Compare unemployment benefits, severance pay & job loss

What are unemployment benefits, severance pay, and termination pay? Distinguishing unemployment benefits, severance pay, and termination pay (nature, conditions, benefits, etc.).

Concept of unemployment benefits, severance pay and job loss benefits

1. What is unemployment benefit?

Unemployment benefits are the amount of money paid by the social insurance agency to employees after the termination of their labor contract with the employer. In addition to unemployment benefits, employees are also supported with vocational training, job referrals, and skills training to maintain their jobs.

>> Learn more: What is unemployment insurance?

2. What is severance pay?

Severance pay is the amount of money an employer pays to an employee on the condition that both parties legally terminate the employment contract. Accordingly, for the employment contract to be considered legally terminated, the employee and the employer must ensure certain conditions or fall under the cases prescribed by law. For example:

• Employees must give notice before quitting their job. The notice period will depend on the term of the employment contract, while ensuring that the form of notice of termination is consistent with the employment contract or company regulations;
• The employer is an individual declared missing or no longer civilly capable by the Court… 

>> Learn more: What is severance pay?

3. What is unemployment benefit?

Unemployment benefits are the amount of money an employer pays to an employee who leaves the job, in case the business changes its structure, technology or for economic reasons… Generally, these reasons come from the employer, not the employee.

4 similarities between unemployment benefits, severance pay, and job loss benefits

Some common points between the three types of unemployment benefits, severance pay and job loss benefits are as follows:

1. These are all financial support that employees can receive during periods of unemployment;
2. To receive these benefits, employees must meet certain conditions;
3. Employees receive benefits for a certain period of time, not permanently;
4. The monthly allowance is usually lower than the employee’s monthly income before leaving the job.

5 differences between unemployment benefits, severance pay and redundancy pay 

Although unemployment benefits, severance pay and redundancy pay all have the same purpose of providing financial support to employees when they are unemployed. However, you also need to clearly understand the differences between unemployment benefits, severance pay and redundancy pay to distinguish correctly, in order to protect your legal rights during the transition period. 

Specifically, the differences between the three types of subsidies above are as follows:

1. Nature of subsidy

2. Paying agency

The agencies responsible for paying unemployment benefits, severance pay and redundancy pay are:

Accordingly, to receive unemployment benefits from the social insurance agency, you need to complete the application and procedures for unemployment benefits. 

To better understand the steps to apply for unemployment benefits, please see the following articles:

>> Instructions for employees on leave to receive unemployment insurance fund support;

>> Instructions for procedures to receive unemployment benefits;

>> Instructions for online unemployment benefit procedures.

Note:

Unemployment benefit beneficiaries must complete and submit their own application and cannot authorize someone else to submit it on their behalf. Therefore, you cannot hire a service to do it for you.

3. Cases eligible for benefits

➤ Unemployment benefits: Employees who are unemployed after quitting their jobs must file for unemployment benefits with the Social Insurance Organization within 3 months of quitting their jobs. If the above deadline is exceeded, the employee will not be entitled to unemployment benefits.

➤ Severance pay:

• Expired labor contract;
• Employees complete work in accordance with the labor contract;
• Employees and employers terminate labor contracts by agreement;
• Employees are sentenced to imprisonment/death penalty/banned from doing the job stated in the labor contract according to the court’s legally effective verdict or decision;
• The employee has died, been declared by the Court to have lost civil capacity, is missing or has died;
• The employer is not the subject of termination of the labor contract or the employer is an individual who has died, been declared by the Court to have lost civil capacity, is missing or dead;
• The employer or employee unilaterally terminates the labor contract according to the provisions of the 2019 Labor Code.

➤ Unemployment benefits: 

• Due to changes in structure and technology by the employer;
• Due to economic changes;
• Due to the employer merging/consolidating/splitting the enterprise, selling/leasing/converting the type of enterprise, transferring ownership or right to use assets of the enterprise or cooperative without a plan to continue employing the employee.

4. Conditions for receiving  benefits

➤ Unemployment benefits:

• Termination of labor contract in accordance with law;
• Having paid social insurance for at least 12 months within 24 months prior to the termination of the labor contract or employment contract (for fixed-term or indefinite-term labor contracts);
• Having paid social insurance for at least 12 months within 36 months before the termination of the labor contract (for seasonal labor contracts or jobs with a term of 3 to less than 12 months);
• Not eligible for monthly pension or disability benefits;
• Submitted application for unemployment benefits at the employment service center;
• Not finding a new job after 15 days from the date of submitting the application at the employment service center, except in the following cases: participating in military service/police service, studying for 12 months or more, serving a temporary detention/imprisonment sentence, settling/working abroad or passing away.

>> See details: Conditions for unemployment benefits.

➤ Severance pay:

• Employees work regularly for the employer for 12 months or more before leaving the job;
• Belong to one of the cases eligible for severance pay;
• Not eligible for retirement;
• Not in the case of voluntarily quitting work without a valid reason within one of the following two time frames:
  • 5 days or more in 30 days;
  • 20 or more days in 365 days.
• Not yet participated in social insurance;
• Employees who participate in unemployment insurance are still entitled to severance pay for certain periods of time such as:
  • Probationary period;
  • Time of temporary suspension from work;
  • Maternity leave or sick leave;
  • Time off work not due to employee fault… 

You can see details of the periods of time that you are entitled to receive both severance pay and unemployment insurance as well as the conditions for receiving severance pay in the article: Regulations and conditions for receiving severance pay.

➤ Unemployment benefits:

• Employees who work regularly for the employer for 12 months or more before losing their jobs;
• Belong to one of the cases eligible for unemployment benefits.

>> See details: Regulations and conditions for unemployment benefits.

5. Benefits

➤ Unemployment benefits:

• Employees are paid health insurance by the Social Insurance Organization and the allowance is calculated based on the employee’s participation in unemployment insurance;
• Each month, you will receive an amount equal to 60% of the average monthly salary participating in social insurance for the 6 consecutive months before leaving work.

The specific formula for calculating unemployment benefits is as follows:

Note:

Employees must meet the condition of having participated in unemployment insurance for 12 months within 24 months before leaving work. At the same time, employees who have paid unemployment insurance for 12-36 months will receive 3 months of unemployment benefits, then for every additional 12 months of payment, they will receive an additional month of benefits (but up to a maximum of 12 months).

>> See details: How to calculate unemployment benefits for employees.

➤ Severance pay: 

Employees will receive a severance pay based on their salary and working time to calculate the severance pay.

The specific formula for calculating severance pay is as follows:

In there: 

• The salary used to calculate severance pay is the average salary of the 6 consecutive months before termination and is calculated for a full 12 months. In case there are odd months, it is calculated as follows:
  • From 1 – 6 months: Salary for calculating allowance is equal to 1/2 of the number of years worked;
  • From 6 months or more: Salary to calculate allowance is equal to 1 year of work.
• The time for calculating severance pay is the total actual time the employee worked minus the time participating in unemployment insurance and the time for receiving severance pay and unemployment benefits.

>> See details: How to calculate severance pay for employees.

➤ Unemployment benefits:

• Receive a unemployment benefit corresponding to the number of years the employee has worked;
• Each year of work will be paid 1 month of salary, but at least equal to 2 months of salary.

The specific formula for calculating unemployment benefits is as follows:

In there: 

• The salary used to calculate unemployment benefits is the average salary of the 6 consecutive months before unemployment and is calculated for a full 12 months. In case there are odd months, it is calculated as follows:
  • From 1 – 6 months: Salary for calculating allowance is equal to 1/2 of the number of years worked;
  • From 6 months or more: Salary to calculate allowance is equal to 1 year of work.
• The time for calculating unemployment benefits is the total actual working time of the employee minus the time participating in unemployment insurance and the time for receiving unemployment benefits and severance pay.

>> See details: How to calculate unemployment benefits for employees.

Frequently asked questions about unemployment benefits, severance pay, and job loss benefits

1. Are unemployment benefits, severance pay and unemployment benefits the same thing?

No. Severance pay, severance pay, and unemployment are completely different.

• Unemployment benefits are the amount of money paid by the Social Insurance agency to employees after the termination of the labor contract with the employer; 
• Severance pay is the amount of money an employer pays to an employee on the condition that both parties legally terminate the employment contract;
• Severance pay is the amount of money an employer pays to an employee who leaves the job before the end of the labor contract due to restructuring, technological changes, or economic reasons.

>> See details: Are unemployment benefits, severance pay, and unemployment benefits the same thing?

2. Who will pay unemployment benefits, severance pay and redundancy pay?

Severance pay and severance pay are paid by the employer. Unemployment benefits are paid by the social insurance agency.

>> See details: Subsidy payment agency.

3. In what cases are unemployment benefits available?

Employees are entitled to unemployment benefits in the following cases:

• Due to changes in structure and technology by the employer;
• Due to economic changes;
• Due to the employer merging/consolidating/splitting the enterprise, selling/leasing/converting the type of enterprise, transferring ownership or right to use assets of the enterprise or cooperative without a plan to continue employing the employee.

>> See details: Cases eligible for benefits.

4. In what cases are severance benefits granted? 

Employees are entitled to severance pay when:

• Expired labor contract;
• Employees complete work in accordance with the labor contract;
• Employees and employers terminate labor contracts by agreement;
• Employees are sentenced to imprisonment/death penalty/banned from doing the job stated in the labor contract;
• …

>> See details: Cases eligible for benefits.

5. Who are eligible for unemployment benefits? 

Employees are entitled to unemployment benefits if they are unemployed after leaving work and have registered for unemployment with the Social Insurance organization within 3 months from the date of leaving work.

>> See details: Cases eligible for unemployment benefits.

6. What are the conditions for employees to receive benefits when leaving work?

• With unemployment benefits: Employees who work regularly for the employer for more than 12 months and are in one of the cases eligible for unemployment benefits;
• With severance pay: 
  • Employees who have worked regularly for the employer for more than 12 months and are in one of the cases eligible for severance pay;
  • Not eligible for retirement;
  • Not in the case of continuous absence from work without justifiable reason;
  • Not yet participated in social insurance;
  • Employees who participate in unemployment insurance are still entitled to severance pay for certain periods of time as prescribed by law.
• With unemployment benefits: 
  • Termination of labor contract in accordance with law;
  • Have paid social insurance for 12 months or more according to the provisions of the 2013 Employment Law;
  • Not eligible for monthly pension or disability benefits;
  • Submitted application for unemployment benefits at the employment service center;
  • Have not found a job after 15 days from the date of application at the employment service center.

>> See details: Conditions for unemployment benefits, severance pay, and job loss benefits.

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