Legal Considerations for Businesses When Downsizing Employees in Vietnam

Legal Considerations for Businesses When Downsizing Employees in Vietnam

Downsizing employees is never an easy decision for any business. Whether driven by economic challenges, restructuring, or operational changes, employers in Vietnam must navigate a complex legal framework to ensure compliance and minimize risks. This guide by Lawyers in Vietnam explores the essential legal considerations when reducing your workforce, helping businesses make informed, lawful, and fair decisions. In case you need advice, please contact Apolo Lawyers via email at contact@apolo.com.vn or Hotline (+84) 903 419 479 for the best advice and support

1. Understanding Legal Grounds for Downsizing

Under Vietnamese Labor Code 2019, companies may only downsize employees under specific lawful grounds, such as:

• Changes in organizational structure or technology
• Economic downturn or financial difficulties
• Mergers, consolidations, or division of enterprises

Employers must clearly document the reasons for downsizing, supported by financial reports or organizational plans. Failure to justify downsizing with legitimate grounds can lead to disputes or claims of unlawful termination.

Legal Considerations for Businesses When Downsizing Employees in Vietnam​

2. Compliance with Termination Procedures

To avoid legal challenges, businesses must strictly follow the procedures prescribed by law:

• Consultation with the grassroots trade union (if applicable)
• Advance notice: 30 days for fixed-term contracts; 45 days for indefinite-term contracts
• Written notice provided to the affected employees
• Notification to the labor authority if downsizing affects multiple employees

Proper documentation and transparent communication are essential to demonstrate compliance and maintain trust during the process.

Legal Considerations for Businesses When Downsizing Employees in Vietnam

3. Employee Benefits and Severance Obligations

Employers are required to compensate employees in accordance with labor regulations, including:

• Severance allowance: At least half a months salary for each year of service
• Unemployment insurance: Ensure timely submission of required documents so employees can claim benefits
• Outstanding entitlements: Payment of accrued leave, overtime, or unpaid salaries

Failure to meet these obligations can result in legal penalties and damage to the companys reputation.

4. Minimizing Legal Risks

To safeguard the business from potential lawsuits or disputes, companies should:

• Conduct a legal audit before initiating downsizing
• Maintain thorough records of consultation and notifications
• Seek guidance from experienced labor lawyers in Vietnam to ensure compliance with the latest regulations

Legal advice is particularly crucial for businesses with large-scale restructuring or complex employee arrangements.

Downsizing employees in Vietnam requires a careful balance between business necessity and legal compliance. By following the Labor Code 2019 and ensuring transparent, lawful procedures, businesses can reduce the risk of disputes while maintaining a positive employer brand.

For tailored legal support, Lawyers in Vietnam provides expert advice and representation to help businesses navigate downsizing efficiently and lawfully.

>>Read more: Terminating Labor Contracts with Foreign Workers in Vietnam

APOLO LAWYERS