Dissolving a Company with Many Employees: Wages, Severance, Insurance

Dissolving a company with many employees can be done through a clear sequence. Most of the work usually lies with the employees: calculating remaining wages, severance pay, unused annual leave pay, and then confirming the insurance contribution period for each person.

The law places employee entitlements first in the payment order during dissolution. So the earlier a company has a labor plan, the smoother the following steps become: tax, the dissolution dossier and filing with the business registration authority.

Employee entitlements are paid before tax debts

Under point a, clause 5, Article 208 of the 2020 Law on Enterprises, on dissolution a company pays in the following order:

1. Outstanding wages, severance pay, social insurance, health insurance, unemployment insurance and other entitlements under the collective labor agreement or labor contract.
2. Tax debts.
3. Other debts.

The 2019 Labor Code also states that these amounts are given priority for payment when a company ceases operation, dissolves or goes bankrupt (clause 2, Article 48).

Practical meaning: before considering tax finalization, a company should know the total amount to be set aside for employees. This figure determines the asset-liquidation plan and the point at which the dissolution dossier can be filed.

How does a labor contract terminate when a company dissolves?

A company (an employer that is not an individual) ceasing operation is a case of labor-contract termination under clause 7, Article 34 of the 2019 Labor Code. The termination date is counted from the time the notice of cessation of operation is given (clause 2, Article 45).

The Law on Enterprises also requires the dissolution decision to include a plan for handling obligations arising from labor contracts (clause 1, Article 208). This decision must be sent to the business registration authority, the tax authority and the employees within 7 working days from the date of adoption; if financial obligations remain unpaid, the debt settlement plan must be sent together with it to creditors and other interested parties (clause 3, Article 208).

A workable labor plan usually clearly states:

• the list of employees and each person’s type of contract;
• the expected contract termination date;
• the amounts each person will receive and how they are calculated;
• the timing and method of payment;
• a contact person to answer employees’ questions.

Severance pay when a company ceases operation

The case under clause 7, Article 34 is subject to severance pay (clause 1, Article 46 of the 2019 Labor Code):

• Who is entitled: employees who have worked regularly for 12 months or more. It does not apply to employees eligible for a pension or to the case under point e, clause 1, Article 36.
• Rate: half a month’s wage for each year of work.
• Period counted: total actual working time, excluding the period during which unemployment insurance was paid and any period for which severance pay or job-loss allowance was already paid (clause 2, Article 46).
• Wage used for calculation: the average wage over the 6 consecutive months under the labor contract before termination (clause 3, Article 46).

A commonly confused point: job-loss allowance (one month’s wage per year of work, at least 2 months) relates to the case under clause 11, Article 34, under Article 47. This is a different case, not the case of a company ceasing operation.

For companies with many employees, the difficult part is usually not the formula but the data: start dates, contract renewals, and periods without unemployment insurance. This data needs to be reconciled for each employee before the figures are finalized.

Table of amounts to calculate for each employee

The table above is a checklist, not an exhaustive mandatory list. Each company may have additional items under its own wage and bonus policy.

Payment deadline and confirming the insurance contribution period

Payment deadline. Both parties must settle all related amounts in full within 14 working days from the date the labor contract terminates. Where the employer is not an individual and ceases operation, this period may be extended but must not exceed 30 days (clause 1, Article 48 of the 2019 Labor Code).

Confirming the insurance contribution period (often called “closing the social insurance book”). The employer is responsible for completing the procedure to confirm the social insurance and unemployment insurance contribution period and for returning the original documents it has kept for the employee (clause 3, Article 48). The 2024 Law on Social Insurance requires the employer to coordinate with the social insurance authority to confirm the contribution period when a labor contract terminates (clause 3, Article 13). From 1 January 2026, unemployment insurance is governed by Law on Employment No. 74/2025/QH15.

In practice, confirmation goes smoothly when the company has paid contributions in full up to the termination date. If there is an outstanding amount, it should be reconciled with the social insurance authority to determine the exact additional amount payable before scheduling the date to return documents to the employee.

Process for handling labor matters in the dissolution dossier

The social insurance authority, tax authority and business registration authority each review matters within their own scope. The order above is a general framework; the specific timeline is set after the dossier is reviewed.

Common situations and how to handle them

Several months of unpaid insurance contributions. This amount falls within the group paid first. How to handle it: reconcile the figures with the social insurance authority and include them in the financial plan before liquidating assets. See also priority order for paying debts on dissolution.

Incomplete labor records. Missing signed contracts, payroll records from previous years lost. How to handle it: reconstruct the data from remaining sources such as payment statements and submitted insurance reports, then reconcile with each employee.

Employees who have already left and are hard to reach. How to handle it: keep evidence that notice and the plan were sent, set aside that person’s payment separately, and clearly record how it can be claimed. The specific case needs to be reviewed before choosing an approach.

Outstanding tax obligations running in parallel. Employee entitlements rank before tax debts. The two should be listed in a single table to see the total obligation; see dissolving a company with outstanding tax obligations.

What Thái Tín can help with when dissolving a company with many employees

Thái Tín can advise large companies with many employees and complex labor and social insurance records, including foreign-invested enterprises. We:

• check the company’s status, the list of employees and existing insurance data;
• set out a roadmap: what the company does, what a professional partner does, what awaits a state authority’s decision;
• connect HR, insurance, accounting and tax partners to calculate entitlements and finalize tax;
• coordinate and report progress until the agreed scope is completed.

The specialized calculations are carried out by partners; state authorities review and decide on the dossier. Costs comprise the service fee, third-party fees if any, and the company’s outstanding obligations; a quote is given after checking the company’s status. General information on dissolution is available on the dissolution page.

Preparing early so the labor portion does not drag on

• Update the list of employees, start dates and contract types before the dissolution meeting.
• Reconcile insurance data periodically, not just when closing down.
• Keep annual-leave tracking records and payroll for the most recent 6 months in an easily accessible form.
• Assign one person to answer employees’ questions throughout the process.

You can send your company’s tax code and current employee count through the contact page to have your status checked before preparing a plan.

Questions and answers

Related articles

Dissolution Paying Debts During Dissolution: Priority Order and Plan Dissolution Dissolving a Company with Outstanding Tax Obligations