The method for determining the average wage to calculate severance allowance

Mon, 16 Aug 2021 15:55:00  |  Print  |  Email   Share:

Mr. Dang Duc Giang (Hanoi) worked for an employer from August 2017 to August 31, 2019, when his labor contract was terminated. His salary had increased from 20 million VND/month to 24 million VND/month as of April 2019. He received his August salary on August 20, 2019.

Mr. Giang asked whether the salary for six consecutive months used to determine his severance allowance will be based on the salary average from March 2019 to August 2019 or from February 2019 to July 2019?

Mr. Giang's question was answered as follows by lawyer Tran Van Toan of Khanh Hung Law Office, Hanoi Lawyer Association:

According to Mr. Dang Duc Giang, it was discovered that during the period of working for an employer from August 2017 to the end of August 2019 (24 months), Mr. Giang and the employer did not pay unemployment insurance premiums; or did not pay unemployment insurance premiums for at least full 12 months within 24 months before terminating the labor contract or working contract, in the case that it is obligated to participate in unemployment insurance as specified at Points a and b, Clause 1, Article 43 of the Law on Employment, Mr. Giang is ineligible for unemployment allowance receipt as prescribed in Clause 2, Article 49 of the Law on Employment.

Article 48 of the Labor Code states that in case a labor contract terminates under Clause 1, 2, 3, 5, 6, 7, 9, or 10, Article 36 of this Code, the employer shall pay a severance allowance to the employee who has worked regularly for full 12 months or longer at the rate of half of a month’s wage for each working year.

The working period used for the calculation of severance allowance is the total period during which the employee actually works for the employer minus the period during which the employee benefits from unemployment insurance under the Law on Social Insurance, and the working period for which the employee has received severance allowance from the employer.

The wage used for the calculation of severance allowance is the average wage following the labor contract for 6 months preceding the time the employee loses his/her work.

For the case of Mr. Dang Duc Giang, he began working for an employer on August 1, 2017 and terminated his labor contract on August 31, 2019, if he is not eligible for unemployment allowance under Clause 2, Article 49 of the Law on Employment, the employer is responsible for paying the severance allowance to Mr. Giang under the provisions at Article 48 of the Labor Code.

According to Clause 3, Article 48 of the Labor Code, the salary used to calculate Mr. Giang's severance allowance is his average salary of the six months preceding his resignation, from March 2019 to the end of August 2019.

The severance allowance = (March salary + April salary + May salary + June salary + July salary + August salary): 6 x ½ x 2.

Lawyer Tran Van Toan

Khanh Hung Law Office, Hanoi Lawyer Association

By: Online Newspaper of the Government/ Translator: Viet Nguyen-Bizic

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