Navigating Employee Termination in Vietnam: A Comprehensive Guide for International Employers

Terminating employment contracts in Vietnam requires careful adherence to local labor regulations. While employers maintain the right to dismiss employees, this process must align with specific legal grounds and procedural requirements. Understanding these nuances is essential for maintaining compliance and minimizing legal risks.

Understanding Notice Period Requirements

Vietnam's labor law establishes distinct notice periods based on contract type, ensuring employees receive adequate time to prepare for employment transitions. The statutory requirements include:

Open-ended contracts: 45 days' written notice
Fixed-term contracts (1-3 years): 30 days' advance notification
Short-term contracts (under 1 year): 3 days' notice
Probationary periods: Typically 3 days, though immediate termination may apply in certain circumstances

All termination notices must be delivered in writing, clearly stating the reasons for dismissal. For example, a multinational technology company recently faced penalties for failing to provide proper written notice when downsizing their Ho Chi Minh City operations.

Severance Pay Obligations

Vietnamese law mandates severance payments for employees with at least 12 months of service who are terminated for specific reasons. The compensation calculation follows a standardized formula: half-month's salary for each full year of employment. The salary basis is determined by the average earnings over the final six months of employment.

Consider this real-world scenario: An employee earning $1,000 monthly with five years of service would receive $2,500 in severance (5 years × 0.5 × $1,000). There's no statutory cap on severance amounts, though practical considerations often apply.

Exceptions to severance requirements include:

Employees with less than 12 months of service
Voluntary resignations without employer fault
Terminations for serious disciplinary violations
Employees qualifying for retirement pensions

When companies implement workforce reductions, redundancy allowances apply instead of standard severance. These require one month's salary per year of service, with a minimum two-month payment.

Structured Termination Process

A methodical approach to contract termination helps ensure legal compliance. The recommended steps include:

Validate Termination Grounds: Confirm legitimate reasons such as contract expiration, mutual agreement, or documented performance issues
Issue Formal Notification: Provide written notice according to statutory timelines, excluding cases involving gross misconduct
Calculate Final Settlement: Process outstanding wages, accrued leave, and applicable compensation
Conduct Exit Formalities: Recover company property and complete knowledge transfer documentation
Administrative Wrap-up: Process social insurance withdrawals and tax clearance certificates

Proper documentation throughout this process is crucial. SailGlobal's HR specialists recommend maintaining termination files for at least three years post-separation.

Unemployment Insurance Considerations

Vietnam's unemployment insurance system provides temporary financial support to eligible workers. Qualification depends on several factors:

Minimum 12 months of social insurance contributions, including six consecutive months with the terminating employer
Involuntary unemployment status (e.g., economic redundancy, business closure)
Timely registration with local employment authorities

Benefits typically cover up to six months based on previous earnings. Beyond financial support, unemployed workers gain access to vocational training and job placement services. A recent case study showed that manufacturers using SailGlobal's termination services reduced unemployment claim disputes by 78% through proper documentation.

Navigating Vietnam's employment termination landscape requires expertise in local regulations and cultural nuances. Professional guidance can help international employers implement compliant termination practices while maintaining positive employer branding.

Vietnam Employee Termination Guide: Notice Periods, Severance & Legal Compliance