Labour Restructuring in Vietnam: Legal Compliance Checklist for Businesses

In the current period of economic difficulty, many businesses are considering labour restructuring (or workforce restructuring), thereby reducing salary costs and conserving resources to overcome immediate challenges. However, when implementing restructuring, businesses must ensure that they comply with statutory regulations. Failure to do so may expose the business to severe liabilities.
When undertaking labour restructuring, businesses will primarily focus on reviewing and cutting down personnel across various departments.
Key Solutions for Handling Surplus Personnel

*Photo Description of the Article: Human Solution When Restructuring*

Personnel deemed surplus after the cuts will be handled through two main avenues:

Retraining and reassigning employees (NLĐ) to other positions/departments.
Terminating employment through the following forms:

Retirement.
Expiration of Fixed-Term Labour Contracts (HĐLĐ) and non-renewal.
Layoffs (under the status of job loss/redundancy).

Contents

Relevant Legal Documents:

The Labour Code 2019.
Decree No. 145/2020/ND-CP guiding the Labour Code on working conditions and labour relations.

Essential Steps for Labour Restructuring

The first step the business needs to take is to determine the scope of the restructuring, thereby identifying the number of employees affected.
After identifying the departments and the number of personnel requiring restructuring, the business must formulate a Labour Utilization Plan

Determining Personnel Arrangement:

How many employees will remain in their current positions (unaffected)? What are the criteria for selecting these employees (competency, experience, type of HĐLĐ, age, etc.)?
How many employees are surplus and what is the arrangement plan for them:

Those who can be retrained and transferred to another department.
Those who will retire (Is it possible to agree on a premature termination of the HĐLĐ earlier than the legal age?).
Those whose HĐLĐ will not be renewed upon expiration (When is the expiration date for each person?).
Those who must be laid off (involuntarily terminated).

Calculating Restructuring Costs:

The subsequent step is calculating the costs associated with implementing the labour arrangement plan:

Costs for employee retraining.
Costs for Severance Allowance (Trợ cấp thôi việc): Calculated at half a month’s salary for each year of employment without participating in Unemployment Insurance (BHTN), applicable to those who are not re-signed or who agree to a voluntary resignation/termination.
Costs for Job Loss Allowance (Trợ cấp mất việc): Calculated at one month’s salary for each year of employment without participating in BHTN, but must be at least two months’ salary, applicable to those who are laid off (redundant).
Other support costs for employees (if any).
Source of funding for these costs (owner’s capital, loans, asset sales, etc.)

Timeline and Communication:

Implementation timeline for the above tasks (when to implement training, when employees retire/resign/are laid off, payment timeframes, etc.).
The above information must be documented in the Labour Utilization Plan. This document must be discussed and agreed upon with the Grassroots Trade Union (Công đoàn cơ sở), and a dialogue must be held with the employees before the business issues the official decision.
The official Plan must be publicly announced to employees within 15 days from the date of approval and must be notified to the Provincial People’s Committee where the business operates at least 30 days in advance.
It is also essential to note that termination of employment for employees in this case must be notified to the employee at least 30 days in advance.

Important Considerations (Compliance & Dispute Resolution)

Businesses must retain all documentation related to the preparation and implementation of the Labour Utilization Plan to demonstrate that they have fulfilled their statutory responsibilities (minutes, photos related to meetings, opinion gathering, public disclosure of information, payment vouchers to employees, etc.).
During the process, conflicts arising from disagreements between the business and the employees are inevitable. At this point, both parties should remain calm and engage in dialogue, avoiding the escalation of conflicts that could lead to an impasse in negotiations. The Grassroots Trade Union, local Labour Confederation, and local labour authorities are entities that can assist the business in communicating with employees. If necessary, the business may seek legal assistance to advise, propagate, and explain legal provisions (regarding restructuring) to employees so they can understand and agree to cooperate with the business.
Should you have any legal inquiries regarding the above matters, please do not hesitate to Contact An Law Vietnam for consultation and support. Our company, with its team of experienced lawyers, is prepared to assist businesses in formulating a suitable plan, minimizing the risk of labour disputes with employees.
In necessary cases, An Law Vietnam is ready to represent the business in labour litigation at court, defending the lawful rights and interests of the business before the judiciary.
Contact An Law Vietnam
📞 Phone: (+84) 986 995 543
📧 Email: info@anlawvietnam.com
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