How to Properly Handle Labor Discipline in Vietnam in 2026 to Avoid Compensation?

In labor discipline, a seemingly reasonable termination decision—even when an employee has clearly committed a violation—can still be declared by a court as a wrongful termination of contract simply due to a missing meeting, a missing report, or a notice sent a few days late. In such cases, the business must reinstate the employee, pay salary for the days they were not allowed to work, and pay additional compensation of at least two months' salary. The majority of damages stem from procedural errors, not from whether the employee committed the violation or not.

Why can a business still lose in court when an employee's theft of company property is clear? Is missing a participant in the meeting, or missing the six-month statute of limitations, really enough to invalidate an entire disciplinary decision? And if your company lets the HR department handle it using templates downloaded from the internet, will that process stand up when challenged or sued? These are questions that many business owners, especially foreign businesses unfamiliar with Vietnamese procedures, only ask when they are already holding a court summons. This article analyzes the current legal framework, the legally correct procedure, and common mistakes, helping businesses handle discipline both legally and avoid unnecessary compensation.

Why improper disciplinary action leads to compensation obligations

Vietnam's labor law allows employers to apply four forms of discipline, in increasing order of severity (Article 124 of the 2019 Labor Code):

• Reprimand;
• Extension of the salary increase interval for no more than 06 months;
• Demotion;
• Dismissal.

Dismissal is the most severe form, completely terminating the employment relationship, and it is also where businesses are most prone to tripping up. A point that surprises many business owners is that although dismissal is classified by law as a form of discipline, if it is applied on the wrong grounds or following the wrong procedure, the court will view it as the employer unilaterally terminating the labor contract illegally. At this point, the consequences are no longer an internal matter but turn into a financial obligation clearly prescribed by law.

What does this mean for your business? Compensation is not a fixed figure but increases over time. Labor disputes often last for many months, sometimes over a year through various court levels, and the entire period is counted as days the employee was not allowed to work, which the company must pay for. If the employee does not want to return, the business must still pay the aforementioned amount plus severance pay, and negotiate an additional amount of at least two months' salary to terminate the contract. A hasty dismissal decision can therefore be many times more expensive than the cost of doing it correctly from the start.

Four mandatory principles and the statute of limitations not to be missed

Before discussing procedural steps, businesses need to understand the principles that, if even one is missing, are sufficient for the disciplinary decision to be considered illegal. The 2019 Labor Code sets out core principles when handling labor discipline.

These four points are binding on each other: the burden of proving fault belongs to the company, not the employee having to prove their innocence; there must be the participation of the representative organization of employees at the grassroots level of which the employee is a member; the employee must be present and have the right to self-defense; and everything must be recorded in minutes. Along with this, the law prohibits applying multiple forms of discipline for the same act, and prohibits disciplinary action when the employee is on sick leave, maternity leave, raising a child under 12 months old, or is being temporarily detained or held in custody. A dismissal decision issued while a female employee is on maternity leave will almost certainly be declared illegal, no matter how justified the reason for discipline is.

The second factor that businesses often lose track of is the statute of limitations. The disciplinary process must be completed within a certain period from the date the violation occurred.

In practice, many businesses let the matter drag on for months due to internal investigations, waiting for leadership opinions, or simply forgetting, and by the time they issue a decision, the six-month limit has passed. At that point, even if the evidence of the violation is complete, the company loses the right to take disciplinary action. Therefore, immediately upon discovering a violation, the first thing to do is to determine the statute of limitations applicable to that case and start the countdown.

Five-step procedure for lawful disciplinary action

The specific order and procedure are guided by Article 70 of Decree 145/2020/ND-CP. It can be visualized as five mandatory steps in order:

1. Drafting minutes and collecting evidence. When a violation is discovered at the time it occurs, the employer drafts a violation report and notifies the representative organization of employees at the grassroots level. If discovered after the act has occurred, proceed to collect evidence proving the fault.
2. Notifying the meeting at least 05 working days in advance. The company must send a notice regarding the content, time, and location of the meeting, the name of the person to be disciplined, and the act of violation to all mandatory participants, ensuring they receive it before the meeting.
3. Conducting the meeting. Hold the meeting at the correct time and place as notified. If a mandatory participant has been properly notified but does not confirm attendance or is absent, the company may still proceed with the meeting.
4. Drafting the meeting minutes. The content of the meeting must be recorded in minutes, approved before conclusion, and signed by the participants. Persons who do not sign must have their full name and reason clearly recorded in the minutes.
5. Issuing a decision within the statute of limitations. The person with authority according to the labor regulations issues the disciplinary decision within the aforementioned statute of limitations and sends it to all parties who must participate.

A fundamental point that precedes all five steps above: a business may only discipline an employee for an act that has been clearly specified in the internal labor regulations. For businesses employing 10 or more employees, internal labor regulations must be in writing and registered, and shall only take effect 15 days from the date the competent authority receives the complete dossier. From July 1, 2025, when the local government machinery shifts to a two-tier model and labor management functions are rearranged, the registration dossier for internal labor regulations is submitted to the specialized agency for internal affairs under the Provincial People's Committee, or the commune level if authorized, according to Decree 129/2025/ND-CP. Businesses that registered regulations previously should review whether the version currently being applied is still appropriate and in effect.

Common mistakes leading to compensation

The majority of lost lawsuits do not stem from the employee not being at fault, but from gaps in the process. Below are recurring mistakes in practice.

Dismissal for an act not included in the regulations. This is the most common and serious error. An employee may truly cause damage to the company, but if that act is not described as grounds for dismissal in the registered internal labor regulations, the dismissal decision is still illegal.

Skipping mandatory participants or failing to draft minutes. Conducting a meeting without inviting the representative organization of employees, not giving the employee the opportunity to be present and defend themselves, or handling discipline solely through a decision without any meeting, are all violations of the procedure under Articles 122 and 70 mentioned above.

Fining or deducting salary as a substitute for discipline. Deducting salary or fining an employee for violations is a method strictly prohibited by law and is not a legal form of discipline.

Dismissal without sufficient grounds regarding the number of days of voluntary absence. The law only allows dismissal when an employee voluntarily leaves their job for 05 accumulated days in 30 days, or 20 accumulated days in 365 days, without a legitimate reason. Dismissing an employee when they have only been absent for a few days, or when they have a legitimate reason such as illness with confirmation from a medical facility, is not in accordance with regulations.

The consequences of these mistakes often come in two layers. The first layer is civil liability toward the employee under Article 41 mentioned: reinstatement, paying salary for the days off, and additional compensation. The second layer is administrative penalties. According to Article 19 of Decree 12/2022/ND-CP, handling labor discipline incorrectly regarding the procedure or statute of limitations is subject to fines, and the penalty level for organizations is twice that for individuals, meaning from 10 to 20 million VND for businesses. Prohibited acts such as dismissal for acts not in the regulations, or fining/deducting salary instead of discipline, can be fined up to 40 to 80 million VND for businesses, accompanied by measures compelling the reinstatement of the employee and payment of full salary.

DEDICA accompanies businesses in handling labor discipline

Encountering difficulties when handling discipline is a very common situation for businesses that do not have a dedicated legal department, especially small and medium enterprises or foreign enterprises familiar with practices in other countries. This is not a sign that the business is doing things wrong, but usually just that there is no standard process available to rely on when an incident arises.

Through regular legal consulting services, i.e., the outsourced legal department model, DEDICA helps businesses review and standardize internal labor regulations, register them with the correct competent authority, build a set of templates for violation reports, meeting notices, and disciplinary decisions in accordance with Article 70 of Decree 145/2020, check the statute of limitations and grounds before each case, accompany the business at the disciplinary meeting, and provide early warnings when regulations change. Each consulting product is checked by an experienced lawyer before reaching the business and is supported bilingually for foreign management teams. Placing the cost of a regular consulting package next to a compensation amount plus fines for just one incorrect disciplinary case, businesses will see that the majority of these risks can be entirely prevented in advance.

Each labor discipline case has its own details regarding the violation, the company's regulations, and the timing of handling. DEDICA Law Firm accompanies businesses from the stage of building regulations and standardizing the disciplinary process to handling each specific case in a way that is both legal and safe from the risk of disputes. Contact DEDICA to have a lawyer review your business's labor discipline process before an incident becomes a costly dispute.

The content of this article is for reference based on legal regulations at the time of drafting. Each business has different legal risks and each case has specific details; please consult a DEDICA lawyer for accurate advice for your specific case.