Terminating a Local Labor Contract in Vietnam: What Foreign Employers Must Know Before They Act
You've built a team in Vietnam, invested in operations, and now face the difficult decision of ending an employment relationship. For foreign employers, this moment carries unique risks: Vietnam's Labor Code 2019 is not an at-will system. Employers cannot simply terminate a contract without a statutory ground, proper notice, and a documented procedure. A single procedural misstep—missing a dialogue meeting, skipping the written notice, or miscalculating severance—can turn a lawful termination into an unlawful one, exposing your company to reinstatement orders, back-pay claims, and administrative penalties.
This guide walks you through the legal grounds, notice requirements, documentation steps, and severance obligations under the Labor Code 2019 (Law No. 45/2019/QH14), with specific attention to foreign employees whose contracts are tied to work permits. Every rule below is drawn directly from the official legal framework. Where the source data does not specify a fee or form number, you will be instructed to verify locally rather than guess.
What Are the Legal Grounds for Terminating a Labor Contract in Vietnam?
Article 34 of the Labor Code 2019 lists 13 specific cases in which a labor contract may be lawfully terminated. For foreign employers, the most commonly applicable grounds include:
- Expiry of the labor contract term (the most straightforward ground, provided no renewal obligations apply).
- Completion of the work specified in the contract (e.g., a fixed project or assignment).
- Mutual agreement between employer and employee to terminate early.
- The employee repeatedly fails to perform their duties according to the employer's established assessment criteria (Article 36.1(a)).
- The employee is ill or injured and has been treated for 12 consecutive months without recovery (Article 36.1(b)).
- Economic reasons, restructuring, or technological change requiring workforce reduction (Article 34.11).
- The foreign employee's work permit expires (Article 34.12).
For foreign employees specifically, the work permit expiration ground is critical. Under the Labor Code 2019, the term of a foreign employee's labor contract may not exceed the duration of the granted work permit. A work permit is valid for a maximum of 2 years and may be renewed only once. When the work permit expires—and is not renewed in time—the labor contract terminates by operation of law under Article 34.12.
Required Notice Periods: How Far in Advance Must You Notify?
When terminating on grounds other than mutual agreement or contract expiry, the employer must provide advance notice. The required notice period depends on the type of labor contract:
| Contract Type | Minimum Notice Period |
|---|---|
| Indefinite-term contract | 45 days |
| Fixed-term contract (12 to 36 months) | 30 days |
| Fixed-term contract (under 12 months) | 3 working days |
These notice periods are set out in Article 36.2 of the Labor Code 2019 and are confirmed by multiple official and legal sources. The law does not explicitly require the notice to be in writing, but best practice—and evidentiary safety—demands written notice with proof of delivery.
For foreign employees whose work permit has expired, the contract terminates automatically under Article 34.12. In this scenario, the employer is not required to provide the standard notice period, because termination occurs by operation of law. However, the employer must still complete all post-termination obligations, including final payment and work permit revocation procedures.
Step-by-Step Termination Procedure for Foreign Employers
Step 1: Confirm a Valid Legal Ground Under Article 34
Before taking any action, verify that your reason for termination falls within the 13 grounds listed in Article 34. Document the specific ground in writing and gather supporting evidence (e.g., performance records, medical certificates, restructuring plans, work permit expiry notice).
Step 2: Conduct a Dialogue with the Employee
Before issuing a final termination decision, the employer must hold a dialogue meeting with the employee. This meeting gives the employee an opportunity to respond to the termination grounds and demonstrates a fair and transparent process. Prepare minutes of the meeting and have both parties sign.
Step 3: Issue Written Notice of Termination
Provide written notice that complies with the applicable notice period (45, 30, or 3 working days). The notice should state the legal ground, the effective date of termination, and the employee's entitlements. Keep proof of delivery.
Step 4: Issue a Formal Termination Decision
After the notice period expires, issue a formal written decision outlining the reason, effective date, and all payments due. This document serves as the official record of termination.
Step 5: Complete Final Payments Within 7–14 Working Days
All final payments—including salary, unused annual leave, severance (if applicable), and other contractual entitlements—must be completed within 7 to 14 working days from the termination date. Delayed or incomplete payments are a common source of post-termination disputes.
Step 6: Handle Work Permit and Temporary Residence Card
For foreign employees, the employer must revoke and return the work permit to the competent authority within 15 days of the labor contract termination. The temporary residence card should also be handled in accordance with immigration regulations.
Severance and Job-Loss Allowances: What You Owe After Termination
Under Article 46 of the Labor Code 2019, an employer must pay severance allowance to an employee who has worked regularly for 12 months or more when the contract is terminated under Articles 34.1, 34.2, 34.3, 34.4, 34.6, 34.7, 34.9, or 34.10.
The severance amount is calculated as:
- Half a month's average salary for each full year of service.
- The average salary is based on the employee's earnings over the last six months of employment, including base wage and fixed allowances.
- The calculation period excludes time covered by unemployment insurance contributions.
For foreign employees, the same severance rules apply. Foreign workers are subject to the Labor Code under Article 2.3, and there is no provision excluding them from severance entitlements. However, because foreign employees are not subject to unemployment insurance under Vietnam's Law on Employment, the entire period of their employment counts toward severance calculation.
Sample Severance Calculation (Illustrative Only)
Employee: [Employee Name]
Contract Type: Fixed-term, 24 months
Monthly Salary (last 6 months average): VND 30,000,000
Years of Service (excluding UI-covered period): 2 years Severance Calculation:
2 years × 0.5 month × VND 30,000,000 = VND 30,000,000 Final Payments Due:
- Salary for remaining days worked: VND [Amount]
- Unused annual leave: VND [Amount]
- Severance: VND 30,000,000
- Total: VND [Total]Copyable Termination Notice Template
The following template can be adapted for a written termination notice under Article 36. Replace all bracketed placeholders with your specific information. Consult a Vietnamese labor attorney before finalizing, especially for foreign employee cases.
SOCIALIST REPUBLIC OF VIETNAM
Independence – Freedom – Happiness
---------------- [Company Name]
[Company Address]
[Tax Code / Enterprise Registration Number] Ref: Date: [Day] / [Month] / [Year] NOTICE OF TERMINATION OF LABOR CONTRACT To: Mr./Ms. [Employee Name]
Passport Number: [Passport Number]
Work Permit Number: [Work Permit Number]
Address: [Employee Address] Pursuant to the Labor Code 2019 (Law No. 45/2019/QH14); Pursuant to the Labor Contract dated [Date] between [Company Name] and Mr./Ms. [Employee Name]; Pursuant to Article 36.1([a/b/c/d/e]) of the Labor Code 2019 regarding the employer's right to unilaterally terminate the labor contract; We hereby notify you that your labor contract will be terminated as follows: 1. Legal ground for termination: [Specify the exact Article 34 or Article 36 ground] Supporting evidence: [List attached documents] 2. Effective date of termination: [Date] 3. Notice period: [45/30/3] days from the date of this notice. 4. Payments due upon termination: - Unpaid salary: [Amount] - Unused annual leave: [Amount] - Severance allowance (if applicable): [Amount] - Other entitlements: [Amount] Total: [Total Amount] 5. Work permit and temporary residence card: The Company will revoke and return your work permit to the competent authority within 15 days as required by law. Please contact the HR Department at [Phone/Email] to arrange the handover of company property and complete the exit procedure. Sincerely, [Signature]
[Full Name]
[Title]
[Company Stamp]Common Mistakes and Rejection Warnings for Foreign Employers
- Applying at-will termination standards from your home country. Vietnamese law requires a statutory ground and strict procedure. Terminating without legal basis is unlawful.
- Skipping the dialogue meeting. The employer must conduct a dialogue with the employee before finalizing termination. Absence of this step weakens the legal position significantly.
- Miscalculating the notice period. Using the wrong notice period for the contract type is a procedural violation that can render the termination unlawful.
- Failing to document performance issues. If terminating for poor performance, the employer must have pre-established assessment criteria and documented evidence. Without this, the termination ground is legally fragile.
- Delaying final payment beyond 14 working days. Late payment is a frequent trigger for post-termination disputes and can result in additional compensation claims.
- Forgetting work permit revocation. For foreign employees, failing to return the work permit to the authority within 15 days of termination is a regulatory violation.
- Terminating during protected periods. Employers cannot terminate on discriminatory grounds, including pregnancy, union involvement, or personal beliefs.
Processing Time, Fees, and Submission Locations
The official source data does not specify government filing fees for the termination process itself. Termination is an internal employer procedure, not a filing with a government agency (except for work permit revocation and, in mass layoff cases, notification to the local labor authority).
Key timing requirements from the official data:
- Notice period: 45 days (indefinite-term), 30 days (fixed-term 12–36 months), or 3 working days (fixed-term under 12 months).
- Final payment: within 7 to 14 working days of termination.
- Work permit return: within 15 days of labor contract termination.
- Mass layoff notification: must notify and obtain approval from the local labor authority before proceeding.
For any specific fee not stated in the law (e.g., administrative fees for work permit revocation or labor authority notifications), verify directly with the provincial Department of Labor, Invalids and Social Affairs (Sở Lao động – Thương binh và Xã hội) in the locality where your company is registered.
Frequently Asked Questions
Can a foreign employer terminate a Vietnamese employee without cause?
No. Vietnam's Labor Code 2019 operates on a closed-list system: termination is lawful only if it falls within one of the 13 grounds listed in Article 34. At-will termination is not permitted. Terminating without a statutory ground renders the termination unlawful and may result in reinstatement and compensation orders.
What happens to the labor contract when a foreign employee's work permit expires?
The labor contract terminates by operation of law under Article 34.12 when the foreign employee's work permit expires. The term of the labor contract with a foreign employee may not exceed the work permit duration. The work permit must be revoked and returned to the competent authority within 15 days of termination.
How much severance pay must a foreign employer provide?
Under Article 46, employees who have worked regularly for 12 months or more are entitled to half a month's average salary for each full year of service. Foreign employees are subject to the same rule and are not excluded from severance entitlements. The average salary is based on the last six months of earnings, including base wage and fixed allowances.
What is the notice period for terminating a fixed-term contract in Vietnam?
For fixed-term contracts of 12 to 36 months, the minimum notice period is 30 days. For fixed-term contracts under 12 months, the notice period is 3 working days. For indefinite-term contracts, the notice period is 45 days.
Is a dialogue meeting required before termination?
Yes. Before making a final termination decision, the employer must conduct a dialogue with the employee to allow them to respond to the termination grounds. This is a procedural requirement, and failure to hold it can undermine the legal validity of the termination.