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Foreign Workers and Right to Severance Pay

Foreigners 28/02/2024

Vietnam, with its dynamic economy and increasing globalization, welcomes a diverse workforce, including foreign workers who contribute significantly to the country growth. Understanding the rights of foreign workers, especially concerning severance pay, is crucial for both employers and employees. Here, Apolo Lawyers (+84) 903.419.479) will delve into the regulations governing the right to severance pay for foreign workers in Vietnam.

Foreign Workers and Right to Severance Pay

Vietnam, with its dynamic economy and increasing globalization, welcomes a diverse workforce, including foreign workers who contribute significantly to the country growth. Understanding the rights of foreign workers, especially concerning severance pay, is crucial for both employers and employees. Here, Apolo Lawyers (+84) 903.419.479) will delve into the regulations governing the right to severance pay for foreign workers in Vietnam.

1. General regulations on severance pay:

Severance pay, also known as redundancy or termination pay, is a common employment practice globally. In many jurisdictions, including Vietnam, there are general regulations governing severance pay to protect the rights and interests of employees. Here are some general regulations on severance pay:

1.1. Legal Basis:

Severance pay regulations are typically outlined in labor laws or employment regulations specific to each country.

In Vietnam, the Labor Code is the primary legal document governing employment relationships, including provisions related to severance pay.

1.2. Eligibility:

Eligibility for severance pay is often linked to the reason for termination. For example, employees may be entitled to severance pay in cases of layoffs, business closures, or other circumstances defined by the labor laws.

Certain conditions, such as the length of service and adherence to notice periods, may also influence eligibility.

Foreign Workers and Right to Severance Pay

1.3. Calculation Method:

The method for calculating severance pay varies, but it often takes into account the employee s length of service and the reason for termination.

Some jurisdictions prescribe a specific formula, while others leave it to negotiation between employers and employees or provide a minimum statutory amount.

1.4. Notice Periods:

Severance pay may be tied to notice periods, during which an employer is required to inform employees of impending termination. The length of these notice periods can vary based on the jurisdiction and the employee s tenure.

1.5. Exemptions and Special Cases:

Some jurisdictions provide exemptions or different rules for specific situations, such as termination due to business restructuring, bankruptcy, or employee misconduct.

Special provisions may also apply to certain categories of employees, like those in leadership positions or on fixed-term contracts.

Foreign Workers and Right to Severance Pay

1.6. Non-discrimination and Equality:

Laws often emphasize non-discrimination and equal treatment concerning severance pay, ensuring that all eligible employees, regardless of   position or background, are entitled to fair compensation.

1.7. Dispute Resolution:

Procedures for resolving disputes related to severance pay are typically outlined in labor laws. This may involve mediation, arbitration, or legal action through labor authorities or courts.

2. Conditions and Eligibility:

The entitlement to severance pay for foreign workers often depends on specific conditions outlined in the labor contract and Vietnamese labor regulations. Generally, foreign employees must meet certain criteria to be eligible for severance pay upon termination.

2.1. Working time according to labor contract:

In Vietnam, employees often receive severance pay depending on the length of time they work with the employer. The longer the working period, the greater the right to severance pay.

2.2. Termination without cause:

Employees are generally eligible to receive severance pay in cases where the employer terminates the employment contract without just cause. Common situations include layoffs, restructuring, or business closures.

2.3. Notice period before contract termination:

Eligibility for severance pay may depend on the employee s compliance with notice periods set forth in labor laws or employment contracts. Failure to comply with these notification requirements may affect eligibility.

2.4. Closing or restructuring the business:

Severance pay is typically triggered by specific events such as business closings, mergers, acquisitions or significant restructurings. Employees affected by these cases are often entitled to severance pay.

2.5. Labor contract terms:

The terms and conditions of the employment contract may provide for entitlement to severance pay. The employment contract should clearly state the conditions of severance pay, including how it is calculated.

2.6. Exclusions and special cases:

Certain categories of employees may be excluded from eligibility for severance pay. Executives, employees on fixed-term contracts or those in specific roles may have different eligibility criteria outlined in employment law.

3. Calculation and Amount:

The calculation of severance pay for foreign workers is typically determined based on factors such as the length of service and the reason for contract termination. The specific amount may be stipulated in the labor contract or governed by Vietnamese labor laws.

The calculation and amount of severance pay for employees in Vietnam is governed by the Labor Code and is based on the employee s working time with the employer. The specific formula for calculating severance pay is stated in Article 46 of the Labor Code.

- Below is the general formula for calculating severance pay in Vietnam:

Severance pay = 1/2 x Working time to calculate severance pay x Salary to calculate severance pay.

- Specific basis explaining the above calculation:

  • According to Clause 3, Article 46 of the 2019 Labor Code, the salary used to calculate severance pay is the average salary of the 6 consecutive months under the labor contract before the employee quits his job.
  • The calculation ensures that severance pay increases with length of employment, reflecting the employee s contribution and loyalty to the company.
  • Working time for calculating severance pay is the total time the employee has actually worked for the employer, minus the time the employee has participated in unemployment insurance and the working time for which the employer has worked. Employers pay severance pay and job loss benefits.

4. Equal Treatment and Protection:

Vietnamese law emphasizes the principle of equal treatment for both local and foreign workers. Ensuring that foreign workers are entitled to severance pay underlines the commitment to fairness and protection of   rights within the Vietnamese labor market.

4.1. Non-Discrimination:

Vietnamese labor law prohibits discrimination based on nationality. Employers are obligated to treat foreign workers on an equal footing with local counterparts in terms of employment conditions, benefits, and opportunities.

4.2. Equal Access to Benefits:

Foreign workers, including those eligible for severance pay, are entitled to the same benefits and protections as Vietnamese employees. This includes social insurance, health insurance, and other benefits mandated by labor regulations.

4.3. Workplace Safety and Health:

Employers must ensure a safe and healthy working environment for all employees, irrespective of   nationality. This includes providing necessary safety training, protective equipment, and facilities to protect workers  well-being.

4.4. Compliance with Labor Laws:

All workers, regardless of   nationality, are subject to the same labor laws and regulations. Employers must ensure that foreign workers are informed about   rights and responsibilities and that   employment contracts comply with Vietnamese labor laws.

Foreign Workers and Right to Severance Pay

4.5. Protection against Unfair Treatment:

Foreign workers have the right to protection against unfair treatment, including harassment or unfair termination. Labor disputes and grievances are handled according to established procedures, providing a fair mechanism for conflict resolution.

4.6. Equal Opportunity for Advancement:

Foreign workers should have equal opportunities for career advancement and professional development. Employers are encouraged to provide training and skill development programs without discrimination based on nationality.

4.7. Access to Legal Recourse:

Foreign workers have the right to access legal recourse in case of labor disputes or violations. Vietnamese labor authorities and courts are responsible for ensuring that foreign workers receive fair treatment and protection under the law.

4.8. Cultural Sensitivity:

Employers are encouraged to promote cultural sensitivity in the workplace to create an inclusive environment. Understanding and respecting cultural differences contribute to a harmonious work atmosphere for both local and foreign employees.

For further information, please contact us via email at contact@apolo.com.vn or Hotline: (+84) 903.419.479

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