POLICIES FOR REDUNDANT EMPLOYEES IN CASES OF OWNERSHIP TRANSFER AND REORGANIZATION OF 100%-STATE-OWNED SINGLE-MEMBER LIMITED LIABILITY COMPANIES

On November 29^th, 2022, the Government issued Decree No. 97/2022/ND-CP (“Decree 97”) on policies for redundant employees in cases of ownership conversion and restructuring of 100%-state-owned single-member limited liability companies (“SMLLCs”).

Decree 97 was adopted to replace Decree 63/2015/ND-CP (“Decree 63”) with the following notable contents:

1. Forms of ownership conversion and enterprise reorganization under Decree 97

• Equitization or selling the entire enterprise.
• Transformation into a multi-member limited liability company.
• Transformation into a non-business unit.
• Merger, consolidation, division, or separation.
• Dissolution or bankruptcy.

2. Subjects of application

Employees working under an employment contract (“EC”), whose name is on the list of employees but at the time of reorganization, could not be assigned jobs by the enterprise.

Compared with Decree 63, Decree 97 adjusted from “the company could not give any jobs after taking all possible measures” to “the company could not arrange jobs”. Given this adjustment, enterprises are no longer required to prove that they have used: could not “all possible measures” to arrange jobs for redundant employees in case of employment contract termination with them, which is a difficulty in practice.

3. Policy for redundant employees who were last recruited before April 21, 1998[1] or before April 26, 2002[2]

• For redundant employees who are from full 01 to full 05 years until the retirement age and have paid compulsory social insurance (“SI”) for at least full 20 years: Not subject to retirement pension reduce due to premature retirement; subject to a pension equivalent to 03-month salary for every year of premature retirement; and subject to a subsidy equal to 0.4 times of the average monthly regional minimum wage for each working year having SI premium payment.
• For redundant employees who are less than 1 year old until the retirement age and have paid SI for at least full 20 years: Not subject to retirement pension reduce due to premature retirement; subject to a subsidy equal to 0.2 of the average monthly regional minimum salary for each working year having SI contributions.
• For redundant employees who have reached the retirement age but still till have to pay SI premiums for up to 06 months to be eligible for pension: the retirement settlement shall be made in a lump-sum payment to the pension funds and death benefit funds for the remaining months before the retirement.
• For redundant employees who are not eligible for the aforementioned benefits:

- Subject to an unemployment allowance; and a subsidy equal to 0.05 of the average monthly regional minimum wage for each year working at the enterprise in case the enterprise reorganizes in the manner of equitization or selling the entire enterprise, transformation into a multi-member limited liability company, transformation into a non-business unit; merger, consolidation, division, or separation.

- Subject to a severance allowance; and a subsidy equal to 0.2 months’ salary for each year working at the enterprise in case of enterprise dissolution or bankruptcy.

4. Remarkable changes to the policies specified in Section 3

• The allowances were calculated previously based on the base salary in accordance with Decree 63 and then based on the monthly regional minimum wage under Decree 97.
• Decree 97 has removed the criteria for determining the subsidy extent as working seniority of employees, but only stipulated a fixed subsidy extent for employees who are entitled to the subsidies as mentioned in Section 3.iv above.

5. Policies for redundant employees who were last recruited from April 21, 1998 or from April 26, 2002 onward

• Unemployment allowance for redundant employees in case the enterprise reorganizes in the manner of equitization or selling the entire enterprise, transformation into a multi-member limited liability company, transformation into a non-business unit; merger, consolidation, division, or separation.
• Severance allowance for redundant employees in case of enterprise dissolution or bankruptcy.

6. Policies for representatives of enterprise’s capital:

Subject to one of the two aforementioned allowances depending on their recruitment time.

7. The salary used as the basis for determining unemployment allowance, severance allowance and other allowances for redundant employees who are entitled to the allowances in Section 3.iv and Section 5 mentioned above shall include salary and allowances and other additional amounts for calculating unemployment allowance or severance allowance as stated in the employment contract. In comparision with Decree 63, of which the determination is based on the average salary according to the employment contract of the preceding 6 months before leave, the provisions of Decree 97 are more beneficial for employees.

8. Funding sources for the policy implementation

From the initial purchase of shares, purchase of enterprise; receivables from dissolution or bankruptcy; or from state budget.

Decree 97 also provided the Development Plan of using employee in Appendix I and forms related to the development and implementation of a employee use plan in Appendix II.

This Decree shall come into force from January 15^th, 2023.

[1] April 21^st, 1998: When Directive No. 20/1998/CT-TTg of the Prime Minister on accelerating the reorganization and renewal of state-owned enterprises took effect.

[2] April 26^th, 2002: When the Decree No. 41/2002/ND-CP dated April 11, 2002 on policies for redundant employees in the process of rearranging state-owned enterprises took effect.