In case of legally terminates the labor contract, the employer is responsible for paying severance allowance to the employee who has worked regularly for at least 12 months. The allowance is calculated at half a month’s salary per year of service, except in cases where the employee qualifies for pension under social insurance laws or voluntarily resigns without justifiable reason after 5 consecutive working days.

1. Subject to Compulsory Social Insurance:

Employees who are Vietnamese citizens are subject to compulsory social insurance, including:

• Employees working under indefinite-term labor contracts, definite-term labor contracts, seasonal contracts, or contracts for specific jobs with a duration of 3 to under 12 months, including labor contracts between employers and the legal representatives of persons under 15 years old as prescribed by labor laws;
• Employees working under labor contracts with a duration of 1 to under 3 months;

Employers subject to compulsory social insurance include state agencies, public service units, people’s armed units; political organizations, socio-political organizations, socio-professional organizations, social organizations, foreign agencies, international organizations operating in the territory of Vietnam; enterprises, cooperatives, household businesses, private individuals, partnerships, and other organizations employing workers under labor contracts.

Thus, employees in a probation period under a probation contract are not subject to compulsory social insurance.

 Legal basis: Article 2 of the Social Insurance Law 2014.

2. Basic Content of a Probation Contract:

The primary content of a probation contract does not include compulsory social insurance participation. Key elements include:

• Name and address of the employer and the name and position of the person signing the contract on behalf of the employer;
• Name, date of birth, gender, place of residence, citizen identification card number, ID card, or passport number of the person signing the contract on behalf of the employee;
• Job and workplace;
• Salary, method of payment, pay period, allowances, and other additional payments;
• Working hours and rest periods;
• Labor protection equipment for employees.

Legal basis: Clause 2, Article 24 and Clause 1, Article 21 of the Labor Code 2019.

3. Social Insurance for Probation Period in Labor Contracts:

If an employee’s probation period is stated in a labor contract subject to compulsory social insurance, both the employer and the employee must pay social insurance for the probation period. The salary or wage used as the basis for social insurance contributions during the probation period is the salary or wage stated in the labor contract.

Legal basis: Point 3 of Official Dispatch No. 2447/LĐTBXH-BHXH dated July 26, 2011, of the Ministry of Labor, War Invalids and Social Affairs, providing guidance on resolving issues in the implementation of the Social Insurance Law.

4. Calculation of working period for severance allowance:

The severance pay calculation period is the total actual working time for the employer minus the period the employee participated in unemployment insurance according to unemployment insurance laws and the period for which severance pay or job loss allowance has been paid by the employer.

Thus, the actual working time includes the probation period and the official working period under the labor contract.

Based on point c, Clause 3, Article 8 of Decree 145/2020/ND-CP, employees with less than or equal to 6 months of working are rounded up to ½ year.

Legal basis: Clause 2, Article 46 of the 2019 Labor Code; Point a, Clause 3, Article 8 of Decree 145/2020/NĐ-CP effective from February 1, 2021.

Salary for severance allowance:

Monthly salary for severance allowance is the average salary of the 6 consecutive months under the previous employment contract before the employee’s cessation.

Severance allowance = 1/2 * 1/2 * […………..] = […………..] VND

Legal basis: Clause 2, Article 46 of the 2019 Labor Code.