Severance pay and conditions for receiving severance pay are an issue that many people are concerned about today, especially for employees at units and businesses. After leaving the job or terminating the labor contract or working contract with the employer, the employee can receive severance pay according to the provisions of law. So what is severance pay and how is it calculated? Let's find out with Faro Vietnam.
1. What is severance pay?
Severance pay is the amount of money that the employer must pay to the employee when the labor contract terminates in cases prescribed by law. According to regulations, priority is given to salary, social insurance, health insurance, unemployment insurance, severance pay and other benefits of employees according to the collective labor agreement and labor contract. Payment in case the enterprise or cooperative terminates operations, is dissolved or goes bankrupt.
Within 14 working days from the date of termination of the labor contract, the employer shall fully pay all amounts related to the employee's benefits, except for the following cases which may be extended but must not exceed 30 days:
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The employer is not an individual terminating operations;
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The employer changes structure, technology or for economic reasons;
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Division, separation, consolidation, merger; selling, leasing, converting business types; transfer of ownership and rights to use assets of enterprises and cooperatives;
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Due to natural disasters, fires, enemy attacks or dangerous epidemics.
Therefore, normally, severance pay is paid within 14 working days from the date of termination of the labor contract.
Conditions for employees to receive the latest severance pay
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2. Latest conditions for severance pay
Pursuant to the provisions of Article 46 of the 2019 Labor Code, employers are responsible for paying severance benefits to employees who have worked regularly for 12 months or more in the following cases:
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Labor contract expires;
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Completed work according to the labor contract;
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Both parties agree to terminate the labor contract;
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The employee is sentenced to prison, death penalty or is banned from doing the job stated in the labor contract according to a legally effective court judgment or decision;
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The employee dies, is declared by the court to have lost civil act capacity, is missing or is dead;
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The employer is an individual who dies, is declared by a court to have lost civil act capacity, is missing or is dead; the employer is not an individual terminating operations;
When fully meeting the conditions for severance pay as prescribed above, the employee will receive severance pay.
3. How to calculate severance pay
Employees receiving benefits can calculate the benefit level according to regulations based on Article 46, Labor Code 2019. Accordingly, the payment of severance pay to employees will be based on the principle: For each year of employment, the beneficiary will receive a stipend equal to half of the monthly salary calculated for severance pay.
3.1 Formula for calculating severance pay
Severance pay = ½ * Salary to calculate severance pay * Working time to calculate severance pay
In which: The salary used to calculate severance pay is the average salary according to the labor contract of the 6 consecutive months before the employee quits his job. The working time used for calculating severance pay includes the total time that the employee has actively worked for the employer, excluding any periods during which the employee has been covered by unemployment insurance and any time for which the employer has provided work. Employers are responsible for providing severance pay and job loss benefits to eligible employees.
Additionally, time covered under unemployment insurance includes the periods when the employee actively participates in unemployment insurance as per legal requirements. Secondly, times when the employee isn't obligated to participate in unemployment insurance as per legal provisions but receives payment from the employer equivalent to the employer's unemployment insurance contribution per labor and unemployment insurance laws.
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3.2. Cases in which severance pay is not eligible
Cases not entitled to severance pay are cases of termination of labor contracts according to Clauses 5, 8, 11, 12, 13, Article 34 of the 2019 Labor Code, specifically as follows:
- Foreign workers working in Vietnam are deported according to legally effective court judgments or decisions or decisions of competent state agencies.
- The employee is disciplined and dismissed.
- The employer terminates the employee's job according to the provisions of Article 42 and Article 43 of the Labor Code:
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In case of structural, technological changes or economic reasons
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In case of division, separation, consolidation or merger; selling, leasing, converting business types; Transfer of ownership and rights to use assets of enterprises and cooperatives.
- Work permits expire for foreign workers working in Vietnam according to the provisions of Article 156 of this Code.
- In case the probationary agreement is written in the labor contract but the probationary agreement is not met or one party cancels the probationary agreement.
CONTACT FARO VIETNAM today for hr related services.
Faro Vietnam
Email: service.vn@farorecruitment.com
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