A Guide to Employee Termination in Vietnam

Employee termination in Vietnam can be a daunting task for foreign employers, especially with the country’s strict labor laws and regulations. Whether you’re looking to let someone go or need to understand the process better, this guide will help you navigate the ins and outs of employee termination in a way that keeps your business compliant and running smoothly.

Understanding the Basics of Employee Termination in Vietnam

The Vietnamese Labor Code is protective of employee rights. This means that as an employer, your ability to terminate an employment contract requires regulation. Therefore, the first step is to understand the different ways employment can legally end.

There are four primary pathways for an employment relationship to conclude:

• Mutual Agreement: This is often the cleanest and lowest-risk approach. You and the employee mutually agree to end the employment contract on specific, negotiation terms in a formal agreement.
• Contract Expiry: If an employee is on a definite-term contract, the employment relationship automatically ends upon the contract’s expiration date, provided neither party takes action to renew it.
• Resignation by the Employee: Employees have the right to resign but must provide you with the statutory prior notice, which varies based on their contract type.
• Unilateral Termination by the Employer: This is the most legally sensitive pathway. You can terminate an employee, but only if you have one of the specific, valid legal grounds permitted by the Labor Code and follow the correct procedures.

Valid Legal Grounds for Employer-Led Termination

If you need to unilaterally terminate an employee, you must have a legally recognized reason and, crucially, be able to prove it with clear documentation. The burden of proof rests on the employer, not on the employee.

Common legal grounds for termination include:

A. Employee Performance or Conduct

Termination may be justified in cases of consistent underperformance, where an employee repeatedly fails to fulfill their duties as outlined in their contract, despite documented warnings and opportunities for improvement. 

Serious disciplinary issues also provide lawful termination grounds as they fall under internal labor regulations, which must be properly registered and supported by a formal disciplinary process. This includes theft, fraud, disclosure of confidential information, or workplace violence.

Employers may also terminate for prolonged unauthorised absence, where an employee is absent without a valid reason for five consecutive working days or a cumulative number of days over a specific period.

B. Business or Operational Reasons

In cases of restructuring, shifts in production, or technological changes that lead to redundancy, the company must prepare a formal labor usage plan and consult with relevant stakeholders before proceeding.

Termination is also permitted in cases of economic difficulties, such as major downturns, natural disasters, or other force majeure events that require scaling down of operations. To ensure a lawful and fair process, you must follow certain statutory procedures.

C. Health or External Factors

Employees who have a prolonged illness with extended treatment but unable to return to work can be terminated. The Labor Code sets specific thresholds, such as 12 months of treatment for indefinite-term contracts, after which termination may proceed if the employee’s capacity is not restored.

For foreign employees, the loss of a work permit constitutes lawful grounds for termination. If the permit expires or is revoked, the employment relationship must be terminated, as the employment is considered illegal.

Keep in mind that simply having a reason for termination is not enough. Emerhub’s local experts advise clients on the critical importance of documenting performance issues, warnings, and the business rationale for any termination decision.

Termination Process and Employer Obligations in Vietnam

1. Review Legal Grounds and Notice Period

Make sure the reasons for termination comply with Vietnam’s Labor Code, and apply the correct notice period, which is:

• 45 days for indefinite-term contracts
• 30 days for fixed-term contracts
• No notice is required for those under probation.

2. Issue the Termination Decision and Notify Employees

Prepare a formal written termination decision with a valid legal reason and date of effectivity. For collective dismissals or large-scale layoffs, consult the trade union and notify the labor authorities beforehand.

3. Settle Severance Pay and Final Compensation

Employees with at least 12 months of service are entitled to severance pay set at half a month’s salary per year of service. Any outstanding salary, unused leave, and other entitlements such as allowances or bonuses must be paid within 14 days (or 30 days in special cases such as natural disasters, epidemics, business restructurings, etc.).

4. Complete Exit and Clearance Procedures

Collect any company assets from your employees, such as laptops, phones, and ID cards, and revoke all their access to your platforms. Additionally, the employee’s social insurance and tax records must be updated, along with providing any necessary documents, which will help with unemployment insurance claims.

5. Finalize and Document the Process

Proper documentation ensures compliance and protects your company if any disputes arise. As such, be sure to keep copies of all notices, approvals, settlement receipts, and exit records of terminations and employment.

Handling Termination Disputes for Employees in Vietnam

Mediation and Labor Dispute Resolution

If an employee has an issue with their termination, they can submit a complaint to the Department of Labor, Invalids, and Social Affairs (DOLISA). Before taking the matter to labor courts, both you and the employee are required to attempt mediation to resolve the issue.

If the termination is deemed unlawful, you may be required to reinstate the employee or provide financial compensation. By addressing disputes early and fairly, you can avoid costly legal battles and maintain a positive relationship with your workforce.

Managing Your Employees with Emerhub

Managing a team in the Philippines requires careful attention to labor laws, payroll, and tax compliance. These responsibilities become even more complex when you hire foreign workers, as you must navigate work permit requirements and employment eligibility rules. Even small mistakes in contracts, salary processing, or termination procedures can lead to serious legal and financial consequences.

Emerhub’s local experts provide comprehensive support in corporate compliance and payroll, helping your business stay on track and operate with confidence. Our services include:

• Comprehensive Payroll Management: From calculating salaries, bonuses, and overtime to handling statutory deductions accurately.
• Social and Health Insurance Contributions: Managing mandatory contributions for social, health, and unemployment insurance.
• Personal Income Tax Filing and Reporting: Assisting with monthly, quarterly, and annual tax submissions, including calculating employee tax liabilities.
• Corporate Tax Compliance: Offering guidance and filing support for tax registration, reporting, and other obligations.
• Regulatory Compliance Updates: Keeping you informed about changes to labor or tax laws so your payroll systems stay up to date.

Need help managing your employees in Vietnam? Fill out the form below to connect with our local experts and keep your business compliant.