Wage and Severance Pay Disputes with FDI Companies – What Is the Resolution Process?
1. Characteristics of Disputes in FDI Enterprises
FDI (Foreign Direct Investment) companies often use employment contracts in English and apply complex salary, bonus, and allowance policies. In reality, many labor disputes in FDI firms relate to delayed payments of wages, allowances, insurance, and severance pay. When such disputes arise, the legal process still follows the 2019 Labor Code and related guiding decrees.
2. Legal Basis and Statute of Limitations
Wages and severance pay are considered personal rights, falling under individual labor disputes.
Statute of limitations for filing a claim:
Mediation is not mandatory for severance pay disputes.
Claims must be filed within 6 months to 1 year from the date of discovering the violation, depending on the case.
3. Dispute Resolution Process
A. Labor Mediation (if applicable):
This is a pre-litigation step, carried out within the company or by a labor mediator.
However, mediation is not mandatory for severance pay disputes.
B. Filing a Lawsuit – Choosing the Resolving Authority:
Labor arbitration (if agreed upon or if mediation fails).
People’s Court, with a file including: employment contract, payslips, confirmation of working period, social insurance records, and proof of wage/severance debts.
For FDI cases: if the contract stipulates foreign law, Vietnamese law still applies if the case is handled in Vietnam.
4. Severance Pay Calculation & Payment Deadline
According to Article 46 of the 2019 Labor Code:
Employees working for ≥12 months are entitled to half a month's salary per year of work.
The salary is calculated based on the average wage of the 6 months before termination, including basic salary and regular allowances.
Employers must pay severance within 14 days from the contract’s end date; in special cases, up to 30 days.
5. Risks of Violations & Employer Liability
FDI companies delaying wage/severance payments may be fined 1–50 million VND.
Delays in social insurance and unemployment insurance payments are also common sources of disputes.
Employees filing lawsuits may claim late payment interest and damages for deadline violations.
6. Duration and Efficiency of Dispute Resolution
Labor Arbitration: Fast, typically resolved in 30–90 days.
Court Proceedings: Take longer, possibly 6–9 months depending on the case volume.
Once a judgment is made, the company must comply with enforcement, including paying interest on late payments.
7. Expert Advice & Practical Notes
FDI companies should establish transparent HR policies, including allowances, bonuses, and severance pay.
Employment contracts must clearly and transparently define compensation and benefits.
Employers should ensure severance is paid within 14 days to avoid legal risks and prolonged disputes.
Employees must collect all relevant documents: contracts, pay slips, handover minutes, and violation evidence, and file lawsuits within the statute of limitations to protect their rights.
Conclusion
Wage and severance pay disputes in FDI companies can be resolved effectively if the correct steps are followed:
Verify your rights → Mediate if needed → File with arbitration/court → Monitor enforcement.
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