The Process of Terminating a Labor Contract in Vietnam

Recent volatility in the global labor market, including large-scale layoffs at major corporations, highlights the importance of understanding the legal framework around employment termination. As companies in Vietnam navigate economic pressure, it is essential to understand when an employment contract may be terminated, what procedures apply, and what financial and legal obligations must be fulfilled.

Grounds for Contract Termination

Employment contracts may be terminated for a variety of reasons, including objective circumstances as well as reasons arising from either the employer or the employee. Both parties may unilaterally terminate an employment contract, provided that the legal grounds, where required, and applicable notice periods are properly observed.

Employees may terminate their employment contract without prior notice in certain circumstances, such as being mistreated or assaulted; where a pregnant employee must stop working as prescribed by law; where the employer fails to pay salary in full or on time; where the employee is not assigned to the agreed job, workplace, or working conditions; where the employee reaches retirement age; or where the employer provides dishonest information that affects the performance of the employment contract.

Common grounds for employment contract termination in Vietnam under the Labor Code include:

1. The employment contract expires, except in certain cases prescribed by the Labor Code.
2. The work stated in the employment contract has been completed.
3. Both parties agree to terminate the employment contract.
4. The employee is sentenced to imprisonment without suspension, is not released under the Criminal Procedure Code, is sentenced to death, or is prohibited by a legally effective court judgment or decision from performing the work stated in the employment contract.
5. A foreign employee working in Vietnam is expelled under a legally effective court judgment or decision, or under a decision of a competent state authority.
6. The employee dies or is declared by a court to have lost civil act capacity, to be missing, or to be dead.
7. The employer, if an individual, dies or is declared by a court to have lost civil act capacity, to be missing, or to be dead; or the employer, if not an individual, ceases operations or receives notice from the provincial business registration authority that there is no legal representative or authorized person to perform the rights and obligations of the legal representative.
8. The employee is dismissed as a disciplinary measure.
9. The employee unilaterally terminates the employment contract in accordance with the law.
10. The employer unilaterally terminates the employment contract in accordance with the law.
11. The employer makes the employee redundant in accordance with the law.
12. The work permit of a foreign employee working in Vietnam expires in accordance with the law.
13. Where a probationary arrangement is included in the employment contract, the probation result is unsatisfactory or either party cancels the probation agreement.

Employment Contract Termination Procedures in Vietnam

The termination procedure in Vietnam may vary depending on the type of employment contract and the reason for termination. The most common procedures are outlined below.

Expiry of the Employment Contract

When an employment contract expires, the termination process is relatively straightforward.

The employer should notify the employee in writing that the contract is expiring. Although current regulations do not specify a mandatory notice period for this situation, employers should provide reasonable advance notice.

If the employee is a current member of the leadership board of an employee representative organization, the contract must be extended until the end of the employee’s term.

Unilateral Termination Due to the Employee’s Repeated Failure to Perform the Work

Where the employer terminates the contract because the employee repeatedly fails to perform the work under the employment contract, the employer should pay attention to the following requirements:

Provide advance notice to the employee, with the required notice period depending on the contract type: 45 days for an indefinite-term contract, 30 days for a fixed-term contract of 12 to 36 months, or 3 working days for a contract of less than 12 months.

The employer must have regulations on evaluating work performance. These evaluation regulations must be issued by the employer and, where an internal employee representative organization exists, must be developed after consulting that organization.

Restructuring Leading to Termination

When organizational restructuring requires a company to terminate employment contracts, the process should generally follow these key steps:

• Issue an official decision on the restructuring.
• Prepare a list of employees who will be retrained or made redundant.
• Develop a labor utilization plan to manage the transition.
• Consult the internal employee representative organization, where one exists and where the affected employee is a member.
• Provide 30 days’ advance notice to the provincial People’s Committee and to the employee.

In this case, the employer must pay job-loss allowance to employees who have worked regularly for at least 12 months. The allowance is calculated at one month’s salary for each year of service, with a minimum payment equal to two months’ salary.

Dismissal as a Disciplinary Measure

If an employee is dismissed for a disciplinary violation, the employer must strictly follow the procedures set out in the Labor Code and related regulations, including:

• Prepare detailed documentation of the violation under Article 125 of the 2019 Labor Code.
• Comply fully with the procedures under Article 70 of Decree 145/2020/ND-CP, including preparing a violation record, holding a disciplinary meeting with the required participants, and issuing the disciplinary decision within the statutory timeline.

It is important to note that, when an employer applies dismissal as a disciplinary measure, the conduct leading to dismissal must be clearly set out in the company’s internal labor regulations, which must have been issued and registered with the labor authority.

Financial and Other Obligations

Regardless of the reason for termination, the employer must complete the following obligations:

• Pay all amounts related to the employee’s rights and benefits within 14 working days from the termination date, except in certain cases where the payment period may be extended but must not exceed 30 days.
• Fulfill the requirements under Article 48 of the 2019 Labor Code, including issuing an employment certificate at the employee’s request, completing procedures to confirm the employee’s social insurance and unemployment insurance contribution periods, and returning the original documents and other papers retained by the employer, if any.

Terminating an employment contract in Vietnam requires careful compliance with legal requirements, which can be challenging for employers. Talentnet provides compliance services designed to help businesses in Vietnam manage HR processes in line with local regulations. These services support companies in handling workforce matters professionally while meeting international standards for confidentiality and security.

With deep experience in the Vietnamese market, Talentnet is a trusted partner for companies seeking compliance support. By working with Talentnet, employers can be more confident that their employment termination process is legally compliant, employee-conscious, and designed to maintain positive workforce relations while avoiding potential legal risks.