How severance pay is calculated in Vietnam
1. Formula (Labour Code 2019, Articles 46 and 47)
Severance = Qualifying years × ½ × Average salary of last 6 months
Job-loss allowance = Qualifying years × 1 × Average salary (minimum 2 months)
2. Qualifying period and rounding
- Qualifying period = total time actually worked for the employer − time covered by unemployment insurance.
- Leftover months of 6 or fewer count as half a year; more than 6 months count as a full year (Decree 145/2020, Article 8).
- The employer must pay within 14 working days of the contract ending (up to 30 days in special cases).
3. Example
An employee worked 5 years 4 months, of which 4 years were covered by unemployment insurance, with an average salary of 12,000,000 ₫.
- Qualifying period: 5y 4m − 4y = 1 year 4 months → rounded to 1.5 years.
- Severance: 1.5 × ½ × 12,000,000 = 9,000,000 ₫.
Frequently asked questions
Who is entitled to severance pay in Vietnam?
Employees who have worked regularly for the employer for 12 months or more and whose contract ends lawfully (for example on expiry, by agreement or by proper resignation) receive severance allowance. It is not paid when the employee reaches retirement age with a pension or is dismissed for disciplinary reasons.
What is the difference between severance and job-loss allowance?
Severance allowance (Article 46) is half a month's salary per year of service. Job-loss allowance (Article 47) applies when the employer cuts jobs because of restructuring, technological change or economic reasons, and is one month's salary per year, with a minimum of 2 months.
Why is unemployment insurance time deducted?
Periods when the employer paid unemployment insurance for you are excluded, because that protection replaces severance for those years. In practice, severance mostly covers time before 2009 or periods not covered by unemployment insurance, including many foreign employees.
Is severance pay taxable?
Severance and job-loss allowances paid in line with the Labour Code are exempt from personal income tax. Extra amounts above the legal minimum are taxable.