Regulations and conditions for receiving severance pay – Severance regime

What are the regulations on termination of employment and termination allowance? When are you entitled to termination allowance? Conditions for termination allowance and how to calculate termination allowance, unemployment insurance, social insurance.

What is severance? What is severance pay?

1. What is termination?

Quitting a job is understood as an individual who is working for an individual or organization or agency then quits the job, no longer continues to work or unilaterally terminates the labor contract (abbreviated: Labor contract/Labor contract).

Quitting a job can come from many different reasons, but mainly because the current working environment is not suitable or because the salary does not match the wishes and abilities.

>> Related article: What is job hopping?

2. What is severance pay?

Severance pay is a financial allowance or support that an employee receives from an employer after quitting, leaving work or terminating a labor contract, provided that the termination of the labor contract is carried out legally.

>> Related articles: Severance pay and unemployment benefits.

Regulations on termination of employment and termination benefits for employees

1. Conditions for receiving severance pay

➤ Cases eligible for severance pay

Employees who have worked for 12 months or more and work regularly, after leaving the job, will be paid severance pay by the employer in the following cases:

• Expired employment contract;
• The employee has fully completed the work according to the labor contract;
• Termination of the labor contract has been agreed upon by the employee and the employer;
• Employees are sentenced to imprisonment, death penalty or banned from doing the job stated in the labor contract by the Court;
• The employee dies or is declared dead, missing or has lost civil capacity by the Court;
• The employer is not the party terminating the labor contract or the employer is an individual who dies, is declared missing, dead, or has lost civil capacity by the Court;
• Employees or employers unilaterally terminate labor contracts according to the 2019 Labor Code.

➤ Cases not eligible for severance pay

Employees will not be entitled to severance pay after leaving work if they fall into one of the following cases:

• Employees are eligible for pension;
• Employees who voluntarily quit their jobs without valid reasons (*) for 5 days or more within 30 days or 20 days or more within 365 days.

Note:

(*) Reasons considered legitimate include: illness of the individual or a relative (with confirmation from a medical facility), natural disasters, fires and some other reasons according to labor regulations.

2. Regulations on notice period before leaving work (notice period of resignation)

➤ How many days in advance do I have to resign?

Depending on the type of employment contract, the employee’s notice period is specified in the table below.

However, if the employee does special work, the notice period before quitting or leaving work is regulated as follows.

Notice of termination	Term of employment contract
≥ 120 days	Indefinite
	Determine the term from 12 months or more
≥ 1/4 of the term of the labor contract	Determine the term from less than 12 months

>> See more: Cases where you are allowed to quit your job without notice.

➤ Regulations on form of notice before leaving work

Pursuant to Article 35 of the 2019 Labor Code, employees have the right to unilaterally terminate the labor contract, but must notify the employer in advance. Regulations on the form of notice of termination of employment are guided as follows:

• If the contract or company regulations do not specifically stipulate the form of notice of termination: Employees can notify termination in writing or in any other form;
• If the contract or company regulations specifically stipulate the form of notice of termination: Employees must comply with the agreement and regulations.

Severance regimes – severance pay for employees

Details about each termination regime, Online Accounting will share below.

1. Severance pay (unemployment benefits)

Severance pay is the allowance that employees receive if they have not participated in unemployment insurance. However, from January 1, 2009 to the present, employees who sign labor contracts for 3 months or more must participate in social insurance, health insurance and unemployment insurance, so they will not receive severance pay, except for the following periods:

• Time the employee has worked directly for the employer;
• Probationary period;
• Time that the employee is sent to study by the employer;
• Time off for sick leave and maternity leave according to regulations;
• Time off for treatment and rehabilitation of work-related accidents or occupational diseases, paid by the employer according to regulations;
• Time off work to perform civic duties as prescribed and paid by the employer as prescribed;
• Time off work not due to the employee’s fault;
• Weekly rest time, paid leave during strike;
• Time to perform the tasks of the employee representative organization;
• Time of suspension from work.

In case the employee is eligible for severance allowance, within 14 days (from the date of termination of the labor contract), the employee will be paid severance allowance by the employer.

➤ Working time to calculate severance pay

Pursuant to Clause 3, Article 8 of Decree 145/2020/ND-CP, the working time for calculating severance allowance is calculated according to the following formula:

In there:

• Total actual working time includes time periods such as: 
  • Probationary period;
  • Time off for benefits (maternity, sickness);
  • Time off work not due to the fault of the employee…
  • The period of participation in unemployment insurance is the period during which the employee has paid unemployment insurance and the period during which the employee is not subject to unemployment insurance but is paid by the employer together with the salary an amount equivalent to the unemployment insurance that the employer must pay for the employee according to regulations.

➤ Salary for calculating severance pay

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 the job and is calculated annually (ie 12 full months). If there are odd months, it will be calculated as follows:

>> See details: Regulations on severance pay – From A to Z how to calculate severance pay.

2. Unemployment benefits – Unemployment insurance regime

Unemployment benefits are deducted from the unemployment insurance fund and are calculated based on the employee’s previous participation in unemployment insurance. From this, you can understand that unemployment benefits are one of the unemployment insurance regimes. 

In addition, according to the 2013 Employment Law, there are 3 other regimes:

• Consulting, support and new job introduction;
• Vocational training support regime;
• Vocational training support regime, improving and fostering vocational skills to maintain employment.

The formula for calculating unemployment benefits is as follows:

Note:

Monthly unemployment benefits ≤ 5 times the regional minimum wage or basic salary.

A person during the working process (from the beginning until the end of work or retirement) is only entitled to a maximum of 12 months of unemployment benefits.

See details: 

>> Unemployment insurance procedures;

>> How to apply for unemployment insurance online.

3. One-time social insurance benefit

According to Article 1 of Resolution 93/2025/QH13, people participating in compulsory social insurance after 1 year of unemployment or voluntary social insurance after 1 year of not continuing to pay but have not paid social insurance for 20 years will be able to withdraw social insurance one time.

Thus, if an employee participates in compulsory social insurance at an agency or organization but when resigning has not paid enough 20 years of social insurance, he/she will receive a one-time social insurance payment.

The one-time social insurance benefit upon termination of employment is calculated based on the number of years of social insurance participation according to the following formula:

Note:

MBQTL: Average salary level.

If the employee has not participated in compulsory social insurance for 1 year, the one-time social insurance benefit is equal to 22% of the monthly salary for social insurance contribution. The maximum benefit is equal to 2 months of average salary.

However, because the one-time social insurance withdrawal file includes the social insurance book (original), after leaving the job, in order not to affect the one-time social insurance withdrawal procedure in particular or unemployment benefits in general, employees should request the employer to provide one of the following documents:

1. Documents proving legal leave of absence:
   • The employment contract has expired;
   • Notice or agreement to terminate the employment contract;
   • Certificate of completion of work according to contract agreement;
   • Decision to terminate employment;
   • Decision to dismiss or decision to discipline to terminate employment.
2. Social insurance book after the closing time has been finalized.

In addition, if the employee wants to obtain copies of documents related to the work process, the employer must provide copies of the documents and send them to the employee. The cost of copying and sending the documents will be paid by the employer.

See details:

>> Social insurance closing procedures;

>> Regulations on one-time social insurance withdrawal.

4. Payment of salary and annual leave after leaving work

➤ Salary payment

Within 14 working days from the date of termination of employment (the date of termination of the labor contract), the employer must pay all salaries and other amounts related to the employee’s rights and interests (Clause 1, Article 48 of the 2019 Labor Code). 

The above payment period may be extended but not more than 30 days if:

• Termination of employment contract not originating from the employer;
• Employers face economic problems, structural or technological changes;
• The employer changes the type of business, transfers ownership and use rights of assets, or is in the process of dividing, separating, merging, etc.;
• In cases of force majeure such as natural disasters, fires, epidemics… 

➤ Payment of unused annual leave

Clause 3, Article 113 of the 2019 Labor Code and Clause 3, Article 67 of Decree 145/2020/ND-CP stipulate the following points:

• Employers must pay employees for unused leave when they leave;
• Untaken annual leave will be calculated based on the salary according to the labor contract of the month preceding the month of termination of employment.

Accordingly, the salary for remaining vacation days when an employee quits or resigns is calculated as follows:

Note:

In addition to salary and annual leave, employees will receive other benefits if agreed in the labor contract, such as allowances, subsidies, etc.

Regulations on the cost of paying severance pay to employers

1. Is severance pay mandatory?

According to Clause 1, Article 46 of the 2019 Labor Code, employers are responsible for paying severance pay to employees who have worked regularly for 12 months or more and are eligible for severance pay (except in cases where employees are eligible for pension). Therefore, severance pay is a mandatory cost that employers must pay to employees after they quit their jobs or legally resign.

2. Is it okay if the company does not pay severance pay?

In case the company does not pay severance allowance to employees, it will be subject to administrative penalties. The level of administrative penalties will be calculated based on the number of employees who are not paid this allowance, specifically:

 

In addition, the employer must pay the employee full severance pay, including interest on the unpaid amount calculated at the highest non-term deposit interest rate of state-owned commercial banks at the time of penalty.

3. Is the cost of paying severance pay to employees subject to corporate income tax?

According to Clause 6, Article 8 of Decree 115/2020/ND-CP, the cost of paying severance pay is included in the business, production or operating expenses of the employer. Therefore, severance pay is a reasonable expense when settling corporate income tax.

In case the company or employer pays this allowance not in accordance with the provisions of the Labor Code and the Law on Social Insurance, this will be considered an invalid expense when determining taxable income for corporate income tax.

>> See details: How to calculate corporate income tax.

Frequently Asked Questions Regarding Termination and Severance Pay

1. What is termination?

Quitting a job is understood as an individual who is working for an individual or organization or agency then quits the job, no longer continues to work or unilaterally terminates the labor contract.

2. What is severance pay?

Severance pay is a financial allowance or support that an employee receives from an employer after quitting, leaving work or terminating a labor contract, provided that the termination of the labor contract is carried out legally.

3. How many days in advance must an employee resign?

Regulations on notice period of resignation or termination for employees are as follows:

• At least 45 days: For employees working under indefinite-term labor contracts;
• At least 30 days: For employees working under a labor contract with a term of 12 to 36 months;
• At least 3 days: For employees working under a labor contract with a term of less than 12 months;
• At least 120 days: For employees with special jobs when working under indefinite-term labor contracts and labor contracts with a term of 12 months or more;
• At least 1/4 of the contract term: For employees with special jobs when working under a labor contract with a term of less than 12 months.

>> See details: Regulations on notice period before quitting job.

4. If a worker resigns legally, what benefits are they entitled to?

When quitting a job or quitting a job legally, employees will be entitled to:

• Severance pay;
• Unemployment benefits;
• Enjoy social insurance one time;
• Receive salary payments and unused annual leave.

>> See details: Severance regime.

5. What are the conditions for receiving severance pay?

Employees who have worked for 12 months or more, worked regularly and are in one of the following cases will receive severance pay:

• Expired employment contract;
• The employee has fully completed the work according to the labor contract;
• Termination of the labor contract has been agreed upon by the employee and the employer;
• Employees are sentenced to imprisonment, death penalty or banned from doing the job stated in the labor contract by the Court;
• …

>> See details: Cases eligible for severance pay.

6. Level of benefits and calculation of severance pay for employees

Employees who meet the conditions for receiving severance pay or job loss benefits, after leaving the job, for each year of work, the employee will receive a subsidy equal to half a month’s salary used to calculate severance pay.

>> See details: Formula for calculating severance pay.

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