What Severance Pay Rules Must Employers Follow in Vietnam?

Which Employees Qualify for Severance Pay?

• Employees with at least 12 months of continuous service whose contracts end lawfully but not due to serious misconduct or full pension entitlement.
• Employees whose fixed-term contracts expire and are not renewed, provided they meet the minimum service requirement.
• Employees unilaterally terminated by the employer for lawful reasons such as restructuring, technological changes, or economic reasons.
• Employees who resign with proper notice and a legitimate reason as allowed under the Labor Code.
• Employees whose employment ends by mutual agreement where the parties do not clearly waive statutory severance rights.
• Employees whose prior service not already covered by unemployment insurance is included when calculating severance entitlement.

What Are the Legal Timelines for Paying Severance?

In Vietnam, you should aim to pay severance at the same time you complete final salary and benefits settlement. The Labor Code requires all final payments, including severance, to be made within 14 working days from the termination date in most cases. This period can be extended up to 30 days only in limited situations, such as business relocation, asset restructuring, or natural disasters. To stay safe, your company should document the calculation, obtain written acknowledgment from the employee, and process payment via traceable bank transfer. Aligning severance payment with your standard offboarding checklist helps avoid disputes and inspection issues.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly or on time in Vietnam, you risk administrative fines, back payments, and potential labor disputes. Labor inspectors can review your termination files, and employees may file complaints or lawsuits seeking unpaid amounts plus interest. Non-compliance can also affect your company’s reputation with authorities and employees.

• Administrative fines can be imposed per violation, scaled to the unpaid amount and company size.
• You may be ordered to pay full outstanding severance plus interest for late payment.
• Employees can file complaints with labor authorities or bring civil claims in court.
• Serious or repeated breaches can trigger broader inspections of your HR and payroll practices.
• Non-compliance can damage your employer brand and complicate future terminations.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as a provider offering services via https://www.playroll.com/employer-of-record does not remove the need to follow Vietnam’s severance rules. In most EOR models, the EOR is the legal employer on paper and is responsible for calculating and paying statutory severance. However, your company typically funds these costs through service fees or pass-through charges, so you still bear the economic burden. You should ensure your EOR contract clearly allocates liability for severance, disputes, and penalties. Regularly reviewing local policies and termination decisions with the EOR helps prevent surprises and misalignment with Vietnamese law.

Be 100 Percent Compliant in Offering Severance with Playroll

Managing severance in Vietnam can be tricky, especially when you are juggling different contract types, service periods, and unemployment insurance records. Playroll helps your team interpret the Labor Code, track employee tenure, and distinguish between periods that count for severance and those covered by unemployment insurance. That means you can make termination decisions with clear cost estimates and fewer legal risks.

When you hire through Playroll’s global platform, severance calculations and timelines are built into the offboarding workflow. Our local experts flag when severance is due, calculate the correct formula, and coordinate compliant payment and documentation. Your managers stay focused on business decisions, while Playroll helps keep your Vietnam exits clean, timely, and fully documented for any future audit.