Employee Termination in Vietnam: Legal Grounds and Compliance Risks for Foreign Employers

Vietnam Labor Code 2019 Article 36 limits employer-initiated termination to 7 specific grounds—use the wrong one, skip a procedural step, or miscalculate notice, and the dismissal becomes unlawful under Article 41. Unlawful termination triggers mandatory reinstatement, full back wages for the entire dispute period, and minimum 2 months’ salary compensation. For a mid-level manager earning VND 30 million (~USD 1,200) monthly, a typical 6-month dispute creates VND 240 million (~USD 9,600) in combined exposure.

Notice periods range from 3 to 120 days depending on contract type. Procedural errors—missing documentation, skipped disciplinary hearings, wrong termination grounds—convert even substantively valid terminations into unlawful dismissals. For FDI employers, these disputes frequently trigger broader labor inspections examining your entire payroll and HR compliance.

The 7 lawful grounds, correct notice calculations, severance formulas, and post-termination payment deadlines all require precise execution. Get any one wrong, and you’re exposed.

The 7 Legal Termination Grounds Under Article 36

Employers can unilaterally terminate on exactly 7 grounds under Article 36. Each demands specific evidence and procedure—and each has a common mistake that converts a valid termination into an unlawful one.

Ground 1: Poor Performance (Article 36.1.a)

Frequent failure to perform duties as defined in the labor contract. You need a documented pattern across at least two consecutive evaluation periods with written warnings between each. One bad quarter doesn’t qualify. The common mistake? Terminating after a single poor evaluation without prior written warnings on file.

Ground 2: Illness or Accident (Article 36.1.b)

Employee unable to work after treatment for 12 months (indefinite-term contracts), 6 months (fixed-term 12–36 months), or half the contract duration (contracts under 12 months). You need medical certificates from a competent health institution confirming the treatment period has expired. Terminating before the treatment period runs out makes the dismissal unlawful—regardless of how clear the medical situation seems.

Ground 3: Force Majeure (Article 36.1.c)

Natural disaster, fire, major epidemic, or government-mandated relocation making contract performance impossible. This requires government emergency declarations or official orders. Don’t confuse this with general economic difficulties—those follow restructuring procedures under Articles 42–44 with labor usage plans and Provincial People’s Committee (PPC) notification.

Ground 4: Post-Suspension Absence (Article 36.1.d)

Employee fails to return within 15 days after suspension ends. Suspension covers detention, military service, pregnancy leave, and similar situations. Document the suspension period and your contact attempts before terminating.

Ground 5: Unauthorized Absence (Article 36.1.e)

Five or more consecutive working days absent without a valid reason. No advance notice required—termination is immediate. But document your contact attempts and written requests for explanation. Without that paper trail, you can’t prove the absence was genuinely unauthorized.

Ground 6: Retirement Age (Article 36.1.dd)

Employee reaches retirement age: 61 years 6 months (male) or 57 years (female) in 2026, increasing gradually to 62/60 by 2028/2035 under the Law on Social Insurance. Parties can agree to continue employment beyond retirement age.

Ground 7: Untruthful Recruitment Information (Article 36.1.g)

False information provided during recruitment that materially affected the hiring decision. You must prove the falsification was material—a minor inaccuracy on an application form won’t hold up.

Restructuring and technology change terminations don’t fall under Article 36. Those follow separate procedures under Articles 42–44, requiring employee dialogue, labor usage plans, and PPC notification for multiple terminations. Using Article 36 grounds for what’s actually a restructuring is one of the fastest ways to an unlawful termination ruling.

Termination is one stage of the broader employment lifecycle—for contract structuring, workplace compliance, and HR obligations from hiring through separation, see Vietnam employment law and HR compliance for FDI companies.

Notice Period Requirements by Contract Type

Wrong notice period calculation makes the entire termination unlawful—even when your grounds are solid. Article 36.2 and Decree 145/2020/NĐ-CP Article 7 set minimum notice periods based on contract type:

Indefinite-term contracts: 45 days minimum. Special industries including aviation and certain manufacturing sectors require up to 120 days under Decree 145/2020/NĐ-CP—verify your sector classification before issuing notice.

Fixed-term contracts (12–36 months): 30 days minimum.

Seasonal or job-specific contracts (under 12 months): 3 working days minimum.

Exception: Unauthorized absence (Ground 5) requires no advance notice. Termination is immediate upon documentation.

The notice period starts when you deliver written notice to the employee. Not when you decide internally to terminate, and not the date on the letter. Backdating notice letters is easily detected during labor inspections and creates separate fraud liability.

Notice periods depend on contract classification—auto-conversion from fixed-term to indefinite-term changes your notice obligation from 30 to 45 days. Review Vietnam labor contract types, auto-conversion rules, and probation compliance to confirm current contract status before issuing notice.

⚠️ COMPLIANCE ALERT: Employment Law 2025 (effective January 1, 2026) expands unemployment insurance coverage but does not alter notice period requirements. Verify severance calculation adjustments related to UI participation periods.

Calculating Severance: The 0.5-Month Formula

Severance pays at 0.5 months’ salary for each year of service under Article 46 of the Labor Code 2019. “Salary” means the average of the most recent 6 consecutive months before termination—including contractual allowances, not just basic salary. Calculating on basic salary alone is the single most common underpayment error that triggers disputes.

The average monthly salary used for severance must meet regional minimum floors—confirm current rates in Vietnam’s 2026 minimum wage rates and employer compliance impact.

The calculation excludes periods where the employee participated in unemployment insurance (post-2009 for formal sector employees). Calculate total service years, subtract years covered by unemployment insurance contributions, then apply the 0.5-month formula to the remaining years.

Example: Employee joined in 2005, started unemployment insurance contributions on January 1, 2009, and is terminated in 2026. Total service: 21 years. UI-covered service: 17 years (2009–2026). Severance-eligible service: 21 − 17 = 4 years. Severance = 4 × 0.5 = 2 months’ average salary.

Employees with less than 12 months’ service receive no severance unless the labor contract specifies otherwise. Severance is paid by the employer—not by the social insurance agency or unemployment insurance fund.

Document the full calculation in your termination decision. Transparent math prevents disputes better than anything else.

Severance calculates on average monthly salary including contractual allowances—confirm which components count in employer payroll costs and gross-to-net calculation guide to avoid underpayment disputes.

Post-Termination Payment Obligations

You have 14 days from the termination effective date to complete all final payments under Article 48.1 of the Labor Code 2019. This deadline is strict—extensions only apply in exceptional circumstances and must not exceed 30 additional days.

Final payment includes unpaid salary through the last working day, unused annual leave converted to cash (Article 113), prorated 13th-month salary if your company provides it, and the severance allowance calculated above.

Simultaneously, return the employee’s social insurance book with updated contribution records (Article 48.3) and complete tax finalization—issuing the final tax statement showing total income and tax withheld for the year.

Returning the social insurance book with updated contribution records is mandatory within 14 days—for contribution reconciliation and expat refund procedures, see Vietnam social insurance 2026 rates and VSS compliance framework.

Foreign employees departing after termination must finalize PIT within 45 days—see personal income tax finalization under the 183-day residency rules for departure clearance procedures.

For restructuring terminations affecting multiple employees, PPC notification is mandatory. You can’t finalize terminations until the PPC review period expires—typically 30+ days. Missing this notification invalidates all terminations and triggers labor inspection scrutiny of your broader HR compliance.

Unlawful Termination: What It Actually Costs

Article 41 mandates three consequences when a court or labor authority rules a termination unlawful:

Reinstatement: The employee returns to their exact former position with full seniority and benefits restored.

Back wages: Full salary for the entire period from termination date to reinstatement date—every month the dispute drags on adds to your liability.

Compensation: Minimum 2 months’ salary. Courts award more for egregious procedural violations.

The math gets expensive fast. A mid-level manager at VND 30 million (~USD 1,200) monthly, with a 6-month dispute: VND 180 million (~USD 7,200) in back wages plus VND 60 million (~USD 2,400) compensation. That’s VND 240 million (~USD 9,600) minimum—before legal costs.

The employee can refuse reinstatement. In that case, they receive the severance allowance plus the 2 months’ compensation. But that’s their choice, not yours.

For FDI employers, unlawful termination disputes frequently trigger broader labor inspections examining your entire payroll, social insurance contributions, and HR documentation. The individual case becomes a gateway to company-wide compliance exposure.

Unlawful termination disputes frequently escalate to labor arbitration with reinstatement orders—understand the full resolution process in Vietnam labor dispute resolution and employer compliance procedures.

The 3 Procedural Errors That Convert Lawful to Unlawful

Three specific mistakes account for most unlawful termination rulings against FDI employers. Each one converts an otherwise valid termination into an automatic loss.

Error 1: Skipping the Disciplinary Hearing

Dismissal for misconduct requires a formal disciplinary hearing with the employee’s representative present. Skip this hearing—even when misconduct is documented and severe—and the termination is automatically unlawful. The hearing must be documented in writing with signatures from all participants. No shortcuts.

Error 2: Insufficient Notice Period

Giving 30 days’ notice on an indefinite-term contract when 45 days is required under Article 36.2 makes the entire termination unlawful. The notice period begins on delivery of written notice, not your internal decision date. One miscounted day can invalidate the whole process.

Error 3: Using the Wrong Termination Ground

Each Article 36 ground has specific evidence requirements. Use “poor performance” when the real issue is illness, and you can’t meet the evidentiary threshold for either ground. The termination fails on both.

Real-world scenario: Employer terminates for “poor performance” but the employee has medical documentation of ongoing treatment. Labor inspector reclassifies as illness/accident ground, finds the treatment period hasn’t expired, and rules the termination unlawful. Total exposure: VND 180–300 million (~USD 7,200–12,000) for a mid-level position.

Mutual Agreement Terminations: When They Backfire

Mutual agreement under Article 34 looks safer than unilateral termination. It isn’t always. Employees frequently claim later they were coerced into signing—and labor inspectors scrutinize these agreements closely when the employee received minimal severance or signed under threat of misconduct dismissal.

If the employee proves pressure or lack of genuine consent, the agreement is void. You face reinstatement plus full back pay as if the termination never happened—regardless of what they initially signed.

Terminating union representatives requires additional procedural safeguards under the 2024 Trade Union Law—see trade union fee obligations and prohibited employer conduct rules for protected-category compliance.

⚠️ COMPLIANCE ALERT: “Mutual agreement termination” often masks unlawful pressure. Employees can later claim coercion, void the agreement, and force reinstatement with back pay regardless of what they initially signed.

When to Engage Professional Support

Engage qualified Vietnamese employment counsel before any misconduct dismissal requiring disciplinary procedure, any termination for illness or accident where medical evidence thresholds are technical, any force majeure claim where distinguishing from general restructuring is critical, any restructuring affecting multiple employees where PPC notification is mandatory, and any termination of employees with 5+ years’ tenure where severance calculations and inspection scrutiny increase.

Vietnamese labor law undergoes frequent updates. This guide reflects regulations current as of January 2026—verify requirements before acting on any termination decision.

Professional Support: Indochina Link Vietnam provides termination compliance support—from documentation review to severance calculation to labor authority liaison. Questions about termination requirements for your situation? We walk FDI companies through compliance requirements daily.

Legal Disclaimer: This guide provides general information about Vietnamese labor law compliance and does not constitute legal advice. Employment termination decisions carry significant legal and financial consequences. Consult qualified Vietnamese employment counsel before initiating any termination to ensure compliance with current regulations and your specific circumstances.