Procedure for Terminating a Labor Contract in Vietnam

The procedure for terminating a labor contract in Vietnam includes the process for unilateral termination and the procedure for termination by mutual agreement between the employee and the company.

Termination of a Labor Contract

Termination of a labor contract refers to the conclusion of the employment relationship between the employee and the employer under the conditions and reasons stipulated in the 2019 Labor Code. The termination of a labor contract can arise from various causes and typically results in the parties no longer being obligated to perform the work agreed upon in the contract.

According to the 2019 Labor Code, there are 13 cases of labor contract termination, which are mainly classified into termination by mutual agreement and unilateral termination by one party.

Procedure for Unilateral Termination of a Labor Contract in Vietnam

1/ Notification of Unilateral Termination of a Labor Contract

When one party (either the employee or the employer) decides to unilaterally terminate the labor contract, a written notice must first be provided to the other party in accordance with the required notice periods as follows:

• 45 days for an indefinite-term contract.

• 30 days for a definite-term contract.

• 3 days for a seasonal contract or a job contract with a term of less than 12 months.

This notice should include:

• Basic information about the employee (full name, position, job title) and the employer (company name, legal representative).

• The reason for termination (if the employer is terminating, the reason must be lawful and clear).

• The termination date.

• Compliance with the notice period as per the Labor Code.

2/ Issuance of Decision and Notification of Labor Contract Termination

After the notice and the conclusion of the notice period, the company must issue an official decision regarding the termination of the labor contract. This decision must be in writing and sent to the employee. The decision should include:

• Official decision to terminate the labor contract.

• Reason for termination.

• Termination date.

• Responsibilities related to job handover, return of company property (if applicable).

• Commitment to fully settle the employee’s benefits in accordance with legal requirements.

3/ Full Payment of Salary and Benefits to the Employee

Upon termination of the labor contract, according to Article 48 of the 2019 Labor Code, the company must fully settle payments related to the employee’s entitlements, including:

• Remaining salary: The company must pay for all days worked by the employee that have not yet been compensated.

• Severance pay: Employees who have worked for 12 months or more are entitled to severance pay, calculated as half a month’s salary for each year of service (excluding periods covered by unemployment insurance).

• Other payments: Any additional allowances or benefits as agreed in the labor contract or collective labor agreement.

• Payment period: These payments must be made within 14 days from the termination date, unless force majeure circumstances allow an extension, but no more than 30 days.

4/ Record Keeping

The company must retain all documents, papers, and materials related to the unilateral termination of the labor contract as evidence in the event of future disputes.

Procedure for Termination of a Labor Contract by Mutual Agreement in Vietnam

Termination of a labor contract by mutual agreement is a method where both the employer and employee mutually consent to end the contract, avoiding unilateral termination. This approach helps both parties minimize legal risks, avoid labor disputes, and ensures an amicable end to the employment relationship. Below is the detailed procedure for mutually agreeing to terminate a labor contract:

1/ Discussion and Negotiation

Before proceeding with termination, both parties should meet and discuss the terms of the contract’s termination. The agreement should cover the following:

• Reason for termination: The mutual agreement may arise from the desire of either party or due to circumstances preventing further cooperation (e.g., company restructuring, the employee’s wish to change jobs, or personal reasons).

• Termination date: Both parties should agree on the date of termination and related procedures (such as job and asset handover).

• Employee benefits: The employee is entitled to remaining salary, severance pay (if applicable), and other related benefits. These terms should be clearly discussed and agreed upon before signing the agreement.

2/ Drafting the Mutual Termination Agreement

Once both parties reach a consensus, the employer must draft the mutual termination agreement. This document should include the following:

• Information about the employee and employer.

• Reason for termination by mutual agreement.

• The termination date (the employee’s last working day).

• Employee benefits and entitlements (salary, severance pay, any allowances).

• Commitment to fulfilling obligations (e.g., the employee completing job handover and returning company property; the employer paying the employee’s benefits).

3/ Issuance of the Termination Decision

After the agreement is drafted and signed, the employer must issue an official termination decision. This document serves as the final legal confirmation of the termination of the employment relationship and outlines the payment of benefits and completion of job handover. The decision should include:

• Information about the employee and employer.

• Reference to the mutual termination agreement.

• The termination date and handover responsibilities.

• Responsibility for payment of entitlements.

4/ Completion of Payment and Handover Procedures

Both parties should complete the following tasks:

• Full payment of entitlements to the employee, including salary, severance pay (if applicable), allowances, and other agreed-upon benefits.

• Job and asset handover by the employee before the termination date.

• Both parties should sign a handover report to confirm the completion of all relevant procedures.

5/ Record Keeping

Both the employer and employee should retain all documents related to the mutual termination of the labor contract, including the mutual termination agreement, termination decision, and documents related to payment and job handover to avoid future disputes.

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