How to Terminate the Employment Contracts Due to Economic Reasons?

Termination of a labor contract is an event that terminates the employment relationship between the employee and the employer.  This event might lead to labour disputes.  The employer and the employee could consult with lawyers at an employment dispute law firm in Vietnam for advice and representation.

What cases of labour contract termination in Vietnam?

In particular, there are many cases of termination of labour contracts such as the labour contract expires, the work stated in the labour contract has been completed, both parties agree to terminate the labour contract, the employer lays off the employee due to structural or technological changes or because of economic reasons, merger, consolidation or division of the enterprise or cooperative,…

Steps taken to terminate labour contract due to economic reasons 

In case more than one employee faces the risk of unemployment for economic reasons, the employer shall propose and implement a labor utilization plan in accordance with labour code.

Specifically, the labor utilization plan must contain the following main contents: list and number of employees who continue to be employed, employees sent for re-training to continue using; list and number of retired employees; list and number of employees transferred to work part-time; employees must terminate labor contracts and measures and financial sources to ensure the implementation of the plan.

In case the employer cannot employ and have to dismiss employees, the employer shall pay job-loss allowances to the employees. Accordingly, the employer shall pay a job-loss allowance to an employee who loses his/her job and has worked regularly for the employer for 12 months or longer. The job-loss allowance is equal to 1 month’s wage for each working year, but must not be lower than 2 months’ wage.

The working period used for the calculation of job-loss allowance is the total time during which the employee actually works for the employer minus the time during which the employee benefits from unemployment insurance in accordance with the Law of Social Insurance and the working period for which the employer has paid a severance allowance to the employee.

The wage used for the calculation of job-loss allowance is the average wage in accordance with the labor contract during 6 months preceding the time the employee loses his/her job.

The dismissal of more than one employee in accordance with this regulation may be implemented only after discussion with the representative organization of the grassroots-level employees’ collective and notification 30 days in advance to the provincial-level state management agency of labor.

How lawyers at an employment dispute law firm in Vietnam could help?

While implementing the procedures of termination of the labour contract due to economic reasons, there are potential disputes arisen between the employer and the employee.  The conflict might be resulted from many issues i.e. the unpaid amount of salary, amount of allowances, the time duration to calculate the amount…

Such conflict might make the process of following the procedure to submit the labour utilization plan at the state authorities.  Hence, it is important for the employer to consult with dispute lawyers specializing in labour matters at an employment dispute law firm in Vietnam for the avoidance of potential dispute with the employee, cause negative social impact when deciding to terminate contract due to economic reasons, and at the same time complying with the procedures of implementing labour utilization plan submitted and approved by the labour related authorities while doing business in Vietnam. 

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