal contract expires, the employment relationship ends unless both parties agree to renew it. If the employer wishes to continue the employment, a new contract must be signed within 30 days; otherwise, the expired contract automatically converts into an indefinite-term contract.
2. Mutual Agreement
Employers and employees can mutually agree to terminate a contract at any time. This is often the most amicable approach and may involve negotiation of severance and transition terms.
3. Unilateral Termination by Employees
Employees can unilaterally terminate their contracts under specific conditions:
- The employer fails to assign agreed-upon work.
- Delayed or insufficient salary payments.
- Workplace harassment, mistreatment, or unsafe working conditions.
- Personal or family difficulties that prevent continued employment.
- Pregnancy (if advised by a doctor).
- Long-term illness or injury requiring prolonged medical treatment.
Employees must provide advance notice based on contract type:
- 45 days for indefinite-term contracts.
- 30 days for definite-term contracts (12-36 months).
- 3 days for contracts under 12 months.
Immediate termination is allowed in cases of maltreatment, harassment, or unpaid wages.
4. Unilateral Termination by Employers
Employers can only terminate employees under specific circumstances:
- Persistent underperformance despite opportunities for improvement.
- Disciplinary dismissal due to serious misconduct (e.g., theft, violence, breach of confidentiality).
- Long-term illness preventing work for extended periods (12 months for indefinite contracts, 6 months for definite contracts).
- Business downsizing due to force majeure (e.g., natural disasters, economic downturns).
- Company closure.
Employers must adhere to the following notice periods:
- 45 days for indefinite-term contracts.
- 30 days for definite-term contracts (12-36 months).
- 3 days for contracts under 12 months.
Failure to follow these procedures can result in legal action and compensation claims.
Severance and Compensation
Employees who have worked for at least 12 months are entitled to severance pay unless they were dismissed for misconduct. Severance is calculated as half a month’s salary for each year of service, excluding periods covered by unemployment insurance. The employer must settle severance payments within 7 days of the termination date.
Avoiding Wrongful Termination
Wrongful termination can lead to severe consequences, including reinstatement orders, back pay, and additional compensation. Employers can protect themselves by:
- Documenting performance issues through written warnings and evaluations.
- Following legal notice requirements before termination.
- Engaging in good-faith negotiations for mutual termination agreements.
- Providing fair severance and final payments promptly.
Special Considerations for Foreign Employees
Foreign employees are subject to the same termination rules as Vietnamese workers but must also comply with work permit regulations. If a foreign worker’s permit expires and is not renewed, their contract is automatically terminated. Employers must ensure proper notification and processing to avoid legal complications.
Termination Disputes and Legal Recourse
Employees who believe they were unfairly terminated can file complaints with the Vietnam Labor Inspectorate or pursue legal action in court. Mediation is encouraged before litigation, but if disputes escalate, courts may order reinstatement, compensation, or both.
Final Checklist for Lawful Termination
- Review employment contracts to confirm lawful termination grounds.
- Provide proper notice in writing and obtain acknowledgment.
- Calculate severance pay accurately.
- Conduct an exit interview to clarify final payments and obligations.
- Issue work certificates and insurance documents to the employee.
- Retain termination records for at least five years to prevent future disputes.
Conclusion
Employment termination in Vietnam requires strict adherence to legal procedures. Whether initiated by the employer or employee, it must be handled transparently, fairly, and in full compliance with labor laws. Employers should stay informed and seek legal advice when necessary to prevent disputes and ensure smooth transitions for all parties involved.