When a company restructures or upgrades its technology, laying off some employees is often unavoidable. Yet this is one of the most error-prone institutions of the Labour Code: missing a single procedural step can render the layoff unlawful and expose the company to compensation liability. Here are 5 notes employers must remember, under Articles 42, 44 and 47 of the Labour Code 45/2019/QH14 and the new sanctions in Decree 283/2026/ND-CP.
1. Identify the correct legal ground: one of the three cases in clause 1 Article 42
Clause 1 Article 42 lists three cases deemed “organizational or technological changes”: (a) changes in organizational structure or labour reorganization; (b) changes in production or business processes, technology, machinery or equipment associated with the employer industry or trade; (c) changes in products or product structure. The company must invoke exactly one of these three cases — a vague “difficulties” reason cannot justify mass layoffs.
Keep three institutions strictly distinct, as they are often confused: layoffs due to organizational/technological changes (Article 42) differ from unilateral termination of labour contracts (Article 36) and from disciplinary dismissal (Article 125). Getting the institution wrong at the outset can invalidate every subsequent step.
2. Draw up the labour utilization plan FIRST, lay off AFTER
Where organizational or technological changes affect the employment of many employees, the employer must formulate and implement a labour utilization plan under Article 44 (clause 3 Article 42). Its key contents include: the number and list of employees continuing to work / sent for retraining to continue working / switched to part-time work; employees retiring; employees whose labour contracts must be terminated; the rights, obligations and responsibilities of the employer in implementing the plan and employment assurance measures; and the cost estimate and funding sources (specifying job-loss allowance, severance allowance and retraining funds).
When formulating the plan, the employer must consult the grassroots employee representative organization (where one exists); the plan must be publicly announced to employees within 15 days of its adoption. Failure to draw up the plan, a plan missing key contents, or failure to consult during formulation → fines of VND 5–10 million for individuals, VND 10–20 million for organizations (point b clause 3 Article 18 of Decree 283/2026/ND-CP). Note: the law does not quantify how many employees count as “many” — companies must not invent their own threshold.
3. Prioritize retraining and job conversion before laying off
Clause 3 Article 42 provides that where new jobs are available, retraining employees for continued employment takes priority. This is both a statutory duty and a crucial “shield” in disputes: only when employment cannot be resolved and employees must be laid off may the company proceed, paying the job-loss allowance (clause 5 Article 42). Skipping retraining and job conversion makes it hard for the company to prove the layoff decision was justified.
4. Comply with the “dual procedure” — missing one step means unlawfulness
Clause 6 Article 42: layoffs may only proceed after both steps are completed: (i) consulting the grassroots employee representative organization (for workplaces having one of which the employee is a member); and (ii) giving 30 days prior notice to the provincial People Committee and to the employee.
This is the most common corporate mistake in labour disputes: skipping either step → unlawful layoff, risking a ruling of unlawful unilateral termination of the labour contract with compensation under Article 41 of the Labour Code. Administrative sanction: layoffs without consultation or without 30-day prior notice → fines of VND 5–10 million for individuals, VND 10–20 million for organizations, plus an order to pay wages for the days of missing notice (point a clause 3 Article 18 of Decree 283/2026/ND-CP).
5. Calculate and pay the full job-loss allowance — do not confuse it with severance
Employees who have worked regularly for 12 months or more and lose their jobs receive a job-loss allowance under Article 47: 01 month salary for each working year, but at least 02 months salary (even where the countable period is under 24 months, at least 02 months are paid). The salary basis is the average salary of the 06 consecutive months under the labour contract before job loss; where several consecutive labour contracts exist, the latest one applies.
The countable period equals total actual working time minus periods covered by unemployment insurance and periods already paid severance or job-loss allowances; odd months of 06 months or fewer count as half a year, over 06 months as one year (Article 8 of Decree 145/2020/ND-CP).
The key distinction: layoffs under Article 42 → job-loss allowance (Article 47: 01 month salary per year, minimum 02 months); ordinary labour contract terminations → severance allowance (Article 46: half a month salary per year). The two regimes differ in amount and conditions — never mix them.
Failure to pay or underpaying the job-loss allowance → fines scaled by the number of affected employees: VND 1–2 million for individuals (1–10 employees), 2–5 million (11–50), 5–10 million (51–100), 10–15 million (101–300), 15–20 million (301 or more) — double for organizations — plus an order to pay the full allowance with interest at the highest non-term deposit rate of state commercial banks at the time of sanctioning (clause 2 Article 18 of Decree 283/2026/ND-CP). For organizations affecting 301 or more employees, fines reach VND 40 million.
Conclusion
A lawful layoff for organizational or technological changes is a closed 5-step process: identify the correct ground under clause 1 Article 42 → draw up the labour utilization plan and announce it within 15 days → prioritize retraining → complete the “dual procedure” (consultation + 30-day notice) → calculate and pay the full job-loss allowance. Skipping any step can render the layoff unlawful.
FAQs
How many employees trigger the labour utilization plan requirement?
The law does not quantify “many employees” in clause 3 Article 42. Companies must not set their own threshold; when changes affect the employment of many employees, a plan is required.
Which authority receives the 30-day prior notice?
Under clause 6 Article 42, 30-day prior notice goes to the provincial People Committee and to the employee. Companies should state it as the law does; the specific receiving unit should be checked locally.
How does the job-loss allowance differ from severance?
Job-loss allowance (Article 47): 01 month salary per working year, minimum 02 months — for layoffs under Article 42 (and Article 43). Severance (Article 46): half a month salary per year — for ordinary labour contract terminations.
Legal sources
- Labour Code 45/2019/QH14 (cited per consolidated document 18/VBHN-VPQH 2026): Article 42 (employer obligations upon organizational/technological changes), Article 44 (labour utilization plan), Article 47 (job-loss allowance).
- Decree 145/2020/ND-CP: Article 8 (severance and job-loss allowances).
- Decree 283/2026/ND-CP (effective 10/9/2026, replacing Decree 12/2022/ND-CP): Article 18 (layoff violations), Article 7 (individual/organization fine levels).
Is your company restructuring or upgrading technology and needs a compliant labour utilization plan? Reach us via the Contact page of FLAT Law Firm for support from plan drafting to allowance payment.
The legal content of this article is reviewed by FLAT’s AI Legal Council and submitted to the owner for approval; it is not an opinion of a licensed lawyer and does not replace legal advice for specific cases.
For reference only, not legal advice.