Vietnam Termination and Severance Rules: Complete Guide (2026)

Vietnam's Labor Code 2019 sets strict rules for employment termination. Employers must follow specific procedures, provide adequate notice, and pay severance in most cases. Wrongful termination results in penalties including reinstatement, back pay, and compensation equal to 2 months' salary plus severance. Understanding these rules prevents costly disputes.

What Are the Lawful Grounds for Employer-Initiated Termination in Vietnam?

Article 36 of the Labor Code 2019 permits employer-initiated termination in seven circumstances. The employee repeatedly fails to perform duties as defined in the employment contract. The employee is sick or injured for 12 consecutive months (indefinite contract) or 6 months (definite contract). Force majeure events (natural disaster, fire, epidemic) require workforce reduction after all preventive measures are exhausted.

The employee fails to return after the suspension period expires. The employee reaches retirement age (60 for men, 55 for women in 2019, increasing by 3 months/year until reaching 62 for men in 2028 and 60 for women in 2035). The employee provides dishonest information during recruitment that affects the hiring decision. The employee is absent without valid reason for 5 consecutive working days.

Disciplinary dismissal is a separate termination ground under Article 125. Grounds include: theft, embezzlement, gambling, intentional injury, drug use at the workplace, disclosure of business secrets, sexual harassment, or recidivism (repeating a violation for which a salary reduction was previously imposed within 3 months).

What Notice Periods Apply for Termination in Vietnam?

The employer can pay salary in lieu of notice. The payment equals the employee's daily salary multiplied by the number of notice days. If the employer terminates without proper notice, the employer must pay both the salary in lieu of notice and an additional 2 months' salary as compensation.

How Is Severance Pay Calculated in Vietnam?

Severance pay in Vietnam equals 0.5 months' salary for each year of employment. The calculation uses the average salary of the 6 months preceding termination. Only years not covered by unemployment insurance count toward severance. Since unemployment insurance became compulsory in 2009, employees hired after 2009 may receive little or no severance from the employer: unemployment benefits from VSS serve a similar function.employer of record in Vietnam eliminates the need for local entity incorporation.

Formula: Severance = (Average monthly salary of last 6 months) × 0.5 × (Years of service not covered by unemployment insurance). Example: Employee worked 10 years (2015-2025) with average salary of 15,000,000 VND. Since unemployment insurance covers the entire period, employer severance obligation is zero. The employee claims unemployment benefits from VSS instead.

For employees with service before 2009 (when unemployment insurance started), the employer pays severance for the pre-2009 years. Example: Employee worked 2005-2025 with average salary of 20,000,000 VND. Severance = 20,000,000 × 0.5 × 4 years (2005-2008) = 40,000,000 VND ($1,600).

What Are the Prohibited Terminations in Vietnam?

Vietnam prohibits termination in six situations. During sick leave (with medical certificate). During annual leave. During maternity leave (including pregnancy and nursing period up to 12 months after birth). When the employee is on marriage leave or bereavement leave. During a work-related injury/illness treatment period. When the employee is fulfilling military obligations.

Terminating an employee during a prohibited period constitutes wrongful termination regardless of the reason. If an employer discovers grounds for termination during a prohibited period, the employer must wait until the protection period ends. The only exception is company dissolution, where all employees are terminated regardless of protected status.

What Are the Penalties for Wrongful Termination in Vietnam?

Wrongful termination triggers four consequences under Article 41. The employer must reinstate the employee to the original position. The employer must pay back wages for the period of wrongful termination. The employer must pay compensation of at least 2 months' salary. The employer must pay severance or job-loss allowance if the employee does not wish to return.

If the employee does not want reinstatement, the employer pays: back wages + 2 months' salary compensation + severance + agreed additional compensation (negotiated between parties). If no agreement on additional compensation, the employer pays at least 2 months' salary. Total wrongful termination cost commonly reaches 6-12 months' salary.

Aniday's employer of record services (Aniday EOR Vietnam) manages all termination compliance including notice periods, severance calculations, and final payment processing.

What Is the Mass Layoff Process in Vietnam?

Mass layoffs due to economic restructuring, technology changes, or organizational changes require a specific process. The employer must develop a labor utilization plan. The employer must consult with the employee representative organization (trade union). The employer must notify DOLISA at least 30 days before implementation.

Priority for retention goes to employees with higher skills, longer tenure, and family breadwinners. Laid-off employees receive job-loss allowance equal to 1 month's salary per year of service (minimum 2 months' salary). This is separate from and higher than regular severance pay.

Can an employer terminate during probation in Vietnam?

Yes. Either party can terminate during probation with 3 days' notice. No severance is required. The employer must notify the employee of the probation result. If the employee does not meet the agreed standards, the employer can terminate without providing grounds beyond unsatisfactory probation performance.

Is mutual termination agreement possible in Vietnam?

Yes. Article 34 of the Labor Code permits termination by mutual agreement. Both parties sign a termination agreement specifying the end date, final payments, and any additional compensation. Mutual termination still requires severance payment. This method avoids the procedural requirements and risks of unilateral termination.

How is final payment calculated upon termination in Vietnam?

Final payment includes: salary up to the last working day, pro-rated 13th month bonus (if applicable), payment for unused annual leave, severance pay (if applicable), and any outstanding allowances or reimbursements. The employer must complete final payment within 14 working days of termination. Complex cases allow 30 working days.

Can an employee resign without notice in Vietnam?

Yes, in specific circumstances. Article 35 permits immediate resignation (no notice) when: the employee is not assigned the agreed work or location, is not paid in full or on time, is mistreated, harassed, or forced to work, is assigned dangerous work without safety measures, or a pregnant employee needs to stop working on medical advice.

Does termination require government approval in Vietnam?

Individual terminations do not require government approval. Mass layoffs (restructuring, technology changes, economic reasons) require 30-day advance notification to DOLISA but not formal approval. DOLISA can intervene if the process does not comply with legal requirements. Disciplinary dismissal requires following the internal disciplinary procedure with trade union participation.

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