Guide To Restructuring A Cross-Border Workforce 2026 – Vietnam

Reduction in workforce

1. Is there a concept of redundancy - based on a shortage of work or other economic reasons - as a justified reason to dismiss employees in your jurisdiction? If so, how is it defined?

Employers in Vietnam are permitted to terminate labour contracts on the grounds of redundancy in the following cases:¹

• Technological or organisational changes (at the level of the employer), which include:
  • changes in organisational structure or personnel rearrangement;
  • changes in processes, technology, or equipment associated with the employer's business lines; and
  • changes in products or product structure.

In such circumstances, if the employer has a new vacancy, it must prioritise retraining and rehiring the affected employees for continuing employment.²

• Economic difficulties, which include economic crisis and economic depression, and changes in law and state policies due to restructuring of the economy or implementing international commitments.
• Division, demerger, consolidation, or merger of enterprises; sale, lease, or conversion of enterprise; transfer of ownership or right of use with regard to the assets of the enterprise (at the level of the employer) (collectively referred to as restructuring transactions).

2. In brief, what is the required process for making someone redundant?

In general, the compulsory procedures for redundancy are as follows:

• Employer's internal approval of the technological or organisational changes or restructuring transactions (if applicable)

Subject to the company's charter (also known as "the articles of association" in other jurisdictions) and the applicable laws on enterprises, the relevant management body of the employer will issue a resolution or decision regarding technological or organisational changes, or restructuring transactions to commence the relevant process, including formulation of a labour usage plan (if applicable).

If the employer is working in Vietnam with the status of a representative office of a foreign company or organisation, the decision or resolution on the reorganisation or restructuring should be issued by the parent company or parent organisation of the Vietnam-based representative office.

• Formulation of labour usage plan³

If the technological or organisational changes, economic difficulties, or restructuring transactions impact more than one employee's job, the employer must formulate and implement a "labour usage plan" after consultation with any grassroots employees' representative organisations (eg, grassroots trade union) and conducting a "dialogue in the workplace" session. A labour usage plan should include, among other contents, the following information:

• a list of employees to be retained, retrained for further employment, and working on a part-time basis;
• a list of employees to retire;
• a list of employees whose employment contracts have to be terminated;
• rights and obligations of the employer, employee, and relevant parties regarding implementation of the labour usage plan; and
• financial resources and methods to implement the plan.⁴
• Dialogue in the workplace in relation to the redundancy due to technological or organisational changes, or economic difficulties, and the labour usage plan⁵

In general, the requirements for dialogue in the workplace session (e.g, participants, time and place) are determined by the employer's democracy in the workplace policy.⁶ However, if the employer has not yet formulated its democracy in the workplace policy, the dialogue in the workplace session can be implemented in accordance with the relevant regulations. Particularly, in order to conduct the dialogue in the workplace session, the employer must send a document specifying the issues subject to discussion (e.g, the reason for the layoff and the draft labour usage plan) to the employees' dialogue representatives. The employees' dialogue representatives will then collect the opinions of the employees they represent on those issues and compile them into a document for the employer. Based on the employees' opinions, the employer will then hold a "dialogue in the workplace" session to discuss the redundancies and the formulation of a labour usage plan, and written minutes of the meeting are recorded.⁷The dialogue in the workplace session should only take place if at least 70% of the employees' dialogue representatives participate.⁸

Within three working days following the dialogue in the workplace session, the employer is required to announce the main contents of the dialogue session at the workplace. Within 15 days of being approved, the employer is required to announce the labour usage plan to its employees. The employees' representative organisation or the employees' dialogue representative group will disseminate the contents of these to their members.

• Notice of termination of employment⁹

The employer must provide both the provincial People's Committee and the affected employees with an advance notice on termination of employment at least 30 days prior to the date of the termination.

• Settlement of rights, benefits and obligations of the impacted employees¹⁰

Within 30 days of the termination date of the labour contract, the employer is required to settle all of the payments and benefits of the employees, including:

• unpaid salary;
• job-loss allowance equal to one month's wages for each year of employment, with a minimum of two months' wages, only applicable to the employees who have worked for the employer for at least 12 full months. The period for calculation of job-loss allowance is the total period during which the employee actually worked for the employer minus the period during which the employee participated in the statescheme compulsory unemployment insurance. However, a minimum of two months' salary should be paid in any case, since the regulations are ambiguous on this minimum requirement. The salary for calculating the job-loss allowance payment is the average salary under the employment contract for the six months immediately preceding termination of the employment contract.¹¹ Periods of one to six months are rounded to half a year, while periods over six months are rounded to a full year;
• compensation salary for unused annual leave;¹² and
• other employee benefits pursuant to the labour usage plan, a valid collective labour agreement (CLA)¹³ and the labour contract (if any).

The employer also needs to:

• finalise compulsory insurance contributions with the social insurance body;
• finalise personal income tax with the taxation authority;
• de-register the employee from the monthly payroll;
• stop paying personal income tax and insurance premiums; and
• verify the social insurance book for the employee (if any) and return it to them.

The employer also needs to issue a decision on the termination of the labour contract and provide the employee with one original executed decision for the employee to claim unemployment insurance allowance.

Footnotes

1 Article 43 of the Labour Code No. 45/2019/QH14 passed by the National Assembly on 20 November 2019 (the Labour Code).

2 Article 42.3 of the Labour Code.

3 Articles 42.3 and 42.4 of the Labour Code.

4 Article 44.1 of the Labour Code.

5 Article 63.2(c) of the Labour Code, Article 41 of Decree No. 145/2020/ND-CP of the Government dated 14 December 2020 on elaboration of some articles of the Labour Code on working conditions and labour relations (Decree 145).

6 Article 41.1(d) of Decree 145.

7 Article 41 of Decree 145

8 Article 41.1(dd) of Decree 145.

9 Article 42.6 of the Labour Code.

10 Article 48 of the Labour Code

11 Article 47 of the Labour Code.

12 Article 113.3 of the Labour Code.

13 Under Vietnamese labour laws, a CLA is a written agreement between the employer and collective employees. The contents of a CLA must not be contrary to the law and should have provisions that are more favourable than the statutory regulations. The CLA's term is up to three years. It is worth noting that it is not compulsory for an employer to issue a CLA. However, if the employees so request, then the employer must work with the employees to negotiate and enter into a CLA. Once the CLA is executed, the provisions of the CLA will be applicable to all of the employees and prevail over other similar internal regulations of the employer.

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Originally published by International Employment Lawyer

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.