Is it illegal in Vietnam to terminate a labor contract without paying social insurance?
Terminating a labor contract without fulfilling social insurance obligations—from payment to finalization—not only violates labor and social insurance laws but may also lead to lawsuits, heavy administrative penalties, and compensation to employees. This article analyzes the responsibilities and rights of both parties under the Labor Code 2019 and the new Social Insurance Law 2024, effective from July 1, 2025.
Obligations to pay social insurance when signing a labor contract
According to the 2024 Social Insurance Law, effective July 1, 2025, all labor contracts of one month or more—including probationary contracts—must participate in social insurance (SI), health insurance (HI), and unemployment insurance (UI). Current contribution rates are: employees contribute 10.5% and employers 21.5%.
Failure to pay in full and on time will result in administrative penalties, back payment, and interest charges for late payment as stipulated by law.
Legal consequences if social insurance is owed when a contract is terminated
A 2019 court ruling in Ho Chi Minh City required an employer to pay over 78 million VND in compensation for unlawful termination, and also to retroactively pay, finalize, and return the employee’s social insurance book for the full contract period.
In addition to civil liability, employers can face administrative fines of up to hundreds of millions of dong under Decree 12/2022. Repeat or serious offenses may also be criminally prosecuted.
Litigation process in social insurance disputes
If the employee files a lawsuit, the Court may proceed without the employer's presence if the company:
Fails to appear despite court summons;
Fails to provide documentation justifying the termination;
Fails to finalize and return the social insurance book.
The Court will rely on the employee’s request, contract, and relevant documents to compel the employer to fulfill obligations.
What should employees do to protect their social insurance rights?
Collect documents: employment contract, payroll, termination decision, work emails, etc.
Submit a formal request for the company to finalize and return the SI book.
File a lawsuit within one year from the date their rights were violated (Article 188, Labor Code 2019).
Request: back pay, compensation for 2 months’ salary, compensation for lack of notice, and SI contributions and book finalization.
Practical lessons and advice for businesses
Review HR – insurance – termination procedures.
Implement clear performance evaluation criteria.
Ensure termination decisions are well-reasoned and documented.
Adhere to notice periods: 30 days for fixed-term contracts, 45 days for indefinite contracts.
Seek dialogue and mediation before disputes escalate.
Failing to contribute social insurance upon termination is a serious legal violation, damaging employee rights and exposing businesses to legal, financial, and reputational risks.
DEDICA Law Firm is committed to supporting both employees and businesses in all matters related to labor contracts and social insurance—from internal advice, process audits to court representation.
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