Is Severance Pay Granted When an Employment Contract Expires?

May 16

During the course of employment, many workers leave their jobs when their labor contracts expire, yet they are unsure whether they are entitled to severance pay. This is an important benefit but depends on several factors governed by current labor laws.

So, are employees eligible for severance pay when their employment contract ends due to expiration? Let DEDICA LAW explain this issue in detail below.

1. What Is Severance Pay?

According to the 2019 Labor Code, severance pay is a sum of money that the employer must pay to the employee upon termination of the labor contract, provided that certain conditions are met.

2. Can You Receive Severance Pay When Your Contract Expires?

✅ Yes, if the employee meets all of the following criteria:

Has worked continuously for at least 12 months, and
Is not eligible for job loss allowance, and
The period of employment is not fully covered by unemployment insurance (UI).

📌 In other words, employees whose contracts end due to expiration may still be entitled to severance pay if:

They did not contribute to UI for the entire working period (e.g., work prior to 2009), or
They worked for employers who did not participate in UI contributions on their behalf.

3. How to Calculate Severance Pay (According to Current Regulations)

Under Article 46 of the 2019 Labor Code, severance pay is calculated as follows:

Severance Pay = 0.5 × Number of years not covered by UI × Average monthly salary over the last 6 months

Where:

0.5 is the severance coefficient (equivalent to half a month's salary for each year of work),
Number of years not covered by UI = Total actual working time – Time already covered by UI,
Average monthly salary = The average of contractual salary over the final 6 months before termination.

✔️ Example:

The employee worked from 2005 to 2024.

The employer only started contributing to UI in 2009.

Therefore, severance is calculated for the period 2005–2008 = 4 years.

If the average salary in the last 6 months was VND 12,000,000, then:

→ Severance Pay = 0.5 × 4 × 12,000,000 = VND 24,000,000

4. When Severance Pay Is Not Applicable

Employees whose contracts expire are not eligible for severance pay if:

The entire working period has been covered by unemployment insurance, or

They are dismissed or unilaterally terminate the contract unlawfully, or

They receive a retirement pension upon termination.

5. When Must Employers Pay Severance?

According to Article 48 of the 2019 Labor Code, employers must:

Pay severance within 14 working days from the date of contract termination.

In special cases (e.g., natural disasters, fire, epidemics, etc.), this period may be extended but must not exceed 30 days.

Conclusion

Employees whose labor contracts expire may still be eligible for severance pay, provided they meet the legal requirements and have working time not covered by unemployment insurance. Therefore, it is crucial to review your UI contribution history and actual working period to protect your lawful rights.