Laborers (LD) may be eligible for severance pay (SP) in certain specific cases after the termination of the labor contract (LCT). So what is severance pay, who are the recipients, and how are the conditions for receiving this benefit regulated? In this article, LawPlus will provide regulations related to the SP payment policy for your reference and application.
Table of Contents/Mục lục
1. Concept of severance pay
Based on Article 46, Clause 1 of the 2019 Labor Code,
“When the LCT is terminated according to the provisions in clauses 1, 2, 3, 4, 6, 7, 9, and 10 of Article 34 of this Code, the Employer shall be responsible for paying SP to LDs who have worked regularly for at least 12 months per year. They are entitled to receive half a month’s salary, except for those eligible for pension according to the provisions of the law on social insurance and cases stipulated in point e, clause 1 of Article 36 of this Code.”
Accordingly, SP is understood as the amount that the unit/employer is responsible for paying to LDs who have worked for the employer for at least 12 months after the termination of the LCT for a certain period. However, not all LDs who terminate their LCTs receive this allowance but must also fully meet the conditions as stipulated in Article 46 of the 2019 Labor Code.
2. Conditions for enjoying severance pay
Based on Article 46 of the 2019 Labor Code guided by clauses 1, 3 to 6 of Article 8 of Decree 145/2020/NĐ-CP effective from 01/02/2021;
2.1. Cases of termination of the LCT eligible for severance pay
The Employer must pay the SP to LDs who have worked regularly for at least 12 months in the following cases:
When the LCT expires, except for the cases specified in clause.4 of this Code.
Having completed the work under.the contract. When the Employer and the LD agree to.terminate the LCT.
When the LD is sentenced to imprisonment.but not eligible for probation or not in a case eligible for probation, life imprisonment, or prohibited from working as stated in the.LCT by the effective legal judgment or decision of the Court.
LD dies, is declared by the Court to have lost.the capacity for civil acts, missing, or has died.
The Employer is an individual who has died, is declared by the Court to have lost the capacity for civil acts, missing, or has died; the Employer is not an individual who terminates operations.
The LD unilaterally terminates the.LCT in accordance with the law.
The Employer unilaterally terminates the.LCT in accordance with the law.
Thus, LDs after resigning fall into one of the above cases and.have a regular working.time of at least 12 months will be entitled to the SP regime as prescribed.
2.2. Cases not eligible for severance pay
According to the 2019 Labor Code, clauses 5, 8, 11, 12, 13 of Article 34 provide detailed provisions on cases of termination of the LCT but not eligible for SP as follows:
- LDs who are foreigners working in Vietnam are deported under the effective legal judgment or decision of the Court, the decision of the competent state agency.
- LDs who are disciplined with dismissal.
- The Employer dismisses LDs in accordance with Article 42 and Article 43 of this Code.
- The work permit expires for foreign workers working in Vietnam
- The case of the probation agreement stated in the LCT but the probation does not meet the requirements or one party cancels the probation agreement.
Thus, if LDs terminate the LCT in the above cases, they will not receive SP even if they have worked regularly for at least 12 months. In addition, LDs who fall into one of the cases specified in clause 1 of Article 8 of Decree 145/2020/NĐ-CP below are also not eligible for SP.
- LDs eligible for pension and the law on social insurance;
- LDs voluntarily leave without justifiable reasons for 05 consecutive days or more. The case is considered to have justifiable reasons as prescribed in clause 4 of Article 125 of the Labor Code.
3. How to calculate the severance pay
The payment of SP to LDs will be based on the principle: Each year the recipient works, they will receive an amount of SP equal to half a month’s salary calculated from the SP.
The formula for calculating SP is as follows:
Severance pay = ½ x Salary used to calculate SP x Working time used to calculate SP
Where: Salary used to calculate SP is the average salary according to the.LCT for the last 6 consecutive months before the LD leaves the job.
The working time calculate SP is determined by the total time.the LD has worked for the Employer minus the time participating in social insurance and the time already paid for SP, lost job allowances.
Note: The loss of employment allowance of the person calculate according to the year with enough 12 months, if there is a fractional month, from 1 month to less than 6 months.is calculated as 1/2 year; from 6 months or more is calculated as 1 year of work.
4. Deadline for SP payment
Based on clause 2 of Article 46 of the 2019 Labor Code, within 14 days from.the date of termination of the LCT, the company is responsible for paying the SP, except for the cases mentione. above, the company may extend the payment period but not more than 30 days.
5. Is the money from the SP subject to PIT?
According to clause 2 of Article 3 of the Personal Income.Tax Law 2007 amended by clause 1 of Article 1.of the Personal Income Tax Law amended in 2012, SP is not.subject to personal income tax. However, based on point b, clause 2 of Article 2 of Circular 111/2013/TT-BTC.(amended by clause 1 of Article 11 of Circular 92/2015/TT-BTC).which stipulates the taxable income from salaries, wages mentioned above, the case of the allowance, allowance received is higher.than the prescribed allowance, allowance according to the instructions mentioned above. SP is subject to personal income tax. In case there is no excess, this SP will not be.subject to personal income tax.
Enjoying SP is one of the rights of LDs after.leaving work. However, there are many cases where Employers.intentionally do not pay this allowance to LDs with unreasonable reasons. Therefore, LDs need to have.an understanding of this type of allowance to avoid losing their rights.
For any related questions, you can contact Law Plus via website, .hotline 02862 779 399 / 0965 052 039 / 0966 008 030 .(WhatsApp, Viber, Zalo) or email info@lawplus.vn.
