Severance pay in Vietnam

How is severance pay calculated in Vietnam?

Severance pay in Vietnam is half a month’s wage for each qualifying year of service, paid to an employee with at least 12 months’ service whose contract ends lawfully (Labour Code 2019, Article 46).1 The catch that surprises almost every foreign employer is the word qualifying: the law excludes from that service count every year already covered by unemployment insurance, which has been compulsory since 2009 (Decree 145/2020, Article 8).2 For anyone hired in the past decade, that offset reduces the statutory severance bill to little or nothing — so the headline “half a month per year” is rarely the figure you actually pay.

That single nuance is the most-miscalculated number in Vietnamese offboarding, and most online calculators get it wrong by ignoring it. Severance is also only one piece of a lawful exit; the grounds you can rely on and the notice you must give are set out in the companion guide to terminating employees in Vietnam. The rest of this page itemises the rule, the offset, the wage base, redundancy pay and the final-pay deadline.

Who is entitled to severance in Vietnam, and how much?

An employee qualifies for severance allowance when they have worked regularly for at least 12 months and the contract ends by one of the lawful routes — expiry, mutual agreement, a valid resignation, or an employer’s lawful unilateral termination (Labour Code 2019, Article 46).1 The rate is half a month’s wage for each qualifying year of service, calculated on the wage base explained below.

Two situations carry no severance even after years of service. An employee dismissed for misconduct through the disciplinary process is not entitled to it, and nor is an employee who leaves because they now qualify for a pension — in that case the state pension, not an employer payment, is the exit route. Probationary cancellations and unlawful walk-outs by the employee also fall outside the allowance. Where the job itself disappears, a more generous payment applies instead: the job-loss allowance, covered further down.

What wage is severance based on in Vietnam?

Both severance and job-loss allowance are calculated on the average wage of the six months immediately before the contract ends (Labour Code 2019, Articles 46.3 and 47.3).1 It is the contractual wage for that period, so a recent raise, a cut to basic pay, or six months of reduced hours all feed directly into the figure. Using a single month, or the starting salary, is a common error.

Because the base is a six-month average, the timing of an exit can change the payable amount even where the qualifying service is fixed. The underlying employment-contract rules — what counts as wage, contract types and probation — are covered in Vietnam labour law and employment contracts.

What is the job-loss (redundancy) allowance?

Where a role genuinely disappears — through restructuring, a change of technology, economic difficulty, or a merger, consolidation or division — the employee receives job-loss allowance in place of severance: one month’s wage per year of service, with a minimum of two months’ wage (Labour Code 2019, Article 47).1 It uses the same six-month average wage base, and the same unemployment-insurance offset reduces the qualifying service.

Job-loss allowance is both more generous and harder to invoke than severance. The employer must show a genuine qualifying reason, consult the workforce’s representative organisation and, where several workers are affected, produce a labour-use plan; it cannot be used to dress up an ordinary performance dismissal. The two payments compare as follows.

A worked severance example

The arithmetic is simplest to see across three illustrative cases, each an employee whose contract ends lawfully in 2026 on a six-month average wage, with unemployment insurance treated as compulsory from 2009. The table shows how the offset, not the half-month rate, decides the figure.

The pattern is clear: the employee hired in 2015 has 11 years of fully insured service, so despite more than a decade with the company the statutory severance is nil. Only the pre-2009 years generate a payment, and even then at half a month each. A departing worker is not left empty-handed, though — for the insured years they can instead claim unemployment benefit from the state fund, which is the counterpart the employer has been contributing to all along.

Is severance pay taxable in Vietnam?

No personal income tax is due on statutory severance pay in Vietnam. Severance allowance and job-loss allowance paid in line with the Labour Code are not counted as taxable employment income, so nothing is withheld from them (Decree 253/2026/ND-CP and Circular 87/2026/TT-BTC, in force from 1 July 2026).3 That is the position as of October 2026.

The exemption also reaches an above-statutory payment: where an employer fixes a more generous severance or job-loss figure in its financial regulations, internal rules, the labour contract or a collective agreement, the amount paid over the statutory level is likewise left out of taxable income (Decree 253/2026, Article 8).3 A one-off ex-gratia sum resting on none of those is treated differently, so confirm how the payment is documented before a larger-than-statutory payout. These instruments replaced Circular 111/2013/TT-BTC from 1 July 2026 — the guidance older write-ups still quote.

When must final pay be settled on exit?

On termination, both the employer and the employee must settle all outstanding payments within 14 working days of the termination date, extendable to 30 days in defined cases — such as an employer that is not an individual ceasing operation, a natural disaster or epidemic, or a corporate restructuring (Labour Code 2019, Article 48).1 The final settlement covers unpaid salary, any untaken annual leave paid in lieu, and any severance or job-loss allowance due.

The same article obliges the employer to complete the closure of the employee’s social-insurance book and return it along with any original documents the employer held, so the departing worker can register an unemployment-benefit claim without delay. Missing the deadline turns a routine exit into a wage-payment breach, so the final-pay calculation should be ready before notice runs out.

How does EOR Vietnam calculate and pay severance?

As the legal employer, an employer of record holds the registered labour contract and the social-insurance records, so it is positioned to get the offset right. EOR Vietnam computes the qualifying service net of insured years, applies the six-month average wage, pays any severance or job-loss allowance, and completes the final settlement and social-insurance book closure within the statutory window — while you make the business decision to end the role. If you are new to the model, see what an employer of record does in Vietnam.

On price, severance does not sit inside our fee. EOR Vietnam charges a flat US$149 per employee per month for Vietnamese nationals — the same fee regardless of salary, seniority, role, location in Vietnam or headcount, as of October 2026 — with no setup, onboarding, offboarding, contract or payslip fees. Any statutory severance or job-loss allowance that falls due is a pass-through employment cost, billed at cost rather than marked up, exactly like gross salary and the statutory employer contributions. The refundable security deposit we hold — two months of the employee’s employment cost — means a lawful exit payment is already funded and is returned at the end of the engagement less any unpaid amounts. You can see how severance and on-costs feed a full EOR Vietnam cost estimate.

One practical point on continuity: qualifying service follows the employment relationship, so if you move a worker between providers the accrued pre-2009 service and any unpaid liability do not vanish — something to check when switching EOR providers in Vietnam.