Question: Currently, my company has 200 employees. However, due to the company's financial difficulties, it needs to reduce its workforce and salary fund, so the company wants to find a way to lay off 70-80 employees. Is there any way for the company to reduce its workforce while saving costs and complying with the law?
Answer
According to the information provided by the company, the company is currently facing financial difficulties and needs to reduce the workforce and salary fund. In this case, the company can consider the following options and then choose the appropriate handling method.
Negotiate
According to Clause 3 Article 34 of the Labour Code 2019: “Both parties agree to terminate the employment contract”. Therefore, the company can negotiate with the employee to terminate the employee contract, however, there are advantages and disadvantages as follows:
Advantages: This is a basic option that will minimize legal risks for the company. During this phase, if an agreement can be reached with the Employee, the two parties can negotiate the termination of the contract and the compensation amount for the Employee.
Disadvantages: In some cases, the company's resources for negotiation are limited, and it is also inevitable that there will be non-cooperation from the Employees, leading to unsuccessful negotiations.
Implementing business restructuring (changes in structure and technology):
Article 42 of the Labour Code 2019 stipulates that the Employer has the right to terminate the Employee in the event of changes in structure or technology after developing and implementing a labour use plan and must fulfil certain obligations, as specified in Article 42 of the Labour Code 2019 as follows:
If the change affects the employment of a large number of employees, the employer shall develop and implement a labour utilization plan prescribed in Article 44 of this Labour Code. In case of new vacancies, priority shall be given to retraining the existing employees for continued employment.
In case the employer is unable to create provide employment and has to resort to dismissing employees, the employer shall pay them redundancy allowances in accordance with Article 47 of this Labour Code.
The dismissal of employees in the cases mentioned in this Article shall only be implemented after a discussion with the representative organization of employees (if any) and after giving prior notice of 30 days to the People’s Committee of the province and the employees”.
According to, this option have advantage and disadvantage as follow:
Advantage: This is an option that the company does not fully control, but is not passive either. Under the law, the company can gradually proceed with the labour restructuring procedures, develop appropriate options and plans, and coordinate with departments, unions, and union local as well as employees to implement.
Disadvantage: This option will take the company a lot of time. In addition, during the implementation process, the company will also have to implement consultations and opinions from many related units, including labour management agencies, which are not always under the company's control. In addition, the company must still maintain the benefits and pay full salary for employees during this process.
