How to Terminate Employees in Vietnam: A Practical HR Guide

Get a complimentary cost simulation today!

Key Takeaways:

Common termination scenarios in Vietnam
Legal reasons and grounds for termination
Notice periods, severance pay, and legal protections

Introduction

Terminating employees in Vietnam requires employers to follow the Labor Code. This guide provides detailed steps to ensure compliance with local laws.

Types of Termination Scenarios in Vietnam

In Vietnam, employers may terminate employees for various reasons, but each situation requires adherence to specific procedures. The three most common termination scenarios are redundancy, misconduct, and poor performance.

1. Redundancy:

Redundancy occurs when a position is no longer required due to organizational restructuring, financial difficulties, or technological changes. In these cases, employers must provide proper notice and severance pay as stipulated by the Labor Code. It’s important for employers to document the reason for redundancy and explore alternatives, such as reassigning the employee to another role before proceeding with termination.

2. Misconduct:

Termination due to serious misconduct can occur when an employee engages in behavior such as theft, fraud, or harassment. Before dismissing an employee for misconduct, employers must follow legal procedures, which include conducting a thorough investigation and allowing the employee an opportunity to defend themselves. Failure to follow these steps could result in a wrongful dismissal claim.

3.Poor Performance:

If an employee consistently underperforms, termination may be considered. However, employers must first provide feedback, set improvement goals, and offer the employee a reasonable amount of time to rectify their performance. Only after these steps have been documented and exhausted should termination for poor performance be initiated.

Each termination scenario requires proper documentation and compliance with the law to avoid disputes.

Grounds for Lawful Termination

The Labor Code of Vietnam specifies clear grounds for lawful termination, and employers must adhere to these regulations to avoid legal complications. Valid reasons for terminating an employee include:

Serious Misconduct: When an employee violates company rules or engages in illegal activities.
Incapacity: If an employee is unable to perform their duties due to illness or injury, and medical evidence supports the termination.
Redundancy: As part of business restructuring or financial difficulties, leading to a reduction in workforce.
Poor Performance: After documented efforts to help the employee improve, failure to meet job expectations can be grounds for dismissal.

Employers are prohibited from terminating employees for discriminatory reasons or for exercising their legal rights, such as filing a labor complaint. Termination outside of these grounds could lead to legal disputes or claims of wrongful dismissal.

Manage your Asia employees with AYP

We’re here to help you on your journey to hire, manage and pay.

Wrongful Dismissal Avoidance

In Vietnam, wrongful dismissal claims can arise if an employer terminates an employee without valid reasons or fails to follow the proper legal procedures. These claims can lead to costly legal battles, compensation payouts, and reputational damage for employers.

How to Avoid Wrongful Dismissal:

1. Document Everything:

Employers must maintain detailed records of performance reviews, disciplinary actions, and any communication related to the reason for termination. Documentation is essential for proving that the termination was justified.

2. Follow Legal Procedures:

Before dismissing an employee for misconduct or poor performance, employers must conduct a fair investigation and provide the employee with an opportunity to explain their side. Termination for redundancy must comply with the Labor Code’s procedures for layoffs.

3. Respect the Employee’s Rights:

Employers must not terminate employees for reasons related to discrimination, pregnancy, or union activities. Any termination based on these factors may be challenged as wrongful dismissal.

By following these steps, employers can minimize the risk of wrongful dismissal claims and ensure a legally sound termination process.

Notice Periods and Pay in Lieu

In Vietnam, the notice period for terminating an employee depends on the type of employment contract and the reason for termination. The standard notice periods under the Labor Code are as follows:

30 days for employees on a fixed-term contract of between 12 to 36 months.
45 days for employees on an indefinite-term contract.
3 working days for employees on a seasonal contract or those working under contracts of less than 12 months.

Pay in Lieu of Notice:

If an employer wishes to terminate an employee immediately, they can offer pay in lieu of notice. This means that the employer compensates the employee for the notice period they would have otherwise received. Pay in lieu must be equivalent to the employee’s wages for the full notice period.

Employers must strictly adhere to these notice requirements, as failure to do so can result in disputes or claims of unlawful termination.

Severance Pay and Long Service Payment

In Vietnam, severance pay is required for employees who are terminated after working for a certain period of time. The amount of severance pay is calculated based on the employee’s years of service and their most recent salary.

Severance Pay Calculation:

Employees who have worked for 12 months or more are entitled to half a month’s wages for each year of service.
Severance is typically provided when the employee is terminated for reasons such as redundancy, incapacity, or the expiration of their contract.

Long service payments may also apply to employees who have served the company for a significant period. Employers must calculate severance and long service payments based on the employee’s total years of service and their final salary.

Steps in the Termination Process

To ensure compliance with the Labor Code, employers in Vietnam must follow a structured termination process. Below are the essential steps to follow:

1. Document the Cause for Termination:

Before taking any action, employers must clearly document the reason for termination, whether it’s redundancy, misconduct, or poor performance. Proper documentation ensures that the termination is legally justified and defensible in case of a dispute.

2. Issue Formal Notice:

Employers must provide the employee with a formal written notice of termination, adhering to the required notice period based on the type of employment contract. If immediate termination is necessary, pay in lieu of notice should be provided.

3. Conduct an Exit Interview:

While not legally required, conducting an exit interview can help address any concerns the employee may have and provide valuable feedback to the company. This step can also help minimize the likelihood of future disputes.

4. Calculate Severance and Final Compensation:

Employers must calculate any outstanding wages, unused leave, and severance pay. These payments should be made promptly to avoid legal complications.

5. Ensure Legal Compliance:

Throughout the termination process, employers must ensure compliance with Vietnam’s labor laws and the specific terms outlined in the employment contract. Failure to follow these steps could result in wrongful dismissal claims or other legal challenges.

How AYP Can Help

Navigating the employee termination process in Vietnam can be complex due to the strict legal requirements. AYP’s Professional Employer Organisation (PEO) and Employer of Record (EOR) services provide expert support to ensure full compliance with Vietnam’s Labor Code. Our experienced HR team can assist with:

Managing Terminations: From issuing formal notice to calculating severance pay, AYP ensures that terminations are conducted legally and professionally.
Handling Employment Contracts: We ensure that employment contracts are compliant with Vietnamese labor laws and include clear termination procedures.
Minimizing Legal Risks: AYP helps employers avoid wrongful dismissal claims by following best practices and ensuring compliance with local regulations.

With AYP’s support, businesses can manage employee terminations confidently and in full compliance with the law. Contact us today to learn how we can assist with your HR and compliance needs in Vietnam.