COVID-19 epidemic with extremely complicated spread seriously affected the production and business activities of enterprises in all fields. Many businesses have to choose to cut costs, reduce wages, even choose to terminate the labor contract with their employees. Today, let Faro Vietnam review the main impacts of the Covid-19 epidemic related to employee’s benefits that businesses need to be concerned about so that they do not face to the management risks as well as the wrong legal violations during the outbreak of the Covid-19 epidemic.
1. Does the employee unilaterally terminating the labor contract due to Covid -19 be entitled to a severance allowance?
In case the enterprise unilaterally terminates the labor contract with the employee because of an epidemic as prescribed in Article 38 of the Labor Code 2012, the employee is NOT entitled to unemployment allowance but is entitled to a severance allowance if he / she has consecutively worked at least 12 months for the enterprise.
In addition, depending on the economic situation and the impact level of the epidemic, in order to not have to unilaterally terminate the labor contract, or force the employee to quit job due to economic reason, the enterprise may agree with the employee to postpone the implementation of labor contract or give the employee unpaid leave.
When an employee has to stop working or quit a job due to the Covid-19 epidemic, he/she will be paid according to the agreement with the enterprise, but not lower than the regional minimum wage set by the Government.
2. Does the employee who receive severance allowance due to Covid-19 epidemic have to pay Personal Income Tax?
Pursuant to Clause i, Point 1, Article 25 of Circular 111/2013 / TT-BTC dated August 15, 2013 of the Ministry of Finance, which is still effective, guiding the implementation of a number of articles of the Law on Personal Income Tax, clearly stated:
Organizations and individuals that pay wages, remunerations and other payments to resident individuals who do not sign labor contracts (under the guidance at Points c, d, Clause 2, Article 2 of this Circular) or sign labor contracts of less than three (03) months with the total income of VND 2 million (2,000,000 VND) or more, must deduct 10% of the income before paying the individual. Thus, for severance allowances paid strictly according to the provisions of the Law on Social Insurance and the Labor Code, it is not included in taxable income from salaries and wages of employees.
For salaries, severance allowances (in addition to the provisions of the Law on Social Insurance and the Labor Code), unused bonuses and leaves of VND 2,000,000 or more must be deducted personal income tax from salaries and wages at the rate of 10% of the total income paid.
Please contact Faro Vietnam for more details:
Tel: + 84 24 3974 3091 (Hanoi Office) / + 84 28 3821 4654 (HCMC office)