What is unemployment benefit? Regulations on cases and conditions for unemployment benefit & instructions on how to calculate unemployment benefit for employees.
What is unemployment benefit?
Unemployment benefits are the amount of money an employer pays to an employee when terminating a labor contract due to changes in structure, technology, economic reasons or other objective reasons.
➤ Cases considered as changes in structure and technology include:
- Change products, product structure;
- Change organizational structure, labor restructuring;
- Change processes, technology, technical equipment, machinery…
➤ Cases considered to be for economic reasons include:
- Economic crisis, recession;
- Restructuring the economy, implementing international commitments in accordance with state policies.
In general, the nature of unemployment benefits is the compensation that the employer pays to its employees, because the cause of job loss almost always comes from the employer.
Note:
Unemployment benefits and severance pay are different but often confused as one. Although both are paid by the employer, these two types of benefits still have some differences such as: nature, conditions, eligible cases and benefit levels. Therefore, you need to clearly distinguish between unemployment benefits and severance pay to avoid affecting your benefits.
Learn more:
>> Regulations on severance regime;
>> Regulations on unemployment benefits;
>> Compare unemployment benefits, severance pay & job loss.
Regulations on unemployment benefits for employees
1. Cases eligible for unemployment benefits
Employees will receive unemployment benefits if they fall into one of the following four cases:
- Due to economic changes;
- Due to changes in processes and technology by the employer;
- Due to NSDLĐ reorganizing its operational structure as follows:
- Merger, consolidation, division, separation;
- For sale or lease;
- Convert business type.
- Due to the employer transferring ownership or right to use assets of the enterprise or cooperative.
2. Conditions for unemployment benefits
Employees are entitled to unemployment benefits if:
- Belong to 1 of the 4 cases entitled to unemployment benefits mentioned above;
- Have worked regularly for at least 12 months for the employer before losing the job.
How to calculate unemployment benefits for workers
Pursuant to Article 47 of the 2019 Labor Code and Article 8 of Decree 145/2020/ND-CP, the unemployment allowance for employees is prescribed as follows:
- The amount of unemployment benefits paid corresponds to the number of years the employee has worked;
- For each year of work, employees will receive 1 month’s salary, but it must be at least equal to 2 months’ salary.
➤ Formula for calculating unemployment benefits:
| Unemployment benefits | = | Salary for calculating unemployment benefits | x | Working time for calculating unemployment benefits |
In there:
The salary used to calculate unemployment benefits is the average salary of the 6 consecutive months before losing the job according to the labor contract and is calculated for a full 12 months. Odd months will be calculated as follows:
- Working time from less than 6 months: Salary for calculating allowance is equal to 1/2 year of work;
- Working time over 6 months: Salary for calculating allowance is equal to 1 year of work.
➤ Formula for calculating working time to receive unemployment benefits:
| Working time for calculating unemployment benefits | = | Actual working time | – | Time to participate in social insurance | – | Working time has been paid severance pay, unemployment benefits |
In there:
- Actual working time includes:
- Direct working time;
- Probationary period;
- Time spent by the employer to attend school;
- Time off for maternity leave and sick leave;
- Time off for treatment due to occupational accidents and diseases while working for the employer;
- Time off to perform public duties for the employer;
- Time off work is not the fault of the employee;
- Weekly rest time;
- Time off with full pay;
- Time on duty for the employee representative organization;
- Time of suspension from work.
- Social insurance participation period includes:
- Social insurance payment period;
- The period when an employee is not required to participate in unemployment insurance but the employer pays an amount equivalent to the unemployment insurance contribution for the employee when paying salary.
Penalties for not paying or not paying enough unemployment benefits to employees
Pursuant to Clause 2 and Clause 3, Article 12 of Decree 12/2022/ND-CP, the penalty levels related to unemployment benefits for employees are as follows:
➤ Fines for employers who do not pay or do not pay enough unemployment benefits to employees. The fine will be based on the number of employees who lose their jobs, specifically:
| Fine level | Number of employees losing their jobs |
| 1,000,000 – 2,000,000 VND | 1 – 10 |
| 2,000,000 – 5,000,000 VND | 11 – 50 |
| 5,000,000 – 10,000,000 VND | 51 – 100 |
| 10,000,000 – 15,000,000 VND | 101 – 300 |
| 15,000,000 – 20,000,000 VND | From 301 and up |
Note:
The above fines only apply to individuals. For organizations, the fine will be twice the fine for individuals.
➤ For the act of not paying the full amount of allowance, in addition to the fine as above, the employer is also required to pay the full amount of unemployment allowance to the employee along with interest on the unpaid allowance.
This interest is calculated based on the highest non-term deposit interest rate of state-owned commercial banks at the time of penalty.
Frequently asked questions about unemployment benefits for workers
1. What is unemployment benefit?
Severance pay is the amount of money an employer pays to an employee when terminating a labor contract due to changes in structure, technology, economic reasons or other objective reasons.
>> See details: What is unemployment benefit?
2. In which cases are unemployment benefits available?
4 cases eligible for unemployment benefits include:
- Due to economic changes;
- Due to changes in structure and technology by the employer;
- Due to the employer merging, consolidating, dividing, separating, selling, leasing or converting the type of business;
- Due to the employer transferring ownership or right to use assets of the enterprise or cooperative.
>> See details: Cases eligible for unemployment benefits.
3. What are the conditions for unemployment benefits?
Employees are entitled to unemployment benefits provided that they have worked regularly for the employer for at least 12 months before losing their job and fall into one of the four categories eligible for unemployment benefits.
>> See details: Conditions for unemployment benefits.
4. How is the unemployment benefit level determined?
Employees who meet the conditions for unemployment benefits will receive a corresponding allowance for each year of work equal to 1 month’s salary, but at least 2 months’ salary, after leaving work.
>> See details: How to calculate unemployment benefits for employees.
5. Is there a penalty for not paying or not paying enough unemployment benefits?
Yes. The fine for not paying or not paying enough unemployment benefits to employees ranges from 1 to 20 million VND, depending on the number of employees who lose their jobs.
>> See details: Penalties for not paying or not paying enough unemployment benefits to employees.
6. Are severance pay and unemployment benefits the same thing?
No. Unemployment compensation and severance pay are two completely different benefits.
>> See details: Compare unemployment benefits, severance pay & job loss.
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