A severance package is a monetary payment made by a company to an employee following the termination of a labor contract. Is it possible for foreign workers to obtain this form of severance package when they leave their jobs in Vietnam?
When foreign workers leave their jobs, can they have a severance package?
Article 46 of the Labor Code 2019 stipulates the conditions for receiving a severance package, This regulation only refers to the beneficiaries who are employees in general. Along with that, Article 2 of the Labor Law 2019 also mentions the subjects of application of the Labor Code.
Accordingly, foreign workers working in Vietnam will also be entitled to a severance package if they fully meet the following two conditions:
1. Have worked regularly for a full 12 months or more for the employer.
2. Termination of the contract for the following reasons:
- Due to contract expiration.
- Completed the work agreed in the contract.
- The parties agree to terminate the contract.
- The employee dies; was declared by the Court to have lost his civil act capacity, missing, or dead.
- The employee is sentenced to prison (no suspension/no release), death penalty, and prohibited from doing the work specified in the contract.
- The employer dies; was declared incapacitated for civil acts, missing or dead.
- The employee or the user exercises the right to unilaterally terminate the lawful contract.
- The employer terminates its operation and/or is notified that there is no representative.
Severance package for foreigners
Pursuant to Article 46 of the Labor Code 2019, employees can calculate a severance package by themselves with the following formula:
Severance package = 1/2 x Number of years of service to calculate severance package x Average salary of 06 consecutive months according to the contract before resigning
– The Number of years of service to calculate the severance package is the actual working time but does not include the period of time when the employee has participated in the severance package, the working time has been paid severance package and Job-loss Allowance.
In case the working time to calculate severance allowance is less than 1 year, it will be rounded as follows:
- With odd months to 06 months: Round to 1/2 year.
- Odds over 06 months: Round to 01 year.
Failure to pay severance packages to foreigners, will businesses be fined?
According to Clause 1, Article 48 of the Labor Code, the employer is responsible for paying in full all amounts related to the employee’s benefits, including the severance package.
The time limit for payment is 14 working days from the date of termination of the labor contract, except in some cases, the time limit can be extended to 30 days.
If the employer fails to pay or fails to fully pay the severance package for foreign workers when they leave, the employer will be fined for violations as prescribed in Clause 2, Article 12 of Decree No. 12/2022/ND-CP.
Accordingly, the fine imposed on the employer will be based on the number of employees being violated.
In addition, the employer is also required to pay the full severance package plus interest on the unpaid amount at the highest interest rate on demand deposits of state-owned commercial banks announced at penalty time.