How to Terminate a Labour Contract in Vietnam? 3 Key Matters on Essential Rules, Legal Insights, and Employer Obligations

Introduction

To terminate a labour contract in Vietnam is a critical process that requires adherence to legal requirements to prevent disputes and ensure compliance with the Labour Code.  Failing to understand and follow procedures would lead to disputes.

Employers and employees must understand the different circumstances under which a labour contract may be lawfully terminated, the required procedures, and potential legal risks.

This article provides an analysis of the legal grounds for terminating a labour contract in Vietnam, including employer responsibilities, necessary notice periods, and compliance with labour laws.

When Can an Employer Terminate a Labour Contract in Vietnam?

Under the Vietnamese Labour Code, an employer may terminate a labour contract in Vietnam only under specific conditions. These conditions must be met to avoid unlawful termination, which could lead to legal disputes and financial liabilities.

Expiration of the Labour Contract

One of the most straightforward cases to terminate a labour contract in Vietnam is when the contract reaches its expiration date.

However, there are important legal obligations attached:

– Notice Requirement: Employers must notify employees in writing before the contract expires.

– Failure to Notify: The failure to notice would be subject to administrative fines.

– Automatic Conversion: If the employee continues to work after the contract expires without signing a new contract within 30 days, the contract will be converted into an indefinite-term contract.

Mutual Agreement to Terminate a Labour Contract in Vietnam

Employers and employees can mutually agree to terminate a labour contract in Vietnam at any time. A mutual termination agreement should be documented in writing, specifying settlement terms, final salary payments, severance pay (if applicable), and other rights and obligations.

Employee’s Voluntary Resignation

Employees can resign by providing prior notice:

– 45 days for indefinite-term contracts

– 30 days for definite-term contracts (12–36 months)

– 3 days for contracts of less than 12 months

However, certain circumstances allow employees to resign without prior notice, such as unpaid wages or workplace harassment.

Employer’s Right to Unilaterally Terminate a Labour Contract in Vietnam

Employers can unilaterally terminate a labour contract in Vietnam in the following situations:

– Employee Consistently Fails to Perform Job Duties: If the employee repeatedly fails to meet performance standards, the employer must establish a performance assessment process before termination.

– Employee is Absent Without Reason: If an employee is absent for 5 consecutive working days without a valid reason, the employer can terminate the contract.

– Restructuring or Economic Reasons: If the company undergoes restructuring, downsizing, or bankruptcy, the employer may terminate contracts following proper compensation policies.

– Employee is Sentenced to Prison: If an employee is convicted and sentenced to imprisonment, the employer can terminate the contract.

Disciplinary Dismissal

Employers can terminate an employee based on serious misconduct, including:

– Theft, embezzlement, or fraud

– Intentional damage to employer’s property

– Disclosure of trade secrets or business secrets

– Physical assault at the workplace

– Repeated violation of internal labor regulations

Termination Procedure and Legal Compliance

Proper procedures must be followed when terminating a labour contract in Vietnam. Employers must:

– Issue a Written Notice: Provide a formal notice of termination stating the reasons and legal basis.

– Settle Final Salary and Benefits: Pay all outstanding wages, bonuses, and unused leave entitlements.

– Provide Severance Pay or Unemployment Benefits: If applicable, employees should receive severance pay based on their working duration.

– Return Employee Documents: Employers must return relevant employment records and social insurance books.

– Report to the Authorities: In some cases, terminations must be reported to the local labour authorities.

Failure to follow proper termination procedures may result in reinstatement orders, compensation claims, or fines imposed by Vietnamese labour authorities.

Common Mistakes Employers Should Avoid When Terminating a Labour Contract in Vietnam

Unlawful Termination Without Just Cause

Dismissing an employee without a legally valid reason could result in legal action, requiring the employer to reinstate the employee or pay compensation.

Failing to Provide Proper Notice

Employers must provide written termination notices within the prescribed timelines.

Not Paying Severance Pay

If an employee has worked for at least 12 months and is terminated without fault, they are entitled to half a month’s salary per working year.

Retaining Employee Documents

Holding back an employee’s personal documents, such as social insurance books, can lead to administrative fines.

Violating Anti-Discrimination Laws

Employers cannot terminate employees based on discrimination related to gender, ethnicity, pregnancy, or union activities.

Ensuring a Smooth and Lawful Termination of a Labour Contract in Vietnam

Employers must carefully navigate Vietnam’s labour laws when terminating a labour contract in Vietnam. Understanding the legal grounds, procedural requirements, and potential pitfalls is crucial to avoiding disputes and maintaining a positive work environment.

By following the right procedures, employers can terminate a labour contract in Vietnam while protecting their legal interests and maintaining a fair workplace for all employees.

About ANT Lawyers, a Law Firm in Vietnam

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers has lawyers in Ho Chi Minh city, Hanoi,  and Danang, and will help customers in doing business in Vietnam.