Terminate the labour contract with the director on retirement age

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Question: The Director (female) of our Company was born on February 20th, 1968, so when is the Director’s retirement age? Does the Company have the right to retire the Director when they reach retirement age? If so, does the Company have to satisfy the condition of the t notice period? Do we have to pay any money? If Ms. A wants to extend her working period beyond the retirement date, can the Company refuse this request?

Answer:

  1. Ms. A – Director of our Company was born on February 20th, 1968, so when is the Director’s retirement age?

According to Clause 2, Article 169 of the Labour Code 2019 stipulated:From 2021, the retirement age of employees under normal working conditions is full 60 years and 03 months for male workers and full 55 years old and 04 months for female workers; After that, every year increase by 03 months for male workers and 04 months for female workers”.

Accordingly, the retirement age for female workers from 2021 is as follows:

 Year of retirement Retirement age
2021 55 years 4 months
2022 55 years 8 months
2023 56 years
2024 56 years 4 months

Pursuant to Clause 1, Article 3 of Decree 135/2020/ND-CP, it is stipulated: “Retirement date is the last day of the month in which one reaches the full retirement age as prescribed. If an employee continues in employment after his full retirement age as prescribed, the retirement date is the date of termination of labour contract”. This means that the retirement date and the date the employee reaches retirement age are not the same, the Company needs to pay attention to this clause to accurately determine the retirement date of the Employee.

Ms. A was born on February 20th, 1968, and works for the Company as a Director which means Ms. A is working under normal conditions, as a result her retirement age is 56 years and 4 months, which is on June 20th, 2024 and her retirement date would be at June 30th, 2024. In case Ms. A continues to work after reaching retirement age, Ms. A’s retirement date is the date of termination of her labour contract.

  1. Does the Company have the right to retire the Director when she reaches retirement age?

Pursuant to Clause 1, Article 36 of the Labour Code, it is stipulated: “An employer shall have the right to unilaterally terminate an employment contract in one of the following circumstances: đ) The employee reaches the retirement age specified in Article 169 of this Labour Code, unless otherwise agreed by the parties”. This means that when Ms. A reaches retirement age, if the company and Ms. A do not have an agreement for Ms. A to continue working, the company has the right to terminate the employment contract unilaterally.

  1. If so, does the Company have to satisfy the condition of the notice period?

Clause 24, Article 4 of the Enterprise Law stipulates that the Director is a title of Enterprise Executive.

Under Point c, Clause 1, Article 7 of Decree 145/2020/ND-CP, Enterprise Executive (including the Director as stated above) is one of the specific works that require a longer notice period in advance by the employer for termination upon retirement than normal cases, specifically as follows:

– At least 120 days for labour contracts with indefinite term or labour contracts with a definite term of 12 months or more;

At least one quarter of the term of the labour contract for labour contracts with a term of less than 12 months.

Therefore, the notice period will be determined differently depending on the terms of the Employment Contract. The Company relies on the terms of the Contract to determine the notice period for Ms. A, the Employee.

  1. Do we have to pay any money?

As stated in Section 2, the Employee who is of retirement age is one of the cases in which the Company has the right to unilaterally terminate the Contract. Therefore, if the Company fulfills its obligation to notify in advance as stated in Section 3, it will not have to compensate any amount to the Employee.

Besides, according to Article 48 of the Labour Code 2019, the Company within 14 working days following the termination, settle all payments related to the Employee’s benefits.

Therefore, if the Company fulfils its obligation to notify in advance, it does not have to pay any compensation to Ms. A, but only needs to pay in full all amounts related to Ms. A’s benefits (such as salary, bonuses, allowances,..).

  1. If Ms. A wants to extend her working period beyond the retirement date, can the Company refuse this request?

Pursuant to Clause 1, Article 36 of the Labour Code, it is stipulated: “An employer shall have the right to unilaterally terminate an employment contract in one of the following circumstances: đ) The employee reaches the retirement age specified in Article 169 of this Labour Code, unless otherwise agreed by the parties”.

The Labour Code allows the Company to unilaterally terminate Employment Contracts with the Employee who have reached retirement age if the Company and the Employee cannot reach an agreement to allow the Employee to continue working. Therefore, when deciding to unilaterally terminate the Employment Contract, the Company has the right to refuse when Ms. A proposes to continue working.

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