Question 10: After Employees terminate LCs, must the Employer pay them unemployment allowances for the period when they do not contribute to the UI fund? Which salary will be the basis to make payments in this case?

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  1. After Employees terminate LCs, must the Employer pay them unemployment allowances for the period when they do not contribute to the UI fund?

First, it is necessary to clarify the two concepts below:

“Unemployment allowances” are the amounts that the SI agency pays to eligible Employees when LCs are terminated[1].

“Severance allowances” are the amounts that Employers must pay to eligible Employees when LCs are terminated [2].

Therefore, when Employees terminate LCs, Employers are not obliged to pay unemployment allowances to Employees. Instead, when LCs are terminated, Employees who have paid UI premiums will receive unemployment allowances from this fund. For the period when Employees do not contribute to the UI fund, Employees will receive a severance allowance from Employers if they satisfy certain conditions.

  • The salary which serves as the basis for unemployment and severance allowances.

For severance allowance, each year of work will entitle them to half a month of salary (have full 12 months of work), if there is any fraction of a year, for full a 1 year to under 6 months, it will be counted as half a year; for full 6 months and over, it will be counted as 1 year. Severance allowances will be calculated based on the average contract salary of the 6 preceding consecutive months prior to termination[3].

The monthly unemployment allowance will be equal to 60% the average salary as the basis to pay UI premiums of the 6 preceding consecutive months prior to termination, but no more than 5 times the base salary for Employees who are the subjects of the salary regime prescribed by the State, or no more than 5 times the area minimum salary for Employees who pay UI premiums under the salary regime decided by Employers at the time of termination of LCs or employment contracts[4].

[1]Article 49 Law on employment 2013.

[2]Article 48.1 Labor Code and Article 14.1 Decree 05/2015/NĐ-CP dated 12/01/2015

[3]Article 48.3 Labor Code and Article 14.3 Decree 05/2015/NĐ-CP dated 12/01/2015

[4]Article 50.1 Law on employment