Distinguish Severance Allowance – Redundancy allowances – Unemployment allowances (of Social Insurance)

When terminating a labor contract, employees will be entitled to allowances to ensure life necessities while applying for new jobs. Currently, there are 3 types of allowances for Employers that have to end labor contracts:

Relevant legal documents:

1. Labor Law 2019.
2. Law on employment 2013.

	Severance allowances	Redundancy Allowance	Unemployment allowances
Employer will be entitled when	Employees only receive this allowance when resigning under normal conditions.	Employees only receive this allowance when they LOSE a JOB (because of restructuring: merger and acquisition, restructuring or technology change, or financial problems)	Employees only receive this allowance when they participate in Unemployment allowances – When Employee has to resign (including job-loss situations)
Pay entity	Employer – Business	Employer – Business	Social Insurance Institution
Condition	The employee has worked at least 12 months for employers	The employee has worked at least 12 months for employers	The employee has participated in Social Insurance for at least 12 months within 24 months before resigning. In the immediate month before resigning, employees must participate in unemployment allowances.
Exclusion	The employee receives a pension, the employee voluntarily resigns, the employee is fired, the foreign employee is deported, and the Work Permit expires.		Employee unilaterally terminates Labor contract not in compliance with the law. Employees receive a pension and monthly working capacity loss allowance.
Level of entitlement	For every working year, that Employer participating in Social Insurance will be entitled to half of the average 6 months that come immediately before resigning.	For every working year, the Employer participating in Social Insurance will be entitled to half of the average 6 months that comes immediately before resigning. Minimum is 2 month-salary	The employee must participate in Unemployment Insurance from 12 to 36 months: will be entitled to 3 months of Unemployment Insurance, each month accounting for 60% of the monthly salary that is participating in Unemployment Insurance in 6 immediate months. Following this, for every 12 months in Unemployment Insurance then it will be increased one more month. 12 months allowance is the maximum entitlement.

Remarks:

When an employee resigns, Employers must pay Severance OR Redundancy allowances (only one).

To be able to receive Unemployment Allowances, the Employee must participate in Unemployment Insurance in the immediate month before resigning. Following this interpretation, should an employee have unpaid leave for a long period of time in the last working month, then that employee shall not qualify (since he/she did not participate in Unemployment Insurance last month). In this situation, it is recommended that employees negotiate to delay the responsibility of conducting a Labor Contract instead of unpaid leave – so that employees will be entitled to receive Unemployment insurance.
Should you have any questions regarding the above allowances, please don’t hesitate to contact An Luat Viet Nam for support and advice.