Short answer: under Vietnam’s Labor Code 2019, cutting headcount during restructuring is lawful only on specific statutory grounds — organizational/technological change, economic reasons, or business reorganization — and only after a written workforce plan, consultation with the employee representative organization, and 30 days’ prior notice to the provincial People’s Committee and the affected employees. Each eligible employee receives a job-loss allowance of one month’s salary per year of service, minimum two months.
The real-world problem
A company automates its packaging line or merges two departments and needs to let 40 people go. Management wants it done this month; the law requires a sequence that takes longer. Skipping steps does not speed things up — a court can declare the terminations unlawful and order reinstatement plus back pay.
Statutory grounds (Labor Code 45/2019/QH14, in force)
Article 42 — organizational/technological change or economic reasons. “Change in structure or technology” covers three cases: changes to the organizational structure or labor reorganization; changes to processes, technology, machinery or equipment tied to the employer’s line of business; and changes to products or product mix. “Economic reasons” covers two cases: economic crisis or recession, and implementation of state policies on economic restructuring or international commitments.
Article 43 — division, separation, merger, acquisition, sale, lease, conversion, or transfer of ownership/use rights. The same procedural duties apply when jobs disappear because the business itself is reorganized.
Article 44 — the workforce utilization plan. Where the change affects many employees, the employer must build and implement a plan covering: who stays, who is retrained, who moves to part-time, who retires, who must be terminated, the rights and obligations of each side, and the funding to implement it. Retraining takes priority wherever a new position exists. The plan must be disclosed to employees within 15 days of approval.
The mandatory sequence
- Identify the statutory ground precisely (Article 42 or 43) — “restructuring” alone is not a legal ground.
- Draft the Article 44 workforce plan, prioritizing retraining and redeployment.
- Consult the grassroots employee representative organization (where one exists and the employee is a member).
- Notify the provincial People’s Committee and each affected employee at least 30 days in advance (Article 42(6)).
- Only then terminate, and pay the job-loss allowance under Article 47.
Cost: the job-loss allowance (Article 47)
Employees who have worked regularly for 12 months or more and lose their jobs on these grounds receive one month’s salary per year of service, with a floor of two months’ salary. Salary means the average of the six consecutive months under the labor contract before the job loss. Creditable service time equals actual time worked minus periods covered by unemployment insurance and periods already compensated with severance or job-loss allowances. Separately, eligible employees claim unemployment insurance benefits from the social insurance agency.
Common mistakes
- Treating a performance-based dismissal as a “restructuring” layoff to use the Article 42 track.
- Notifying the People’s Committee but skipping consultation with the representative organization — or vice versa.
- Counting the 30 days from the decision date instead of ensuring 30 days’ actual advance notice.
- Paying the allowance on base salary only, instead of the six-month contractual average.
- Forgetting that the workforce plan must be publicized to employees within 15 days.
Frequently asked questions
Can we dismiss employees immediately if the company is losing money?
No. Financial difficulty may qualify as an “economic reason” under Article 42, but the procedure — workforce plan, consultation, 30 days’ notice — is still mandatory. Urgency does not waive it.
Do we owe the allowance to someone employed for 8 months?
No. Article 47 requires at least 12 months of regular work. Shorter-service employees are still entitled to the procedural protections, just not the statutory job-loss allowance.
Is the 30-day notice to the People’s Committee the same as notice to the employee?
Both are required and run in parallel: 30 days’ advance notice to the provincial People’s Committee and to each affected employee, after consultation with the representative organization.
Can we offer a mutual separation agreement instead?
Yes — termination by mutual agreement (Article 34) is a separate, valid track and often faster, but the agreement must be genuinely voluntary with consideration the employee accepts. It cannot be used to bypass the allowance where Article 42/43 applies and the employee does not truly consent.
What if the employee representative organization disagrees with our plan?
The law requires consultation (exchange of opinions), not consent. Document the consultation properly; disagreement alone does not block the process, but a missing consultation record can invalidate the terminations.
Facing a restructuring? FLAT Law Firm guides employers through workforce reductions that survive scrutiny — contact us before the first notice goes out.
This article has been quality-reviewed by the FLAW AI Legal Council