Severance Allowance for Foreign Employees Working in Vietnam

If you are a foreign employee working in Vietnam, you may already be familiar with work permits, employment contracts and payroll. But when your employment comes to an end, there are also important benefits you should be aware of — including severance allowance.

Under Vietnam’s Labour Code, foreign employees who have worked regularly for an employer for 12 months or more may be entitled to severance allowance when their employment contract ends, provided that the applicable conditions are met.

Here is what foreign employees working in Vietnam should know.

I. Who May Be Entitled to Severance Allowance?

A foreign employee may be entitled to severance allowance if:

• They have worked regularly for the employer for 12 months or more; and
• Their employment contract is terminated under circumstances where severance allowance is applicable.

Being a foreign national does not automatically exclude an employee from receiving severance allowance.

It is important to note that foreign employees are generally not covered by Vietnam’s unemployment insurance scheme. However, this does not mean they automatically lose their right to severance allowance.

II. How Is Severance Allowance Calculated?

The general calculation is:

Severance allowance = ½ month’s salary × eligible years of service

The salary used for the calculation is generally the average salary under the employment contract for the six consecutive months immediately preceding termination.

For example, if an employee has 4 eligible years of service, the severance allowance would generally be equivalent to 2 months’ salary.

The actual amount will depend on the employee’s eligible service period and applicable salary.

III. How Is the Service Period Calculated?

The period used to calculate severance allowance is not necessarily limited to the time you were directly working.

Depending on the circumstances, recognised periods of employment may include:

• Actual working time;
• Probation;
• Training assigned by the employer;
• Certain periods of sick leave or maternity leave;
• Certain periods of occupational accident or occupational disease treatment;
• Paid statutory leave;
• Work suspension not caused by the employee; and
• Other periods recognised under Vietnam’s labour regulations.

The calculation will generally exclude periods for which the employee participated in unemployment insurance, as well as periods for which severance or job-loss allowance has already been paid.

IV. How Are Partial Years Calculated?

Partial years of service are also taken into account.

Generally:

• Up to 6 months: counted as ½ year
• More than 6 months: counted as 1 full year

For example:

• 3 years and 4 months of eligible service → 3.5 years
• 3 years and 8 months of eligible service → 4 years

This can make a meaningful difference to the final severance amount.

V. What About Unemployment Insurance?

This is particularly relevant to foreign employees.

Foreign employees working in Vietnam are generally not subject to unemployment insurance.

Where an employee is not covered by compulsory social insurance, health insurance or unemployment insurance, the employer may be required to pay an additional amount together with salary, corresponding to the employer’s statutory contribution obligations under the applicable regulations.

This payment is different from severance allowance and should not be confused with it.

VI. When Does Severance Allowance Not Apply?

Severance allowance does not apply to every termination situation.

Certain statutory exceptions include cases where:

• The employee is eligible for a pension under applicable social insurance regulations; or
• The employee voluntarily leaves work without a legitimate reason for 5 consecutive working days or more.

The specific circumstances and reason for termination should therefore be reviewed before determining the employee’s entitlement.

VII. What Should Foreign Employees Check Before Leaving a Job?

Before completing your employment termination and final settlement, it may be helpful to review:

1. Employment period: How long have you worked for the employer?

2. Employment contract: What salary is stated in your contract, and have there been any changes?

3. Salary for the last six months: This may be relevant to the severance calculation.

4. Insurance status: Were you covered by unemployment insurance during any part of your employment?

5. Previous payments: Has any part of your service period already been used to calculate severance or job-loss allowance?

6. Final settlement: Make sure your final salary, applicable allowances and other employment-related payments have been properly reviewed.

Know Your Employment Rights in Vietnam

For foreign professionals working in Vietnam, understanding employment regulations can help you make informed decisions throughout your career — not only when joining a company, but also when changing jobs or ending an employment relationship.

If you are unsure about your entitlement to severance allowance or how your final settlement should be calculated, it is advisable to review your employment contract and employment history and seek professional HR or legal advice where necessary.

At Metasource, we believe employment information should be accessible and practical for both businesses and professionals.

We support local and foreign professionals working in Vietnam through recruitment, EOR, payroll, immigration and work permit services.

For questions about employment and HR matters in Vietnam, contact our team at info@metasource.co.