India and Vietnam both set a service “threshold” for layoff compensation — India: 240 days of continuous service; Vietnam: 12 months of regular work. But the payouts differ widely: India 15 days’ wages per year for “workmen”, Vietnam 0.5–1 month’s wage per year for all employees. In mass layoffs, India’s 240-day threshold is “wider”, but the government-approval procedure is the real barrier.
India: 15 days’ wages per year under Section 25F — plus government approval
The Industrial Disputes Act 1947, Section 25F, sets conditions precedent for retrenching workmen with 1+ years (240 days) of continuous service: (1) 1 month’s written notice stating reasons, or wages in lieu; (2) compensation of 15 days’ average pay for each year of continuous service (part over 6 months rounded to a full year); (3) notice to the appropriate government.
The key point: non-compliance with Section 25F voids the retrenchment ab initio — the worker is declared in continued service with full back wages. Establishments with 100+ workers (300 in some states) must also seek government permission before retrenching — which can be refused.
Scope: this regime covers “workmen” (hands-on/technical workers, excluding managers and highly-paid specialists). For non-workmen, severance is contractual — a Singapore-like model.
Vietnam: 12 months of regular work — and two payout rates
Article 46 of the Labour Code 2019: severance allowance 0.5 month’s wage/year — 12+ months of regular work, UI time excluded. Article 47: job-loss allowance 1 month’s wage/year, minimum 2 months’ wages — structural/technological change or economic reasons, no UI deduction.
Threshold comparison: India’s 240 working days (≈8 months counting rest days) is “wider” than Vietnam’s 12 months — a 9–11 month worker is protected in India but not yet in Vietnam (absent special cases). But payout: India’s 15 days’ wages/year equals 0.5 month’s wage/year — exactly Vietnam’s ordinary severance rate (Article 46), and half the job-loss rate (Article 47, 1 month/year).
Scope: Vietnam covers all employees with 12+ months — no workman/manager split as in India. A plant director cut for economic reasons in Vietnam still gets job-loss allowance; in India, senior management outside “workman” follows agreement.
Side by side: the 240-day or the 12-month threshold?
The real barrier: in India it is not money (15 days’ wages/year is fairly “soft”) but procedure — 1 month’s proper notice, government notification, and for large establishments permission (refusable). A procedural slip voids the entire round — a “total loss” risk. In Vietnam the barrier is money (1 month’s wage/year, minimum 2 months, across all tenure) — simpler procedure (labour-utilisation plan, union consultation).
Rounding: India rounds a part over 6 months up to a full year — more worker-friendly than Vietnam’s full-year computation (Articles 46–47 count years of service, fractions per guiding regulations). A 5-year-7-month worker counts as 6 years in India.
Tax: Indian retrenchment compensation is tax-exempt up to the lowest of: the formula amount, INR 500,000, or the actual receipt — under the Income-Tax Act. Factor this into large-package budgeting.
Transition phase: India’s 4 new labour codes took effect 21/11/2025 — retrenchment/workman rules are being re-read under the new frame. Track the guidance of the state where the establishment sits; do not mechanically apply old IDA 1947 readings.
Practical recommendations
First, in India, treat procedure as priority one — one slip (missing notice, wrong form, no government intimation) can void the whole round. Second, identify who counts as “workman” in the cut list — managers/specialists follow separate contractual terms, not Section 25F. Third, in Vietnam, do not confuse the 12-month threshold with India’s 240 days in regional HR management — two different “measuring sticks”; misapplication misidentifies beneficiaries.
Frequently asked questions
What does India’s Section 25F require for retrenchment?
For workmen with 1+ years (240 days) of continuous service: (1) 1 month’s written notice stating reasons or wages in lieu; (2) 15 days’ average pay per year of continuous service (part over 6 months rounded to a year); (3) notice to the government. Non-compliance voids the retrenchment ab initio.
Who is a “workman” in India?
A hands-on/technical worker — excluding managers and highly-paid specialists. The Section 25F regime covers only workmen; others follow contractual severance.
Is India’s 240 days “wider” than Vietnam’s 12 months?
Yes — 240 working days (≈8 months counting rest days) is below 12 months. A 9–11 month worker is protected in India but not yet eligible for Vietnamese severance/job-loss allowance.
Which Vietnamese rate matches India’s 15 days’ wages/year?
About 0.5 month’s wage/year — matching ordinary severance (Article 46), half the job-loss rate (Article 47: 1 month/year). But India adds procedural barriers (notice, government notification/permission) Vietnam does not have at that level.
Does retrenchment in India need government permission?
Establishments with 100+ workers (300 in some states) must seek government permission before retrenching workmen — refusable. The biggest barrier, completely unlike Vietnam (labour-utilisation plan plus union consultation).
For detailed advice on workforce reductions and compliance in India or Vietnam, companies may contact FLAT Law Firm.
This article has been quality-reviewed by the FLAW AI Legal Council. Content was prepared by the FLAT Law Firm AI Legal Council and has not been reviewed by a human lawyer.
