Letting go of an employee should be a clean break. But in Vietnam, one wrong move can cost your business more than just money. It can cost your reputation, your operating license, and even your ability to hire again.
Some foreign companies believe they can handle things the same way they do at their home countries. They skip legal checks, avoid union consultation, and send out a termination letter with no explanation. What they do not realize is that employment termination in Vietnam follows its own rules. And those rules are strict.
If you do not understand the local labor law, you may fall into legal traps. These traps are common. But they are avoidable.
This article will walk you through those hidden dangers. You would learn how to avoid costly mistakes and manage dismissals with clarity, compliance, and confidence.
10 Legal Traps in Vietnam Employment Termination That Can Cost You Big
By the end of this guide, you will:
- Understand when and how you can legally terminate an employee in Vietnam
- Recognize the most common mistakes that employers make
- Discover how to comply with the Vietnamese Labor Code
- Learn the correct steps to take during employee dismissal
- Be better prepared to avoid lawsuits and labor disputes
Whether you are a foreign company setting up in Vietnam or an international HR manager unfamiliar with local requirements, this article is your roadmap.
Imagine this scenario
You dismiss a staff member who has not been performing well. You believe it is justified. Later, you receive a formal complaint filed with the labor authority. You are shocked. Your documents are in English only. The employee argues they were never warned, never consulted, and were terminated without notice.
You now face a labor inspection. The employee is asking for reinstatement, back wages, and public apologies. You call your lawyer in Vietnam, but by now, the damage is done. You could lose the dispute, just because you did not follow Vietnam’s strict termination process.
This scenario plays out more often than you would expect.
Avoiding it starts with understanding the legal traps.
10 Legal Traps in Employment Termination in Vietnam
Terminating Without Legal Grounds
Vietnamese labor law permits termination only in specific cases. Poor performance, restructuring, or misconduct must meet strict definitions. Without valid legal grounds, the termination may be declared illegal.
Not Documenting the Cause
If you intend to terminate based on performance or misconduct, you must collect evidence. That includes warning letters, evaluations, and internal memos. Without this paper trail, you’re exposed to wrongful termination claims.
Ignoring Notice Period Rules
The notice period in Vietnam depends on the type of contract. It’s usually 30 to 45 days for fixed-term contracts. If you dismiss someone without proper notice, you may owe extra compensation.
Firing Without Union Consultation
In certain terminations, especially for misconduct or downsizing, union consultation is legally required. Skipping this step may invalidate the termination, even if your reasoning is solid.
Dismissing During Protected Periods
Employees on maternity leave, sick leave, or in quarantine cannot be lawfully terminated. Doing so violates the law, regardless of performance or company needs.
Misusing Probation Clause
Terminating during probation seems easy, but even here, employers must follow notice rules. Firing probationary employees without warning can trigger labor disputes.
Avoiding Severance and Final Payouts
Many employers forget that severance pay is still owed in certain cases, even after a lawful termination. Failing to settle final wages, annual leave days, and bonuses can lead to legal action.
Using English-Only Termination Letters
Contracts and termination decisions must be written in Vietnamese. English versions may support understanding, but only Vietnamese documents hold legal power.
Not Reporting to Authorities or Updating Social Insurance
Employment termination in Vietnam must be followed by updates to social insurance records and tax declarations. Failure to do so may result in penalties or audits.
Proceeding Without Legal Advice
Termination is a sensitive and technical process. Many foreign companies attempt to handle it internally, without local legal counsel. This often results in invalid dismissals and reputational damage.
Step-by-Step Guide to Lawful Termination
Step 1: Review the Labor Contract
Check the type (indefinite, definite, seasonal) and determine which article of the Labor Code applies.
Step 2: Determine Legal Grounds
Valid reasons include restructuring, force majeure, repeated violations, or poor performance after review.
Step 3: Gather Documentation
Prepare evidence such as internal warnings, performance evaluations, meeting records, and attendance logs.
Step 4: Consult the Union (if required)
For terminations related to conduct or layoffs, consult the company’s trade union in writing and receive written opinion.
Step 5: Prepare a Termination Letter
Draft a bilingual letter, but ensure the Vietnamese version is legally reviewed and aligned with labor law.
Step 6: Provide Advance Notice
Notice must be clear, documented, and delivered according to the contract.
Step 7: Calculate Final Payments
This includes unpaid salary, unused leave days, severance (if eligible), and bonuses or allowances.
Step 8: Update Government Records
Inform social insurance and tax authorities of the termination. Submit required forms.
Step 9: Retain Legal Counsel
Review all steps with a Vietnamese labor lawyer or employment law solicitor before executing the decision.
Frequently Asked Questions (FAQ)
Can I fire an employee for poor performance?
Yes, but you must document the poor performance, allow for improvement, and follow internal processes. Otherwise, it could be seen as unfair dismissal.
Do I need to consult the union every time?
Only for specific termination types like misconduct or economic restructuring. But when in doubt, consult.
How much severance is due?
Severance pay equals half a month’s salary for each year of service, unless the termination is for misconduct or during probation.
Can I terminate someone during their probation?
Yes, with notice. However, probation rules must be in the signed contract to be enforceable.
What if I don’t have a Vietnamese version of the contract?
You must create one. Only Vietnamese-language contracts and termination letters are enforceable in labor disputes.
What happens if I don’t issue a work certificate?
You may face fines and complaints. The employee has the right to request one upon termination.
Can an employee sue me for wrongful termination?
Yes. They may file a complaint with the Department of Labor, seek mediation, or take you to court.
Conclusion
Many foreign employers treat termination as a routine task. But employment termination in Vietnam is anything but routine. It’s regulated, documented, and culturally sensitive.
Mistakes in dismissal can lead to lawsuits, back-pay orders, and damage to your employer brand. Avoiding these outcomes requires process. It requires documentation. And above all, it requires legal understanding.
Before you terminate an employee, review your steps, talk to local counsel, and ensure full compliance.
If you’re unsure. Ask. Speak with English-speaking lawyers in Vietnam who know both your language and your legal risks. The price of caution is low. The cost of getting it wrong is not.
About ANT Lawyers, a Law Firm in Vietnam
We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers has lawyers in Ho Chi Minh city, Hanoi, and Danang, and will help customers in doing business in Vietnam.
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