Etymology Corner 🔍
The English term "severance" comes from the Old French word "sevrer," meaning "to separate" or "to cut off." It's quite fitting for a payment that comes when the employment relationship is being severed! Just like pruning a tree can lead to new growth elsewhere, a proper severance package helps employees branch out to new opportunities. 🌱
When Your Ex-Employer Ghosts Your Severance Pay 💸
Hello, legal enthusiasts! 👋 Today we're diving into the fascinating world of severance pay in Vietnam, featuring a recent court case that perfectly answers the question: "How is severance pay calculated, and what happens when employers refuse to pay?" Spoiler alert: The court has a way of making employers pay attention! 💰
The Case in a Nutshell 🥜
Picture this: An employee resigns from her job after several years of loyal service, follows all proper procedures, but when it's time to receive her severance pay... crickets! 🦗 The company acknowledges they owe the money but simply refuses to pay. Let's meet our key players in this workplace drama:
The key players:
- Lily Nguyen (plaintiff): A human resources assistant who worked at Jupiter Company from 2018 to 2023
- Jupiter Company (defendant): A limited liability company with offices in Tra Vinh Province
- Patricia Tran: Legal representative of Jupiter Company
- The Court: Duyen Hai Town People's Court, Tra Vinh Province
The case began when Lily submitted her resignation in May 2023, properly following all termination procedures. After completing her work on July 18, 2023, the company issued a formal termination decision effective July 19, 2023. Despite acknowledging that they owed Lily severance pay as per her employment contract, Jupiter Company refused to pay the approximately 74 million VND (about $3,000 USD) they admitted owing her.
The Contract That Couldn't Be Clearer 📝
The employment contract between Lily and Jupiter Company, signed on March 29, 2018, was an indefinite-term contract that specifically stated:
"The employee will receive severance pay of one month's salary for each year of work (the amount will be based on the average of the last 6 months' salary before termination)."
This provision was actually more generous than the standard legal requirement in Vietnam's Labor Code, which only requires half a month's salary per year of service!
The Company's Defense (or Lack Thereof) 🤷♀️
The most surprising aspect of this case? Jupiter Company fully acknowledged they owed Lily the money! They even calculated the exact amount: 82,329,666 VND before tax, or 74,096,699 VND after 10% personal income tax.
Despite this acknowledgment, the company simply stated they "disagreed" with paying the severance and interest - without providing any legal reasoning whatsoever. It's like admitting you ate someone's lunch from the office refrigerator but refusing to reimburse them just... because!
The Judgment: Pay Up! ⚖️
On January 12, 2024, the Duyen Hai Town People's Court issued its verdict:
- Jupiter Company was ordered to pay Lily the full severance amount of 74,096,699 VND
- The company also had to pay 2,460,000 VND in interest for the 4-month delay (from July 19 to November 19, 2023)
- Jupiter Company was required to pay court fees of 2,296,710 VND
The court emphasized that Jupiter Company had violated both:
- Their contractual obligations (Article 6 of the Labor Code)
- Their legal obligations to fulfill financial commitments (Civil Code Articles 274, 275, 278, and 280)
Severance Pay in Vietnam Explained 📊
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How Severance Pay Works in Vietnam 📝
According to Article 46 of Vietnam's 2019 Labor Code, severance pay works as follows:
- Who qualifies? Employees who have worked regularly for the same employer for 12+ months when their employment ends (with certain exceptions).
- How much? The legal minimum is half a month's salary for each year of service - though employers can offer more generous terms by contract (as Jupiter did in Lily's case).
- Base salary calculation: The average contractual salary over the final 6 months of employment.
- Time period calculation: Total employment time MINUS periods covered by unemployment insurance and periods for which severance was previously paid.
- Payment deadline: Must be paid within 14 working days from termination date (Article 48).
The Lily vs. Jupiter case illustrates several important points:
- Employment contracts can offer better severance terms than the legal minimum
- When contracts specify severance terms, employers must honor them
- Courts will enforce contractual severance obligations with interest for delays
- Even when employers acknowledge the debt, they must still pay court costs if they force employees to sue
Real-Life Examples of Severance Disputes 🏢
- The "We'll Pay You Later" Ploy ⏰ A manufacturing company in Binh Duong told 50 laid-off workers they would receive severance "when business improves." The court ordered immediate payment plus 5% interest, emphasizing that financial difficulty is not a legal excuse for delaying severance.
- The "Different Calculation Method" Trick 🧮 An IT company in Ho Chi Minh City tried to calculate severance based only on base salary, excluding allowances that were part of the contractual salary. The court ruled that all contractual salary components must be included in the calculation.
- The "Unauthorized Absence" Claim 📅 After an employee resigned with proper notice, a tourism company claimed she had unauthorized absences that disqualified her from severance. The court ruled that documented approved leave cannot be retroactively reclassified as unauthorized.
Did You Know? 🤔
- Vietnam's first Labor Code in 1994 required a full month's salary per year for severance, which was reduced to half a month in the 2012 revision! 📉
- Vietnam introduced unemployment insurance in 2009, which is why the severance calculation excludes periods covered by this insurance! 🛡️
- If an employee has multiple consecutive contracts with the same employer, all contract periods are combined when calculating severance! 📚
- Companies must pay severance even if they're going bankrupt - severance claims take priority over almost all other creditor claims! 💼
- Vietnamese courts typically process severance disputes much faster than other labor disputes - the Lily case took just one month from filing to judgment! ⚡
Severance in Nature: Animal "Termination Packages" 🐜
Even in the animal kingdom, we can find parallels to severance packages:
- Ant colonies provide "severance" to older forager ants by reassigning them to less dangerous tasks within the nest when they can no longer forage effectively.
- Elephant herds continue to support elderly members who can no longer keep up with the herd's pace by adjusting travel speeds and sharing food resources.
- Wolf packs often continue to feed injured or elderly members who can no longer hunt, providing a form of "retirement benefit" before natural death.
The key difference? In nature, "severance" comes in the form of continued support for contribution, while human society has monetized the concept. Also, you rarely see elephants filing lawsuits over unpaid benefits! 🐘
Tips for Navigating Severance Pay Issues 💡
For Employees:
- Get it in writing - Ensure your employment contract clearly states severance terms.
- Keep detailed records of your employment history, including all contracts, amendments, and salary information.
- Calculate your expected severance before resignation to know what to expect.
- Submit a formal written request for severance pay immediately after termination.
- Follow up in writing if payment is not received within 14 working days.
- Consider mediation through the labor department before going to court.
For Employers:
- Budget for severance as part of your operational costs.
- Create clear policies about severance calculation methods.
- Process severance promptly to avoid interest penalties and court costs.
- Document all communications about severance payments.
- Consider severance agreements for key employees that clarify all terms.
- Remember: Refusing to pay legitimate severance almost always costs more in the end due to interest, court fees, and damage to company reputation.
Test Your Severance Pay Knowledge! 📝
- In Vietnam, what is the minimum legal severance pay requirement? a) One month's salary per year of service b) Half a month's salary per year of service c) Three months' salary regardless of time served d) Whatever is specified in the employment contract
- Which of these employees would NOT be entitled to severance pay? a) An employee who resigns with proper notice after 3 years b) An employee who is eligible for a pension c) An employee whose fixed-term contract expires d) An employee laid off due to technology changes
- In the Lily vs. Jupiter case, what was unusual about the company's position? a) They claimed the employment contract was invalid b) They acknowledged owing the money but refused to pay anyway c) They disputed the amount of severance owed d) They claimed Lily had been terminated for misconduct
- How is the salary base for severance calculation determined? a) The final month's salary only b) The highest monthly salary during employment c) Average contractual salary of the last 6 months d) Base salary excluding all allowances and bonuses
(Answers: 1-b, 2-b, 3-b, 4-c)
The Takeaway: Know Your Rights, Get What You're Owed 📋
The Lily vs. Jupiter case demonstrates several critical points about severance pay in Vietnam:
- Contractual terms matter - Courts will enforce severance provisions in employment contracts, especially when they're more generous than the legal minimum.
- Documentation is crucial - Having a clear record of employment terms, resignation procedures, and payment obligations was key to Lily's victory.
- Interest accrues on delays - Employers who delay severance payments will be liable for interest, making the "pay later" strategy financially unwise.
- Legal costs add up - Jupiter Company ended up paying not just the severance and interest, but also substantial court fees.
As Vietnam's labor market continues to mature, both employers and employees should be well-versed in severance requirements. The days when employers could simply ignore these obligations are clearly over, as courts consistently uphold employees' rights to their hard-earned severance pay.
Call to Action 🗣️
Have you experienced challenges receiving your severance pay in Vietnam? Or as an employer, have you faced difficulties in calculating appropriate severance? Share your experience in the comments below—your story might help others navigate this important aspect of employment relationships!
⚖️ Real legal case: the judgment number 01/2024/LĐ-ST , issued on Jan 12, 2024📜(Source: congbobanan.gov.vn)
🚨 Fun But Serious: A Brief Legal Disclaimer 🚨
Hey there, legal explorer! 🕵️♂️ Before you go...
- This article is like a map, not a teleporter 🗺️ It'll guide you, but won't zap your problems away!
- Each legal journey is unique 🦄 Your mileage may vary!
- For real-world quests, seek a professional legal wizard 🧙♂️ (May we suggest Thay Diep & Associates Law Firm?)
Remember: Reading this doesn't make you a labor lawyer, just like watching "The Office" doesn't qualify you as a branch manager! 📎😉
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If you're reading this in the evening, may your dreams be full of properly calculated severance packages! 😴 If you're reading this in the morning, may your workday be productive and your employment rights respected! ☀️ And if you're reading this during your lunch break, here's hoping your employment contract includes better benefits than whatever sandwich you're eating! 🥪
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