Retrenchment in Vietnam – Avoiding Costly Mistake

Labour restructuring is one of the most complex legal processes in Vietnam. In this post, we’ll break down the most common pitfalls and how to overcome them.

Mistake 1: Proving Organisational Changes

Without clear definitions in the law, companies must prepare robust evidence to justify retrenchment, including:

  • Financial reports showing reduced operations.
  • Declining production or exports.
  • Changes to employee headcounts.

Case Study: Proving Necessity

In a court case, Company N proved it reduced operations by submitting:

  • Export data showing a decline.
  • Employee social insurance records showing reduced headcount.

Proving both necessity and actuality is critical to compliance.

Mistake 2: Inadequate Trade Union Consultation

Informal or incomplete consultation with the grassroots trade union is a recurring issue. Courts require formal meeting records signed by the trade union’s executive committee to validate the process.

Case Study: Lack of Proper Consultation

In one case, a company obtained the trade union president’s signature but failed to consult the executive committee. The court ruled the retrenchment invalid, requiring the company to reinstate employees and pay compensation.

Mistake 3: Notification Failures

Notifying provincial labour authorities requires:

  • Clear reasons for the layoffs.
  • Details of affected employees.
  • Timing of layoffs and job-loss allowances.

Incomplete notifications can lead to disputes.

Case Study: Proper Notification Recognized

In another case, the court accepted a company’s notification letter as valid because it:

  • Included key details about layoffs.
  • Was submitted 30 days in advance.

Proper documentation can protect against disputes.

Practical Solutions for Employers

  • Document all changes with detailed evidence.
  • Formally consult with the grassroots trade union.
  • Notify provincial authorities with complete and accurate information.

Plan Ahead to Avoid Pitfalls

Retrenchment is a high-stakes process. Proactive planning and strict adherence to legal requirements are critical to minimizing risks and protecting your business.

Need Expert Guidance?

Labour law in Vietnam is complex, but the right advice can make all the difference. 

Contact us at info@letranlaw.com for tailored solutions that ensure compliance and protect your workforce.

Retrenchment in Vietnam - Avoiding Costly Mistake