Understanding Labor Contract Termination and Legal Procedures

Terminating a labor contract in accordance with the law brings many benefits to employees and employers. So what is labor contract termination? How to legally complete labour contract termination? All will be shared in detail by Faro Vietnam in the article below.

1. What is Labor Contract Termination?

Terminating a labor contract involves ending the employment relationship between an employee and an employer in cases prescribed by law. There are various reasons for terminating a labor contract, including contract expiration, mutual agreement, unilateral termination by one party, dismissal, layoffs, retirement, or other objective factors. When concluding labor contracts, both parties must adhere to the notice period specified in the 2019 Labor Code.

1.1 Termination Cases According to Regulations

Pursuant to Article 34 of the 2019 Labor Code, there are 13 termination cases for terminating an employee in Vietnam. These include six cases where termination is initiated by the employee, five cases where termination is initiated by the employer, and two cases agreed upon by both parties or due to specific objective conditions. The termination cases are as follows:

• Expiry of the labor contract, unless the employee holds a position on an organization's employee representative board.
• Completion of the work agreed upon in the labor contract.
• Mutual agreement between both parties to terminate the contract.
• The employee is sentenced to imprisonment without parole, the death penalty, or is prohibited from engaging in work specified in the labor contract due to a legally effective court judgment.
• Deportation of foreign employees in Vietnam based on legally effective court judgments or decisions by competent state agencies.
• The employee's death or declaration by the court as incapacitated, missing, or deceased.
• Death, loss of civil act capacity, disappearance, or declaration of death by the court of an individual employer.
• Disciplinary dismissal of the employee.
• Unilateral termination of the labor contract by the employee.
• Unilateral termination of the labor contract by the employer.
• Dismissal of the employee by the employer.
• Expiry of work permits for foreign employees as per Article 156 of the 2019 Labor Code.
• Failure to meet the probationary period as stated in the labor contract or cancellation of the probation agreement by either party.

Terminating an Employee in Vietnam

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1.2 Notice Period Regulations Prior to Termination Of Labor Contract

The notice period required before terminating a labor contract is connected to the rights of both employees and employers. The 2019 Labor Code, specifically in Article 35 and Article 36, outlines that the notice period depends on the type of contract and the cause of Termination Of Labor Contract. The specifics are as follows:

• For indefinite-term labor contracts, a notice of at least 45 days is required.
• For labor contracts with a fixed term between 12 and less than 36 months, a notice of at least 30 days is necessary.
• Labor contracts with a term of fewer than 12 months necessitate a notice period of at least 3 days.
• Some specific industries, occupations, and jobs follow different notice periods specified in Article 7, Decree No. 145/2020/ND-CP issued by the Government. In these cases, the notice periods are as follows:
• At least 120 days for an indefinite labor contract or a labor contract with a term of 12 months or more.
• At least 1/4 of the labor contract term for contracts with a term of less than 12 months.
• Termination during the probationary period does not require prior notice.

2. What is the legal way to terminate a labor contract?

Pursuant to the regulations stated above. Currently, there are many ways for employees or employers to legally terminate labor contracts such as:

1) Termination of labor contract in the following cases: due to expiration, completion of work, conviction, deportation, loss of capacity, disappearance or death.
2) Agreement to terminate the labor contract between both parties.
3) Unilaterally terminate the labor contract of one party, but must comply with the regulations on notice period for the other party.
4) Termination of labor contracts due to changes in structure, technology, economic reasons or due to division, separation, consolidation or merger of enterprises.
5) Terminate the labor contract during the probationary period.
 

Labour contract termination in Vietnam 2024

3. What are the benefits of legally terminating a contract?

If the labor contract is terminated legally, the employee and employer will have the following benefits:
 

• Employees will have their legitimate rights protected, such as severance pay, job loss benefits, social insurance, health insurance, unemployment insurance.... Employees will also not be responsible for compensating damages to the employer.
• The employer will not be responsible for compensating damages to the employee, and will not be subject to lawsuits or administrative sanctions for violating labor laws. Employers will also maintain good reputation and relationships with employees.
   

Additionally, legal labor contract terminations play a pivotal role in fostering labor market development. They provide employees and employers with opportunities to discover suitable job matches that align with their needs and capabilities. This, in turn, bolsters productivity and labor quality, ultimately contributing to the socio-economic development of the country.

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