Termination of employment contracts with foreign employees has become an important legal issue for enterprises operating in Vietnam. As Vietnam continues to attract foreign direct investment (FDI), the demand for foreign experts, managers, and technical workers continues to grow. Along with business expansion, enterprises may need to terminate employment contracts due to restructuring, changes in business strategy, poor performance, or disciplinary violations.
By 2026, Vietnamese law has introduced many changes in the management of foreign employees. A notable development is the issuance of Decree No. 219/2025/ND-CP. This Decree replaces the previous regulations on work permits. The article below analyzes the latest regulations on the termination of employment contracts with foreign employees. At the same time, Law Plus clarifies the applicable procedures and conditions. The article also addresses key considerations when dismissing senior FDI personnel in Vietnam. Accordingly, enterprises may proactively reduce the risk of disputes. They may also ensure legal compliance. At the same time, they may develop more effective human resource management strategies.
1. Legal basis governing the termination of employment contracts with foreign employees
1.1. Regulations under the 2019 Labor Code
Employment relationships with foreign employees are primarily governed by the 2019 Labor Code. Article 2 of the Labor Code provides for its scope of application. Accordingly, foreign employees working in Vietnam are subject to the Labor Code. However, an international treaty may provide otherwise.
Article 34 of the 2019 Labor Code provides for cases of termination of employment contracts. Meanwhile, Article 36 provides for the employer’s right to unilaterally terminate an employment contract. If dismissal is applied, the enterprise must comply with Article 122. This Article provides the principles for handling labor discipline. At the same time, the enterprise must comply with Article 125. This Article provides the cases in which dismissal may be applied.
1.2. Regulations on foreign employees
In addition to the Labor Code, enterprises must comply with Decree No. 219/2025/ND-CP. This Decree regulates foreign employees working in Vietnam. Decree No. 219/2025/ND-CP replaces Decree No. 152/2020/ND-CP and Decree No. 70/2023/ND-CP. At the same time, the Decree amends many procedures relating to work permits. Reporting and foreign employee management obligations have also been revised.
Accordingly, termination of an employment contract not only ends the employment relationship. It also gives rise to related administrative obligations. The enterprise must handle the work permit and temporary residence card. In addition, the enterprise must complete other necessary procedures.
2. Cases in which an enterprise may terminate the employment contract of a foreign employee
2.1. Termination by agreement or upon expiry of the contract
Clauses 1 and 3 of Article 34 of the 2019 Labor Code provide two cases of termination. First, the contract terminates upon expiry. Second, the contract terminates when the parties reach an agreement.
This is a relatively low-risk option. In practice, many FDI enterprises choose to negotiate with senior personnel. This option helps enterprises limit disputes. At the same time, the enterprise’s image is better protected.
2.2. Unilateral termination by the employer
Under Article 36 of the 2019 Labor Code, an enterprise may only unilaterally terminate an employment contract in cases prescribed by law. For example, the employee repeatedly fails to complete the work, suffers from prolonged illness, is absent from work for at least five consecutive working days without a legitimate reason, or falls into other cases prescribed by law. Where the enterprise changes its organizational structure or technology, or terminates employment for economic reasons, Articles 42 and 44 of the 2019 Labor Code must apply. Such cases do not constitute unilateral termination under Article 36.
The enterprise must prove the legal grounds. At the same time, it must comply with the required notice period. If these conditions are not satisfied, the termination decision may be considered unlawful.
2.3. Dismissal of senior FDI personnel
Dismissal of senior FDI personnel is the most severe form of labor discipline. Under Article 125 of the 2019 Labor Code, an enterprise may only apply dismissal where the employee commits an act prescribed by law. Such acts include embezzlement, disclosure of business secrets, causing serious damage, or being absent from work for several days without a legitimate reason.
The enterprise may not arbitrarily expand the grounds for dismissal if they are not provided in the internal labor regulations or by law.
3. Procedures for terminating the employment contract of a foreign employee
3.1. Review of the legal grounds
First, the enterprise must review the employment contract, internal labor regulations, and work performance assessment records. This review helps determine the correct grounds for termination and reduce the risk of disputes.
For senior management personnel, the enterprise should also review provisions on confidentiality, non-competition, and compensation for damage after termination.
3.2. Compliance with disciplinary procedures
If senior FDI personnel are dismissed, the enterprise must comply with Article 122 of the 2019 Labor Code. Accordingly, the employer must prove the employee’s fault. At the same time, the enterprise must ensure the employee’s right to provide an explanation and must prepare full written records throughout the process.
Even one procedural error may cause the dismissal decision to be declared invalid by the Court.
3.3. Full payment of employee benefits
Under Clause 1 Article 48 of the 2019 Labor Code, the enterprise must fully pay salary, payment for unused annual leave, and other benefits within 14 working days from the date of termination of the employment contract. In force majeure cases, this period may be extended but must not exceed 30 days.
Full payment not only protects the employee’s rights but also limits the risk of later complaints.
3.4. Procedures relating to the work permit
After the employment contract is terminated, the foreign employee’s work permit becomes invalid under Article 156 of the 2019 Labor Code. Under Article 31 of Decree No. 219/2025/ND-CP, within 15 days from the date the work permit becomes invalid, the employer must recover the work permit and return it to the issuing authority together with a written report. If the work permit cannot be recovered, the enterprise must clearly state the reason in the written report.
The enterprise must update the information with the management authority where the employee works. It must also coordinate with the employee in completing procedures relating to the temporary residence card, if the employee uses a temporary residence card sponsored by the enterprise. This is a step that many enterprises overlook. However, failure to properly complete it may result in administrative penalties.
4. Key considerations when dismissing senior FDI personnel
In practice, most disputes do not arise from the grounds for dismissal but from procedural errors. Therefore, enterprises should retain full records of work performance assessments, email correspondence, meeting minutes, and other evidence.
In addition, enterprises should review the legality of their internal labor regulations before applying disciplinary measures. Invalid internal labor regulations or internal labor regulations that have not been properly issued may affect the validity of the dismissal decision.
Enterprises should also review personal income tax obligations, compulsory social insurance obligations, if applicable, and commitments under the employment contract before completing the termination. Foreign employees working in Vietnam are subject to compulsory social insurance if they satisfy the conditions under the 2024 Law on Social Insurance and Decree No. 158/2025/ND-CP, except for cases excluded by law. Upon termination of the employment contract, the enterprise must complete the procedures for reporting a decrease in employees, confirming the social insurance contribution period, and settling related benefits.
5. Conclusion
Termination of employment contracts with foreign employees and dismissal of senior FDI personnel require enterprises to strictly comply with the 2019 Labor Code and the latest regulations on the management of foreign employees. Compliance with the correct legal grounds, sequence, and procedures will help enterprises limit disputes, protect their reputation, and reduce legal risks in investment activities in Vietnam.