How to Securely Terminate Employment in Asia | INS Global

How to Securely Terminate Employment in Asia

How to Securely Terminate Employment in Asia

April 7, 2023

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Key Takeaways

  1. Employment terminations must follow local employment law guidelines to avoid paying fees or fines.
  2. Severance pay is usually calculated by one month’s wages per year of service.
  3. Written termination notices are considered best practice.
Summary

 

Regardless of the size or location of your company, every employer eventually has to deal with the difficult task of employee dismissal. Terminating employment in Asia is more than just a conversation with the employee however. It’s a complex process that requires following local labor laws at all times.

This article aims to help you avoid any pitfalls and errors with a four-step plan for smoothly terminating an employee contract.

 

Four Simple Steps for Effective Employee Termination

 

Employee dismissals or contract termination can bring up complex emotions for both the employee and the employer. Having a reliable termination plan in place helps the process to go smoothly.

Many disputes arise from employers unilaterally terminating a labor contract due to mistaken ideas about labor laws, for example. With the right expertise, you can let the employee go on good terms and allow them to move on with their career.

You can integrate these four steps into all your planning before you even start the termination process.

 

Determine the Reason for Ending the Relationship

 

Sometimes there are external factors around an employee dismissal. These can include economic reasons or relocation alongside market changes. Other times it could be that the employee is not a strong fit for the team, or they aren’t able to improve their work performance.

It’s best to clearly state the reason for the dismissal in writing. That way, there’s no room for doubt or questioning later.

This may require rereading the original employment agreement, and providing a clearly written letter of termination. Many companies use a standard termination letter template, but this can cause employees to feel disrespected.

Having a written termination notice is also important for legal evidence if there is any court action taken against the company.

 

Have a Conversation with Your Employee About the Dismissal

 

Even when you are dismissing an employee you should treat them with the same respect and diligence as any other member of the staff team. This not only reflects positively on the company but sets a good example for the rest of the employees.

Don’t just send an email to the employee as this feels impersonal. It’s essential that you arrange for a face-to-face meeting, or video call if they are a remote worker. Listen to them express their feelings about the situation and respond accordingly.

Show them that you appreciate their time with the company and that you want to do everything you can to make the next step of their career easier.

 

Celebrate the Employee’s Contribution to the Company

 

Depending on the period of time the employee has been with the company, they may have developed profound connections with the rest of the team. As such, it is important to honor those feelings.

In the event of a positive end to the contract, ask the employee if they would like to have a farewell dinner. Alternatively, you may want to arrange a company activity or party in honor of the employee’s time there. Parting ways on good terms shows how much you value every member of your team. This can reduce employee dissatisfaction among those who remain.

 

Make Sure Every Step of the Termination is Legally Compliant

 

Failing to comply with local employment laws can lead to having to pay expensive fees and fines. Every country will have different requirements. Global operations mean you need to make sure you are following the right employee termination guidelines in multiple countries.

You will need to determine if you need to offer severance pay to the employee or it it’s required. Then, this payment may need to be made either as a lump sum or include pay in lieu for their time if the employee agrees.

You may also need to consider how or if the employee should use up remaining vacation time as this can affect their final paycheck.

Expertise is key to knowing the best path during difficult times. You should make every effort to ensure that your Human Resources system is processing the notice period and severance pay correctly. That way, there’s less chance of future wrongful termination claims.

 

Termination Laws in Asia

 

While this list does not cover all countries in Asia, we hope that these brief summaries will give you the information you need at a glance. As a result, you can easily stay informed on the rules around employee termination in these countries.

 

China

 

Employee termination in China can be either by mutual agreement, the decision of one party, or the natural end of a contract.

Notice is 30 days or payment in lieu for Chinese employees.

Severance pay is calculated at one month’s salary for each year of service. Notice and severance are not required in the case of disciplinary dismissals.

 

Singapore

 

Notice periods are required in Singapore and range from 1 day to 4 weeks depending on the employee’s length of service. Termination notices must be in writing.

Employees who are dismissed due to misconduct or a breach of contract do not need to be given notice or compensation in lieu of notice.

Severance pay ranges between 2 weeks to 1 month per year of service.

 

Taiwan

 

Employers cannot dismiss employees in Taiwan without just cause, or due to severe misconduct. The required notice period ranges from 10 to 30 days.

In July 2005, Taiwan changed the system under which severance pay is issued with employees who began before that being able to choose the system they use.

Under the LPA employees receive severance pay of 50% of monthly wages for each year of service.

 

Japan

 

All potential grounds for dismissal must be clearly stated in the employment contract. The statutory notice period in Japan is 30 days, and payment must be given in lieu of notice.

Japanese employees aren’t entitled to severance pay, but it is considered best business practice to have a severance pay system in place to encourage voluntary termination.

 

South Korea

 

A 30-day notice period is required for all dismissals except in cases of extreme misconduct, or if the employee has been with the company for less than 3 months.

Severance pay is required and is calculated at one month’s wages for every year of service.

 

The Philippines

 

The notice period in these cases is 30 days. Employees who resign are also required to give 30 days’ notice to their employer.

Severance pay ranges from 50% of a month’s wages to a full month’s wages for every year of service.

 

Malaysia

 

The notice period ranges from 4 to 8 weeks depending on seniority to leave time for an employee response.

For those who have worked for:

  • less than 2 years – termination compensation is 10 days’ wages for every year of service
  • 2-5 years service – 15 days’ wages per year
  • 5+ years – 20 days wage per year

 

Vietnam

 

Notice periods in Vietnam range from 3 days for those who have been working less than 12 months to 45 days for those with indefinite-term contracts. Severance pay is 0.5 month’s salary for every year with the company.

terminate employment in asia

 

Compliance Assurance Mastery and Global Expansion

 

It’s not easy to keep track of employment laws and updates to local legal systems. You may not know how to write a termination letter that works for your market’s culture or navigate complex termination laws.

Partnering with a global service provider like INS Global can streamline the process and reduce obstacles. Our legal experts can also guarantee full legal compliance for your company and all your employees.

Our international PEO and global Employer of Record services are available in over 100 countries worldwide. As a services provider for more than 15 years, we understand the importance of market changes and being able to adapt. Because of this, our team of experts can help you through every step of the expansion process.

We are ready to guide you from recruitment to payroll and HR services, so you can expand safely and simply.

Contact us here today to learn more.

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