Question 8: Must Employers pay Employees severance allowances in cases where Employees are assigned to other jobs due to Employers’ transfer of ownership or the right to use corporate properties? If yes, what salary level will serve as the basis for Employers to pay severance allowances?

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Pursuant to Article 45 of the Labor Code, in case of transfer of the ownership or the right to use corporate properties, Employers take the following responsibilities:
  • Set up a plan to employ labour pursuant to the Labor Code[1];
  • Calculate statutory retrenchment allowances to pay Employees who must terminate LCs according to the said labour employing plan[2];
  • Employees who continue to be engaged will be re-trained for further employment, and they will be assigned to part-time jobs in the enterprises after transfer of the ownership or the right to use corporate properties according to the said labour employing plan. Upon termination of LCs, the next Employers shall calculate severance or retrenchment allowances as provided for by the Labor Code to pay Employees for their actual working time; and severance allowances to pay Employees for their actual working time at the enterprises prior to the transfer of the ownership or the right to use properties including the period of employment in the state sector when Employees are recruited for the last time to the enterprise that carried out the transfer of the ownership or the right to use properties before 01/01/1995[3]; and
  • In cases where Employers, after the transfer of the ownership or right to use corporate properties, continues to transfer the ownership or the right to use corporate properties in part or in whole, Employers before and after the transfer of the ownership or the right to use properties shall also take the same responsibilities as aforesaid.
Thus, upon implementing the transfer of the ownership or the right to use corporate properties, enterprises as Employers must first set up the plan to employ labour. Based on the plan to employ labour, if Employees are assigned to new jobs at the enterprises after transferring the ownership or the right to use properties, LCs with recent Employers will terminate and the next Employers shall calculate severance or retrenchment allowances as provided for by the Labor Code to pay Employees for their actual working time; and severance allowances to pay for Employees for their actual working time at the enterprises prior to the transfer of the ownership or the right to use properties. In other words, the responsibility for former Employers to pay Employees severance allowances for their actual working time will be succeeded and carried out by the next Employers after transferring the ownership or the right to use properties. In addition, it should be noted that, according to the regulations, recent Employers must pay Employees severance allowances within 7 days of terminating LCs. In case of any late payment of severance allowances, the Employer will be sanctioned for administrative violations and pay interest over delayed severance allowances calculated at the maximum interest rate applicable to non-term deposits announced by the State Bank of Vietnam at the time of penalty on severance allowances[4].
  • Salary level serving as the basis for payment of severance allowances
When Employers pay Employees severance allowances, the salary serving as the basis for calculating severance allowances will be counted as the average salary of an LC for the 6 consecutive months before an Employee leaves or loses his/her job, including the following[5]:
  • Salary level calculated according to the job time or title based on salary scale and payroll as stated by Employers in accordance with the labour legislation, which is agreed upon by Employers and Employees. For Employees receiving piecework or lump sum salaries, the salary rate is the one calculated over the time to determine the product unit price or lump sum salary.
  • Salary allowances to compensate for such factors as labour conditions, job complexity, living conditions and labour attraction extent[WU1] [WU2] , which are agreed upon by Employees and Employers while the agreed contractual salary has not yet been covered or insufficiently covered, such as salary allowances; and
  • Additional amounts defining the specific figures along with the agreed salary level in the LC and paid regularly in each salary period agreed upon by Employees and Employers.
[1]Article 45 Labor Code [2]Article 15.2 Decree 05/2015/NĐ-CP dated 12/01/2015 and Article 49 Labor Code [3]Article 15.2 Decree 05/2015/NĐ-CP dated 12/01/2015 and Articles 48 and 49 Labor Code [4]Article 8 Decree 95/2013/NĐ-CP dated 22/08/2013 as amended and supplemented by Decree 88/2015/NĐ-CP dated 07/10/2015 [5]Articles 8.1 and 4 Circular 47/2015/TT-BLĐTBXH dated 16/11/2015