How Severance Pay is Calculated in Vietnam

Severance pay in Vietnam is calculated as half a month’s average salary multiplied by your years of service, based on your last 6 consecutive months of earnings. Foreign teachers working 12+ months receive 0.5 months’ salary per year worked (for example, 3 years of service equals 1.5 months’ salary), paid within 14 working days after contract termination under the 2019 Labor Code.

The calculation formula applies to all foreign language teachers and education professionals who meet three conditions: worked regularly for 12+ consecutive months, hold definite-term or indefinite-term contracts, and terminate employment under lawful circumstances specified in Article 34 of the Labor Code. Unlike Vietnamese employees, foreign teachers are not subject to unemployment insurance deductions, meaning your entire work period counts toward severance calculations without reductions for social insurance contributions.

This guide follows the 2019 Labor Code (Law No. 45/2019/QH14), Decree 145/2020/ND-CP (effective February 1, 2021), and the 2014 Social Insurance Law (Law No.58/2014/QH13).

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How Is the Basic Severance Pay Formula Applied in Vietnam?

The basic severance formula is: Severance Pay = 0.5 × Average Monthly Salary (last 6 months) × Years of Service. For example, a teacher earning VND 30,000,000 monthly who worked 3 years receives: 0.5 × VND 30,000,000 × 3 = VND 45,000,000 in severance pay.

Step 1: Calculate Your Average Monthly Salary

Your average monthly salary includes your base wage plus all fixed allowances from the last 6 consecutive months before termination. According to Decree 145/2020/ND-CP Article 8, this calculation must use actual paid wages, not contracted amounts if they differ.

Example calculation:

Total earnings for months 1-6: VND 180,000,000
Average: VND 180,000,000 ÷ 6 = VND 30,000,000

The VND 30,000,000 average becomes your salary basis for severance calculation.

Step 2: Calculate Your Service Years

For foreign teachers, service years equal your total time worked minus any previous severance payments received from the same employer. The 2019 Labor Code Article 46 specifies that foreign employees are not subject to unemployment insurance deductions, unlike Vietnamese staff.

Rounding rules according to Decree 145/2020/ND-CP Article 8:

6 months or less of incomplete year = 0.5 year
More than 6 months of incomplete year = 1.0 year

Examples:

Worked 2 years 4 months → counts as 2.5 years
Worked 2 years 8 months → rounds to 3.0 years

Step 3: Apply the 0.5 Multiplier

Vietnamese law mandates half a month’s salary per year of service. This 0.5 multiplier is fixed by Article 46 of the Labor Code and cannot be negotiated lower.

Complete calculation example:

VND 30,000,000 × 0.5 × 3 years = VND 45,000,000

What Salary Components Are Included in Severance Calculations?

Severance calculations include your base salary plus all fixed monthly allowances averaged over the last 6 consecutive months, but exclude one-time bonuses, annual bonuses, or variable performance payments. According to Decree 145/2020/ND-CP, only contractually fixed and regular payments count toward your severance salary basis.

Included in Calculation	Excluded from Calculation
Base monthly salary	Annual bonuses (13th month)
Housing allowance (if fixed)	One-time performance bonuses
Transportation allowance (if fixed)	Overtime payments
Fixed teaching allowances	Variable incentive payments
Seniority supplements	Per diem or travel reimbursements

Your base salary plus fixed allowances equals your severance calculation basis.

Multiple Successive Contracts

If you’ve worked under multiple consecutive contracts with the same employer, the Labor Code Article 46 requires using the average salary from the last 6 months before your final contract ends. This protects teachers whose salaries increased over time.

Example scenario:

Contract 1 (2 years): VND 25,000,000/month
Contract 2 (1 year): VND 30,000,000/month
Last 6 months average: VND 30,000,000 (this amount is used for calculation)

How Do Foreign Teachers Calculate Service Years Differently from Vietnamese Employees?

Foreign teachers count their entire work period toward severance because they are not subject to unemployment insurance contributions, unlike Vietnamese employees who must subtract UI participation periods. According to Decree 145/2020/ND-CP Article 8, the formula for foreign employees is: Total Time Worked – Previous Severance Paid (if any).

Employee Type	Service Calculation	Typical Result
Foreign Teachers	Total work time minus previous severance paid	3 years work = 3 years counted
Vietnamese Employees	Total work time minus UI period minus previous severance	3 years work = approximately 1.5-2 years counted

Foreign teachers receive significantly higher severance because the entire work period counts without UI deductions.

What Counts as Total Time Worked

According to Decree 145/2020/ND-CP Article 8, your total time includes:

Direct teaching hours and preparation time
Probationary periods (if specified in your contract)
Paid sick leave covered by your employer
Maternity/paternity leave with salary
Work suspension periods through no fault of yours
Public duty leave with salary

What does NOT count:

Unpaid leave exceeding 5 consecutive working days without acceptable excuse
Contract periods declared null and void due to illegal terms
Time under contracts you unilaterally terminated in violation of law

What Happens When Teachers Have Multiple Consecutive Contracts?

When you’ve worked under multiple successive contracts with the same employer, all contract periods are combined for severance calculations as long as you never received severance payments between contracts. The Labor Code Article 20 specifies that successive contracts create continuous service history for severance purposes.

Scenario 1: Typical Contract Renewals (Most Common)

Many language centers use yearly contracts that auto-renew:

Year 1: VND 25,000,000/month
Year 2: VND 28,000,000/month
Year 3: VND 30,000,000/month
Severance calculation: 3 years total service
Salary basis: Last 6 months average (VND 30,000,000)
Severance: 0.5 × VND 30,000,000 × 3 = VND 45,000,000

Some schools use 11.5-month contracts to avoid insurance obligations:

Contract 1: 11.5 months (VND 25,000,000/month)
Gap: 2 weeks
Contract 2: 11.5 months (VND 26,000,000/month)
Gap: 2 weeks
Contract 3: 11.5 months (VND 27,000,000/month)

If gaps are minimal and clearly designed to evade labor laws, Vietnamese courts may rule these as continuous employment. However, employers often dispute this, leading to legal battles.

Scenario 3: Legitimate Contract Gaps

If you take extended unpaid leave (30+ days) between contracts or work elsewhere temporarily:

Previous contract severance may be settled separately
New contract starts fresh service calculation
Total severance equals sum of both calculations

When Must Employers Pay Severance to Foreign Teachers?

Vietnamese law mandates severance payment within 14 working days after your final work day, not 14 calendar days. According to Labor Code Article 48, employers who miss this deadline face fines of VND 1,000,000-20,000,000 (individual employers) or VND 2,000,000-40,000,000 (organizations), plus mandatory interest at the highest demand deposit rate of state-owned banks.

Payment timeline breakdown:

Day 0: Your last working day
Days 1-14 (working days): Employer must pay severance plus final salary plus unused leave
Day 15+: Employer faces administrative fines plus interest penalties

The 14 working days deadline excludes weekends, public holidays, and Tet holidays.

Example calculation of working days:

Final work day: Friday, December 20, 2024
Deadline: Friday, January 10, 2025 (14 working days, excluding weekends and Tet)

What’s included in final payment:

Outstanding salary for days worked
Unused annual leave converted to cash (Labor Code Article 113)
Severance pay calculated per formula
Pro-rated 13th month bonus (if applicable per contract)

For comprehensive guidance on Vietnamese labor regulations for teachers, see our Vietnam Labor Code for Foreign Teachers: Essential Guide 2025.

How Are Partial Years Rounded in Severance Calculations?

Partial years follow strict rounding rules: work periods of 6 months or less count as 0.5 years, while periods exceeding 6 months round up to 1.0 full year. This rounding system, mandated by Decree 145/2020/ND-CP Article 8, significantly benefits teachers who work slightly over standard contract periods.

Actual Time Worked	Counted Service Years	Example Severance (VND 30M base)
11 months	0.5 years	0.5 × VND 30M × 0.5 = VND 7,500,000
1 year + 3 months	1.5 years	0.5 × VND 30M × 1.5 = VND 22,500,000
1 year + 7 months	2.0 years	0.5 × VND 30M × 2.0 = VND 30,000,000
2 years + 4 months	2.5 years	0.5 × VND 30M × 2.5 = VND 37,500,000
2 years + 8 months	3.0 years	0.5 × VND 30M × 3.0 = VND 45,000,000
3 years + 6 months	3.5 years	0.5 × VND 30M × 3.5 = VND 52,500,000
3 years + 11 months	4.0 years	0.5 × VND 30M × 4.0 = VND 60,000,000

Working just 1 extra month past 6 months increases your severance by 0.5 years’ worth (for example, VND 7,500,000 more on VND 30,000,000 salary).

Strategic Timing Insight

Teachers terminating contracts should consider timing:

Before month 6: No rounding benefit
After month 6 (even by 1 day): Rounds to full year
Potential gain: VND 7,500,000 for VND 30,000,000 monthly salary

What Are the Most Common Severance Calculation Mistakes?

The three most frequent errors are: incorrectly deducting unemployment insurance periods that don’t apply to foreign workers, using contracted salary instead of actual average earnings from the last 6 months, and failing to combine multiple successive contracts into continuous service.

1. Unemployment Insurance Deduction Error (Most Common for Foreign Teachers)

Incorrect calculation:

Foreign teacher works 3 years
Employer subtracts 3 years of UI period (doesn’t exist for foreign workers)
Claims: 3 – 3 = 0 years → No severance due

Correct calculation:

Foreign teachers are not in UI system
Full 3 years count
Severance: VND 45,000,000 (based on VND 30,000,000 salary)

Financial impact: VND 45,000,000 difference per example.

2. Wrong Salary Basis

Incorrect: Using only base salary (VND 20,000,000), ignoring fixed allowances (VND 10,000,000)

Correct: Including base plus fixed allowances (VND 30,000,000 total)

Financial impact: 33% underpayment (VND 30,000,000 vs VND 45,000,000 for 3 years)

3. Successive Contract Errors

Incorrect: Treating 3 separate yearly contracts as independent

Correct: Combining all 3 years as continuous service

If your salary grew from VND 25,000,000 to VND 30,000,000, correct method uses VND 30,000,000 for the entire 3-year period.

4. Missing Payment Deadline

Employers missing the 14 working days deadline face:

Administrative fines: VND 2,000,000-40,000,000 (organizations)
Interest penalties: Highest bank rate
Legal fees if employee files complaint

5. Improper Rounding

Incorrect: 2 years 8 months = 2.7 years
Correct: 2 years 8 months = 3.0 years (more than 6 months rounds up)

Financial impact: VND 7,500,000 difference on VND 30,000,000 salary

Are Foreign Teachers Exempt from Any Severance Requirements?

Foreign teachers are not exempt from severance pay requirements – the 2019 Labor Code applies equally to Vietnamese and foreign employees working under Vietnamese labor contracts. The only exceptions are: employees eligible for retirement pensions under social insurance laws, or employees absent without excuse for 5+ consecutive working days (Labor Code Article 36).

Common misconception: Some language centers incorrectly claim foreign teachers on yearly contracts aren’t entitled to severance. This is legally false. Vietnamese courts have consistently ruled that contract duration doesn’t affect severance eligibility – only the 12-month minimum continuous service requirement matters.

Notable case precedent: In 2018, Ho Chi Minh City Court awarded VND 2,000,000,000 (approximately USD 87,000) to a foreign teacher at International German School who was unlawfully terminated without severance after 5 years of service. The court ruled that the teacher’s successive yearly contracts constituted continuous employment requiring full severance calculation.

You’re NOT Eligible If:

You voluntarily resign before completing 12 months
You’re dismissed for serious misconduct (theft, violence, revealing trade secrets per Labor Code Article 125)
You’re absent 5+ consecutive days without medical certificate or valid excuse
You receive retirement pension under Vietnamese social insurance

You ARE Eligible If:

Your contract expires naturally after 12+ months
Mutual agreement to terminate after 12+ months
Employer-initiated termination for business reasons (restructuring, economic changes)
Work permit becomes invalid (though this is disputable if employer’s fault)

For more information on leave policies that count toward your service time, see Vietnam Sick Leave Policy: 30 Days Paid Leave Per Year.

How Can Teachers Verify Their Severance Calculation Is Correct?

Verify your severance in 4 steps: confirm your last 6 months’ average salary from payslips, calculate total service years from contract start/end dates with proper rounding, apply the 0.5 multiplier formula, and ensure payment is made within 14 working days after termination. Request written calculation details from your employer before signing final documents.

Step 1: Collect Salary Documentation

Gather your last 6 months of payslips showing:

Base salary paid
Fixed allowances (housing, transport, teaching)
Deductions (taxes, but not for foreign workers’ non-existent UI)

Calculate average: (Month 1 + Month 2 + … + Month 6) ÷ 6

Example:

January: VND 29,000,000
February: VND 29,500,000
March: VND 30,000,000
April: VND 30,000,000
May: VND 30,500,000
June: VND 31,000,000
Average = VND 180,000,000 ÷ 6 = VND 30,000,000

Step 2: Calculate Service Years

Use your contract start date and final work date:

Start: September 1, 2021
End: June 30, 2025
Duration: 3 years, 10 months
Rounded: 4.0 years (more than 6 months rounds up)

Step 3: Apply Formula

Severance = 0.5 × Average Salary × Service Years
Severance = 0.5 × VND 30,000,000 × 4.0
Severance = VND 60,000,000

Step 4: Verify Payment Components

Your final settlement should include:

Severance: VND 60,000,000
Final salary: June 2025 prorated
Unused annual leave: 12 days unused × daily rate
Total payment: Sum of above within 14 working days

Red Flags Indicating Calculation Errors:

Employer mentions “unemployment insurance deduction” for foreign workers
Amount seems low compared to 0.5 × monthly × years formula
Employer refuses to provide written calculation breakdown
Payment delayed beyond 14 working days without explanation
Employer claims yearly contracts don’t accumulate service time

Action If Calculation Disputed:

Request written explanation citing specific Labor Code articles
Document everything: emails, contracts, payslips, termination notice
File complaint with local Department of Labor, Invalids and Social Affairs (DOLISA)
Legal consultation: Contact employment law firms specializing in foreign worker rights
Deadline: File disputes within 1 year of termination (Labor Code Article 189)

Frequently Asked Questions About Severance Pay in Vietnam

Can I Negotiate Higher Severance Than the Legal Minimum?

Yes, the 0.5 months’ salary per year is the legal minimum – you can negotiate higher severance in your employment contract, but employers cannot pay less than this statutory rate. Enhanced severance packages (for example, 1 month per year) are common in international schools and premium language centers.

According to Labor Code Article 46, the 0.5 multiplier establishes the floor, not the ceiling. Many international schools offer enhanced severance as competitive benefits:

Standard formula: 0.5 months per year (legally required)
Enhanced packages: 0.75-1.0 months per year (competitive schools)
Executive contracts: 1.5-2.0 months per year (director/management level)

Always ensure enhanced severance terms are written explicitly in your contract – verbal promises aren’t enforceable under Vietnamese law.

What If My Employer Refuses to Pay Severance?

File a written complaint with your local Department of Labor, Invalids and Social Affairs (DOLISA) within 1 year of termination, documenting your employment period, salary records, and termination circumstances. DOLISA mediates disputes and can impose administrative fines of VND 2,000,000-40,000,000 on non-compliant employers, plus mandatory interest on delayed payments.

The complaint process follows Labor Code Article 189:

Mediation: DOLISA attempts resolution within 30 days
Labor Arbitration: If mediation fails, case moves to arbitration within 7 working days
Court: Final recourse through People’s Court if arbitration unsatisfactory

Documented cases show most disputes resolve at mediation stage when employees provide clear evidence (contracts, payslips, termination notice).

Does Severance Pay Count as Taxable Income?

Severance pay in Vietnam is partially tax-exempt – you only pay personal income tax (PIT) on amounts exceeding 6 months’ average salary under Circular 111/2013/TT-BTC. For example, if severance equals 3 years of service (1.5 months’ salary), the entire amount is tax-free; if it exceeds 12 years (6 months’ salary threshold), only the excess is taxed.

Service Period	Severance Amount	Tax Status
3 years	1.5 months	100% tax-free
6 years	3 months	100% tax-free
12 years	6 months	100% tax-free (threshold)
15 years	7.5 months	1.5 months taxable (excess)

Amounts equal to or less than 6 months’ salary are completely tax-free.

Am I Entitled to Severance If I Resign Voluntarily?

Generally no – voluntary resignation typically forfeits severance rights under Labor Code Article 46, unless you resign due to employer violations (unpaid salary, unsafe conditions, contract breaches) per Article 35. In these specific cases, resignation is treated as constructive dismissal, preserving your severance eligibility with full payment required within 14 working days.

Resignation scenarios:

No severance:

Standard resignation with proper 30-45 days’ notice
Career change to new employer
Personal reasons (family, relocation)

Severance protected:

Unpaid salary for 15+ days after due date
Unsafe working conditions threatening health
Contract violations (employer doesn’t provide agreed benefits)
Harassment or discrimination documented formally

If resigning due to employer violations, document everything before submitting resignation to preserve legal claims.

What Happens to Severance If My School Closes or Goes Bankrupt?

Employee wage claims, including severance pay, hold first-priority status in bankruptcy proceedings under Vietnamese law – your severance must be paid before other creditors, shareholders, or secured debts. The Labor Code Article 98 and Enterprise Law 2020 classify unpaid salaries and severance as priority claims settled immediately from available assets.

Bankruptcy payment hierarchy:

Employees’ claims (outstanding salary plus severance) – FIRST PRIORITY
Tax obligations
Secured creditors
Unsecured creditors
Shareholders (last)

Document your severance claim immediately when bankruptcy proceedings begin. Contact DOLISA and the appointed bankruptcy administrator to register your wage claim. In practice, employees typically recover substantial amounts of owed severance in school bankruptcies due to priority status.

Do Part-Time Teachers Qualify for Severance Pay?

Yes, part-time teachers working 12+ consecutive months qualify for severance using the same 0.5 months’ salary per year formula, calculated on their actual average earnings from the last 6 months. The Labor Code does not distinguish between full-time and part-time status – only continuous service duration and regular employment matter for eligibility.

Example calculation for part-time teacher:

Teaching hours: 40 hours/month
Hourly rate: VND 300,000
Monthly earnings: VND 12,000,000
Service period: 2 years
Severance: 0.5 × VND 12,000,000 × 2 = VND 12,000,000

Critical requirement: Your part-time contract must be formal (written, signed, registered) and demonstrate regular continuous employment – sporadic freelance work doesn’t qualify.

Need More Information on Vietnam Employment Rights?

Understanding severance pay is just one aspect of navigating Vietnam’s employment landscape as a foreign teacher. Labor law compliance, contract negotiations, and workplace rights require careful attention to protect your interests.

Explore More Employment Rights Guidance:

Vietnamese labor regulations cover comprehensive protections for foreign teachers beyond severance calculations. From sick leave entitlements to contract termination procedures, staying informed helps you make confident career decisions and avoid costly mistakes.

Visit our EMPLOYMENT RIGHTS & CONTRACTS category for detailed guides on:

Work permit requirements and renewals
Contract negotiation strategies
Annual leave and holiday entitlements
Tax obligations for foreign teachers
Dispute resolution procedures
Social insurance benefits

Stay protected and informed – bookmark our employment rights resources for quick reference whenever questions arise about your legal protections in Vietnam.

Severance pay in Vietnam follows a clear legal framework – 0.5 months’ average salary per year of service, calculated from your last 6 consecutive months’ earnings, paid within 14 working days after termination. Foreign teachers benefit significantly because the entire work period counts without unemployment insurance deductions that reduce Vietnamese employees’ calculations.

Key protections to remember:

Minimum 12 months service triggers eligibility
Partial years round up after 6 months (valuable for timing)
Multiple contracts combine into continuous service
Payment deadline violations incur fines plus interest
Disputes must be filed within 1 year at DOLISA

Critical verification: Always request written calculation details before signing termination documents. Compare your employer’s calculation against the verified formula using your actual payslips and contract dates. If discrepancies appear, document everything and seek legal counsel immediately.

Vietnamese labor law strongly protects employee rights – understanding these protections ensures you receive full severance compensation earned through your teaching service. Keep thorough records, verify calculations independently, and don’t hesitate to file complaints through proper channels if employers don’t honor their legal obligations.

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