Written By PLF Law Firm

Employees might be entitled to job-loss allowance or severance allowance after finish working at an enterprise. The payment of these benefits varies depending on the circumstances and reasons causing the employees to retire/stop working.

In terms of semantic, severance allowance is construed as the benefit paid to employees when they have to terminate the labor contract as it expires or as agreed by the parties, or other cases as regulated by law; on the other hand, employees can enjoy job-loss allowance when enterprise restructuring, merger, separation, division, etc., are the reasons for their loss of job.

Allowance for job loss is paid to employees by the employer in the two following cases: (1) enterprise restructuring, technological changes, or due to economic reasons; (2) merger, consolidation, separation, or division of the enterprise.

In case the changes in structure, technology, or economic reasons lead to the risk of unemployment to many workers, the enterprise is responsible for elaborating and implementing labor utilization plan after a discussion with the local representative organization of the employees and upon a 30-day prior notice to the provincial labor authority. Additionally, the detailed list of dismissed employees must be included in the labor utilization plan.

In case of merger, consolidation, separation, and division of the enterprise, the succeeding employer must comply with the elaborated labor utilization plan when the existing workforce cannot be fully employed, thus being dismissed from work.

In regards of the aforementioned cases, the employer must pay a job-loss allowance when dismissing an employee based on his/her working term at the enterprise. Specifically, such allowance is equivalent to 1 month’s wage subsidy for each working year (however must not be lower than 2 months’ wages in any case).

Therefore, enterprises need to reasonably and effectively elaborate and implement labor utilization plans to guarantee the best compliance with laws. In case they are unable to continue hiring the existing workforce, it is necessary to rightfully pay job-loss allowance to the employees in accordance with law.

We'd love to meet you and let you the perfect solution