Terminating the employment relationship: grounds, procedures and legal consequences.

1. An employer may end a contract only on a statutory ground

The Labour Code 2019 recognises 13 ways a labour contract can end. For employers, the main ones are:

2. Unilateral termination needs a ground and the required notice

2.1. The seven grounds for unilateral termination

1. The employee regularly fails to complete their work, as measured against the work performance criteria in the employer's rules.
2. The employee is ill or injured and has been treated for 12 consecutive months (indefinite-term contract), 6 consecutive months (fixed-term contract of 12 to 36 months) or more than half the contract term (contract under 12 months) without recovering their working capacity. If the employee recovers, the parties consider a new contract.
3. Because of a natural disaster, fire, dangerous epidemic or hostile act, or relocation or downsizing ordered by a competent authority, the employer has tried every remedy but must still cut jobs.
4. The employee does not return to work within 15 days after a contract suspension ends.
5. The employee reaches retirement age, unless the parties agree otherwise.
6. The employee is absent without good reason for 5 or more consecutive working days.
7. The employee gave false information when signing the contract, affecting the recruitment decision.

The first ground depends on the enterprise having valid work performance assessment rules. Without them, the employer cannot use this ground, however poor the employee's actual results.

2.2. The notice period depends on the type of contract

For certain particular business lines and occupations, comprising members of aircraft crews, technicians maintaining aircraft and carrying out specialised aviation repairs, flight operations officers, enterprise managers, and seafarers working on Vietnamese ships operating abroad, the notice period is at least 120 days in the case of an indefinite-term contract or a fixed-term contract of 12 months or more, and at least one quarter of the term of the contract in the case of a contract of less than 12 months. That notice period applies to the employer and to the employee alike.

The employer need not give notice for the fourth and sixth grounds.

2.3. Some cases bar unilateral termination

An employer may not terminate unilaterally in three groups of cases:

• The employee is ill or has an accident or occupational disease and is being treated or convalescing on the instructions of a competent medical facility, except under the second ground in section 2.1.
• The employee is on annual leave, personal leave or other leave the employer has agreed to.
• The employee is pregnant, on maternity leave or raising a child under 12 months old.

The third group is the most protective. The law also prohibits dismissal or unilateral termination because of marriage, pregnancy, maternity leave or raising a child under 12 months, and prohibits any disciplinary action during that time.

These rules do not prohibit ending a contract on expiry. If the contract expires while the employee is pregnant or raising a child under 12 months, she has priority for a new contract. The line between these two situations often leads to disputes and should be handled carefully.

3. Dismissal is the most tightly regulated form of discipline

3.1. Dismissal is available in only four groups of cases

1. The employee commits theft, embezzlement, gambling, intentional injury or drug use at the workplace.
2. The employee discloses the employer's business or technology secrets or infringes its intellectual property; causes serious damage, or threatens particularly serious damage, to the employer's assets or interests; or commits sexual harassment at the workplace as defined in the internal labour regulations.
3. The employee, already disciplined by an extended salary-increase period or demotion, reoffends before the record is cleared.
4. The employee is absent without good reason for a total of 5 days in 30 days or 20 days in 365 days, counted from the first day of absence.

Two easily confused measures. The fourth dismissal ground counts 5 days in total within 30 days; the sixth ground for unilateral termination in section 2.1 counts 5 consecutive working days. These are two regimes with different procedures and consequences, so choosing the wrong one is a mistake from the first step.

3.2. Discipline must follow mandatory principles

• The employer must prove the fault of the employee.
• The grassroots employee representative organisation to which the employee belongs must take part.
• The employee must be present and may defend themselves or be defended by a lawyer or the employee representative organisation.
• The disciplinary process must be minuted.
• Only one sanction may be applied to one breach. For several breaches, only the most severe sanction, matching the most serious breach, applies.

No disciplinary action may be taken while the employee is on sick or convalescence leave, on leave with the employer's consent, in custody or detention, awaiting the outcome of an official investigation into a breach in the first or second group of grounds, or pregnant, on maternity leave or raising a child under 12 months.

3.3. The disciplinary meeting must follow the statutory procedure

1. Record the breach. If caught in the act, the employer makes a record and notifies the grassroots employee representative organisation. If discovered later, the employer gathers evidence of the fault.
2. Give notice of the meeting at least 5 working days in advance, stating the subject, time, place, the employee's full name and the breach.
3. Confirm attendance. Required participants must confirm. If one cannot attend at the notified time and place, the parties agree a change; failing agreement, the employer decides.
4. Hold the meeting. If a required participant does not confirm or does not attend, the employer may still proceed.
5. Minute the meeting, adopt the minutes before closing and have attendees sign. For anyone who refuses to sign, the minute-taker records their name and reason in the minutes.
6. Issue the disciplinary decision within the limitation period and send it to the required participants.

Required participants are: the grassroots employee representative organisation to which the employee belongs; the employee and any defender; the legal representative of an employee under 15; and the person authorised to discipline under the internal labour regulations.

Proceeding without a required participant is an important tool for employers, but it works only if the employer can prove it gave valid notice at least 5 working days ahead. The notice file, with proof of sending and receipt, is therefore the most valuable document in a dismissal dispute.

3.4. The limitation period runs from the date of the breach

Discipline must be imposed within 6 months of the breach, or 12 months for breaches directly involving finance, assets or disclosure of technology or business secrets.

If the limitation period has expired, or has less than 60 days left, when a period in which discipline is barred ends, the limitation period is extended by up to 60 days from the end of that period.

The period runs from the breach, not from its discovery. This hurts employers when breaches surface late, such as fraud found only in the next year's audit. Once the period expires, the employer can no longer discipline and can only claim damages in civil law or report the matter for criminal investigation.

4. Reorganisation requires a labour utilisation plan

Where a change in structure or technology, or an economic reason, affects the employment of a number of employees, the enterprise must prepare and implement a labour utilisation plan; give priority to retraining employees where there are new workplaces; pay job-loss allowance if employees have to be let go; and let employees go only after exchanging views with the grassroots employee representative organisation and giving 30 days' prior notice to the provincial state labour management authority and to the employees.

In the case of division, separation, consolidation or merger; sale, lease or conversion of the enterprise; or transfer of ownership or use of assets, the new employer must prepare a labour utilisation plan, and both the old and the new employer must carry out the approved plan.

The labour utilisation plan must state the number and the list of employees who will continue to be employed, who will be retrained, who will move to part-time work, who will retire and whose contracts must be terminated; the rights and obligations of the parties; and the measures and the financial resources securing implementation. In preparing the plan, the employer must exchange views with the grassroots employee representative organisation, and the plan must be made public within 15 days from the date on which it is adopted.

5. The employer must pay allowances on termination

5.1. Severance allowance is often low because insured periods are deducted

An employee who has worked regularly for 12 months or more receives severance allowance when the contract ends on the relevant grounds: half a month's salary for each year worked.

Two exceptions: employees who qualify for a pension, and employees absent without good reason for 5 or more consecutive working days.

Qualifying service is total actual working time, minus time covered by unemployment insurance contributions and time for which severance or job-loss allowance has already been paid.

The period of actual work includes the probation period; the period of assignment to study; periods of leave on sickness or maternity benefits; periods of leave for treatment and functional rehabilitation following an occupational accident or occupational disease for which salary was paid; periods of leave to perform citizens' duties for which salary was paid; periods of work stoppage not attributable to the fault of the employee; periods of annual leave, paid personal leave and public holidays and Tet holidays; periods spent performing the duties of the employee representative organisation; and periods of temporary suspension from work (Decree No. 145/2020/ND-CP).

Service counts in full years of 12 months. Remaining months of 6 or fewer count as half a year, and more than 6 count as a full year. The salary used is the average contractual salary for the 6 months before the employee leaves.

In practice, severance allowance is often very low. Because the whole of the period during which unemployment insurance was contributed must be deducted, and unemployment insurance has been compulsory since 1 January 2009, in practice most employees today have a severance allowance of zero or of a very small amount. The remaining period consists only of work performed before 2009 and of periods not subject to unemployment insurance. The Law on Employment No. 74/2025/QH15, in force from 1 January 2026, widens the categories of persons required to contribute to unemployment insurance, so the range of periods that must be deducted continues to widen.

5.2. Job-loss allowance is double severance allowance

An employee who has worked regularly for 12 months or more and loses their job because of restructuring, new technology, economic reasons or reorganisation receives one month's salary for each year worked, with a minimum of 2 months' salary. Service and salary are calculated as for severance allowance.

Comparing the two shows why the ground for termination matters financially: service and salary are calculated the same way, but the multiplier doubles and there is a 2-month minimum.

5.3. All amounts must be paid within 14 working days

Within 14 working days from the date of termination of the contract, the two parties are responsible for paying in full all amounts related to the entitlements of each party. That time limit may be extended but by no more than 30 days in the cases where an employer that is not an individual ceases operations; there is a change in structure or technology or an economic reason; there is a division, separation, consolidation, merger, sale, lease, conversion of form or transfer of assets; and there is a natural disaster, fire, hostile act or dangerous epidemic.

6. The employer must complete the insurance formalities on termination

The employer must certify the employee's social and unemployment insurance contribution period and return it with any original documents it holds, and must provide copies of documents about the employee's work on request, at the employer's cost.

Where an enterprise is in arrears on social insurance, the practice is that if the enterprise is able to pay, it must pay the insurance contributions in full, including the amount calculated on the late paid sums, before certification of the book is obtained; if it has not paid in full, the social insurance authority certifies up to the point paid and the remainder is added once the arrears have been recovered. Arrears of social insurance are accordingly not only a financial problem but also something that holds up the termination of the employment relationship.

7. Unlawful termination can be very costly

An employer that terminates unlawfully must:

• reinstate the employee under the existing contract;
• pay salary and social, health and unemployment insurance contributions for the days the employee was not allowed to work;
• pay an additional at least 2 months' salary under the contract;
• if notice rules were breached, pay salary for the days of notice not given;
• once reinstated, the employee refunds any severance or job-loss allowance received.

If the employee does not want to return, the employer must also pay severance allowance. If the employer does not want to reinstate and the employee agrees, the parties agree additional compensation to end the contract.

The largest cost is salary for the whole litigation period. The amount grows fastest not because of the fixed sums but because of the salary and insurance for the whole time the employee was kept from work, i.e. the whole litigation. In a case that goes through two court levels, this can far exceed all the other amounts combined.

Unlawful dismissal produces a similar consequence. Dismissal is at once a form of labour discipline and a ground for terminating the contract, so an error as to the ground, the disciplinary principles or the procedure, or expiry of the limitation period, all lead to the dismissal decision being held unlawful. Accompanying this are the administrative remedial measures under Decree No. 283/2026/ND-CP, comprising compulsory reinstatement of the employee, compulsory payment of salary, compulsory public apology and compulsory refund of the amounts collected.

8. Termination disputes may go straight to court

8.1. Conciliation is not mandatory in every case

In principle, an individual labour dispute must go through conciliation by a labour conciliator before going to a labour arbitration council or court. The law also sets out exceptions, including:

• disputes over dismissal or unilateral termination of a labour contract;
• disputes over compensation and allowances on termination;
• disputes over social, health and unemployment insurance, and occupational accident and disease insurance;
• disputes between domestic workers and employers, and between sub-leased workers and sub-leasing employers.

So disputes arising from termination do not need to go through conciliation, and the employee can go straight to court. An enterprise should not plan its response on the assumption that conciliation will come first.

8.2. The limitation period for suing runs from discovery

Here the period runs from the discovery of the breach, unlike the period for discipline, which runs from the breach itself. This reflects how the law allocates risk: strict on employers when disciplining, more generous to employees when suing.

9. What employers should do

1. Prefer termination by agreement. It carries the least risk and usually costs less than the expected cost of a dispute.
2. Identify the right ground before acting. Confusing dismissal with unilateral termination causes errors throughout the rest of the procedure.
3. Check the limitation period as soon as a breach is found, because it runs from the date of the breach.
4. Check the employee's personal circumstances before deciding, especially pregnancy, maternity, caring for a young child, illness under treatment and leave.
5. Keep proof of the meeting notice, with full proof of sending and receipt; it is decisive if you proceed in the employee's absence.
6. Pay all amounts within 14 working days and certify the social insurance period, even if the ground for termination is disputed.