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 Question: Due to many difficulties caused by the world economy down turn, our company is forced to shrink its operation scale. Therefore, many of our labourers are deemed to be redundant. Can we reduce our workforce by terminating the labour contract with these labourers?


According to the regulation of the Labour Code and the Decree No.44/2003/ND-CP dated 9th May 2003 of the Government detailing and guiding some articles of the Labour Code regarding the labour contract, your company is only entitled to unilaterally terminate their labour contracts in cases of acts of God, fires or cases where due to the requests of competent State bodies of the provincial or higher level, to enemy sabotage or epidemics that cannot be overcome though your company had already tried to apply all measures. In this case, your company must comply with provisions of the Labour Code on giving notice to labourers; accordingly subject to kind of labour contract, your company must give an advance notice to labourer respectively. Except the above and cases of terminating labour contract due to re-organization of the company structure as stipulated in Article 17 of the Labour Code, any unilateral termination of labour contracts by employer shall be deemed to be illegal.

Anyhow, if your company is forced to shrink its operation scale caused by other reason (e.g. shortage of client’s orders; the decline of business), your company shall only be entitled to cut-off its labour force on agreement basis with its labourer. Accordingly, your company must discuss with labourers to terminate the labour contract or temporarily postpone the performance of labour contract under the provisions in Article 35(c) of the Labour Code.

In case labour contracts are terminated either by unilaterally termination or mutual agreement, your company shall have the responsibility to pay severance allowance to labourer who has worked for full 12 months or more in line with Article 42 of the Labour Code, accordingly each working month shall be paid half of a monthly salary. Besides, if labour contracts are terminated by mutual agreement, your company has to pay other benefits to labourers according to mutual agreements between your company and labourers.    

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