Sunday, December 7, 2014

Obligation for payment of severance allowance

Under the regime of unemployment insurance, the employer is not subject to this regime if the employer has less than 10 employees. Many employers who has never contributed to unemployment insurance regime for any of its’ employee question whether they still have to have to pay severance for its’ employees or not?
According to Article 48 of the Labor Code, the employer is responsible to pay a severance allowance to any employee who has regularly worked for a full twelve months or more and is a subject as specified under the Article 36 of Labor Code. The severance allowance shall be one half of one month’s wage for each year of employment.
We assume that the termination of labor contract of the employee is legal and under the circumstances of Article 36 (i.e. expiry of labor contract; the job completion in accordance with labor contract; Mutual agreement of contract termination; the employee sentenced to a jail term or to the death penalty, or prohibited from performing the job under the labor contract; the employee’s death or by court declaration of having lost legal capacity for civil acts, missing or being deceased; the employer’s death or cease to operation; the employee’s legally unilateral termination of labor contract; the employer’s legally unilateral termination of labor contract):
For responding to the above question, we must divide the case into some below scenarios:
1.                 For any employee who has been working for less than 12 months, those employees will not be subject of severance allowance.
2.                 For the employees who have been working for a full twelve months or more, the employer has to pay them the severance allowance.
The calculation formulation of severance allowance is as follows (Article 48.2 of the Labor Code): “The length of a working period for calculating a severance allowance on retrenchment means the total working time the employee actually worked for the employer minus the period for which the employee received unemployment benefits in accordance with the Law on Social Insurance and the working period for which the employer has already paid a severance allowance”
With the above calculation formulation and in this case that the employer has not paid unemployment insurance for its’ employee, the employer will mostly have to pay severance allowance for the total working time its’ employee actually have worked.
In case that the employee unilaterally terminates indefinite-term labor contract (i.e. – by giving 45 day notice of termination), likely he/she is subject to severance allowance because it is under the circumstance of Article 36.9 of Labor Code.
According to Article 36.9 of Labor Code, the employee unilaterally terminates the labor contract in accordance with Article 37 of Labor Code which regulates that the employee working pursuant to an indefinite term labor contract has the right to unilaterally terminate the contract but must provide the employer with at least 45 days’ advance notice, except for the case of female employee who is pregnant and has a certificate from a competent medical consulting or treating establishment certifying that continued employment would adversely affect her foetus. In such case the female employee must give advance notice to the employer depending on the period determined by the medical consulting or treating establishment.
With respect to the regime of foreign employee in this case, currently, the labor laws of Vietnam have not yet covered all aspects arising from employment relationship, thus it is ambiguous whether the foreign employee is subject to severance allowance or not. Under the laws of Vietnam, the foreign employee is only subject to the medical insurance and not subject to social insurance.
I opine that the foreign employee is subject to severance allowance since the foreign employee working in Vietnam is one of the applicable entities of Labor Code. This is unfair when the foreign employee is sick or in pregnant or maternity but the employer does not agree to give him/her any allowance.