How to Terminate an Employee Legally in Vietnam
Terminating an employee in Vietnam requires more than a simple notice, it involves a careful and legal process governed by strict labor regulations. Vietnam’s Labour Code (2021) had strong emphasis on protecting employees, and any improper termination can expose employers to serious risks, including reinstatement orders, back pay liabilities, and administrative fines.
For foreign companies operating in Vietnam, understanding the legal framework and procedures for lawful termination is essential to avoid disputes and maintain compliance.
Legal Framework for Termination of Employment
Under Vietnamese law, an employer may unilaterally terminate an employment contract only for specific, legally recognized reasons. The most common lawful grounds include:
1. Performance-related issues – The employee frequently fails to perform the work according to agreed standards, as confirmed by a proper performance evaluation process.
2. Health reasons – The employee remains unfit for work after treatment for a prescribed period (12 consecutive months for indefinite contracts, six months for fixed-term contracts).
3. Natural expiration of a fixed-term contract.
4. Organizational restructuring or technological change – The enterprise must prove redundancy due to restructuring, mergers, or economic difficulties.
5. Serious violations of internal labor regulations – Such as theft, fraud, or disclosure of business secrets, after proper disciplinary proceedings.
6. Absence without justification – The employee is absent from work for five consecutive working days without proper reason.
Employers cannot terminate employees due to reasons such as pregnancy, maternity leave, or while on sick leave, except under very limited circumstances provided by law.
Notice Period Requirements
Employers must give employees advance notice before termination. The required notice period depends on the contract type:
• 45 days for indefinite-term contracts.
• 30 days for fixed-term contracts (12–36 months).
• 3 working days for seasonal or task-based contracts (under 12 months).
Failure to provide proper notice can render the termination unlawful, even if the reason itself is valid.
Termination Procedure
To legally terminate an employee, companies must follow a structured process:
a) Step 1: Review the contract and Internal Labor Regulations
Confirm that the reason for termination is lawful and supported by your company’s Internal Labor Regulations (ILRs), which must be registered with the Department of Labour, Invalids and Social Affairs (DOLISA).
b) Step 2: File the documentation
Collect and maintain evidence supporting the termination such as performance appraisals, written warnings, or attendance reports. Proper documentation is critical in case of a labor inspection or dispute.
c) Step 3: Provide written notice
Deliver the termination notice in writing, signed by the legal representative or authorized person. The notice should clearly state:
• The reason for termination.
• The effective termination date.
• The applicable notice period.
d) Step 4: Conduct a meeting (in case of disciplinary termination)
For disciplinary dismissals, employers must organize a disciplinary meeting attended by:
• The employee and their representative (if applicable).
• The company’s trade union representative.
• Relevant management members.
Meeting minutes must be recorded, signed by all participants, and kept on file.
e) Step 5: Settle final obligations
Within 14 days from the termination date, the employer must:
• Pay all outstanding salary and allowances.
• Compensate unused annual leave days.
• Return social insurance books and personal documents.
• Issue a termination certificate confirming the employee’s service period.
Delays or failure to complete these steps may result in penalties or administrative sanctions.
Compensation and Severance Pay
Depending on the reason for termination, the employer may owe the employee certain benefits:
• Severance allowance:
Employees who have worked 12 months or more are entitled to half a month’s salary per year of service, excluding the period already covered by unemployment insurance.
• Job-loss allowance:
If termination results from organizational restructuring or economic reasons, the employee is entitled to one month’s salary per year of service, with a minimum of two months’ salary.
• Compensation for unlawful termination:
If an employer unlawfully terminates a contract, they may be required to reinstate the employee and pay back wages from the date of dismissal to reinstatement, plus at least two months’ salary as compensation.
Common Mistakes Employers Make
Foreign employers often face compliance challenges due to misunderstandings of Vietnam’s labor regulation. Some common mistakes when terminating employees in Vietnam include:
• Failing to document performance issues before dismissal
• Terminating without registered internal regulations
• Not observing required notice periods
• Conducting disciplinary actions improperly, such as skipping union involvement
• Overlooking post-termination obligations like social insurance finalization
Such procedural missteps can lead to employee complaints to labor authorities or courts, resulting in financial and reputational damage.
Best Practices for Lawful Termination of Employment
To minimize risks, employers should:
1. Develop clear HR policies and ensure they are registered with DOLISA.
2. Maintain detailed employee records (performance evaluations, warnings, attendance).
3. Train HR personnel on the correct disciplinary and termination process.
4. Seek legal advice before proceeding with any complex or sensitive termination.
5. Communicate professionally with employees to preserve goodwill and avoid disputes.
Proper preparation and documentation can help employers navigate Vietnam’s strict labor environment confidently and compliantly.
Terminating an employee in Vietnam is a legal process, not a simple notice alone. Every step – from establishing a lawful reason to following the correct settlement procedures – must align with Vietnam’s labor regulation. That’s why foreign companies operating in Vietnam should approach termination carefully, combining legal compliance with fair HR management.
With proper planning, transparent communication, and professional legal guidance, businesses can protect their interests while upholding Vietnam’s employee protection standards — ensuring a lawful, respectful, and smooth conclusion to any employment relationship. ATA Services Vietnam can be your reliable partner that can assist you to approach the employment termination carefully, combining legal compliance with fair HR management.
