What Are Potential Disputes over the Settlement Method for Employees When Separating Enterprises?

In Vietnam, reorganization of an enterprise means the division, separation, consolidation, merger or transformation of an enterprise. In particular, when separating enterprises, in addition to legal issues related to enterprise separation procedures, registration for newly formed enterprises, the introduction of a plan for the employees of the separated company is also a matter of concern. The transferor company and the transferee company need to allocate and use the existing labor force accordingly. It is important to ensure the interests of workers. Specifically, in case of continuing to employ employees, when separating an enterprise, the next employer is responsible for continuing to use up the existing workforce and proceeding with the labor contract amendment and supplement. All of this might lead to potential disputes which lawyers would be involved to provide legal advice from the early stage.

Dispute settlement method for employee when separating enterprises in Vietnam

If the enterprise does not use up all the employees or the labor demand of the company does not run out of the existing number of employees, the enterprise must develop a suitable plan to use employees in accordance with the law. Specifically, an employment plan must contain the following main contents: The list and the number of employees to be continued to be used, the employee sent for retraining to continue using; List and number of employees to retire; The list and number of employees who are transferred to part-time work; the employee must terminate the labor contract; Measures and financial resources to ensure implementation of the plan. Enterprises should note that when developing plans for the employment of employees, there must be the participation of organizations representing labor collectives at the grassroots level.

In case it is imperative that the employees quit their job, the enterprise must pay the employee a job loss allowance so that the interests of the employee will still be guaranteed when separating the enterprise. The Labor Code has specified as follows: An employer shall pay a job-loss allowance to an employee who loses his/her job and has worked regularly for the employer for 12 months or longer. The job-loss allowance is equal to 1 month’s wage for each working year, but must not be lower than 2 months’ wage. The working period used for the calculation of job-loss allowance is the total time during which the employee actually works for the employer minus the time during which the employee benefits from unemployment insurance in accordance with the Law of Social Insurance and the working period for which the employer has paid a severance allowance to the employee. The wage used for the calculation of job-loss allowance is the average wage in accordance with the labor contract during 6 months preceding the time the employee loses his/her job.

It is important to have proper and proactive discussion with impacted employee and avoid disputes impacting the company’s reputation. Dispute lawyers in Vietnam could be of help for advice and preparation.

ANT Lawyers is a law firm in Vietnam, recognized by Legal500, IFLR1000. We are an exclusive Vietnam member of Prea Legal, the global law firm network covering more than 150 jurisdictions. The firm provides a range of legal services to multinational and domestic clients.