In the context of Vietnam’s economy, deducting employees’ wages is a contentious issue, especially when considering its legality and fairness. However, the question remains whether wage deduction is a reasonable and fair method for both parties. In this article, TNTP will present the points that both businesses and employees need to be aware of regarding the deduction of employee wages.

1. Cases where the company can deduct wages:

• According to Article 124 of the Labor Code 2019, disciplinary measures for employees include reprimand, deferment of a pay raise for up to 6 months, demotion, and dismissal.

• Additionally, under Clause 2 Article 127 of the Labor Code 2019, it is prohibited for employers to apply monetary fines or reduce the employee’s wage.

Thus, although companies, as employers, can use disciplinary measures to manage personnel and maintain discipline within the company, withholding wages instead of applying disciplinary measures is prohibited. Therefore, companies are not allowed to deduct employees’ wages for disciplinary purposes.

• However, in practice, there are cases where companies or employers arbitrarily deduct employees’ wages. According to Article 102 of the Labor Code 2019, employers are only allowed to deduct employees’ wages in the following cases:

– When the employee damages tools, or equipment, or causes damage to the company’s property.

– When the employee loses tools, equipment, or other property entrusted by the employer.

– When the employee consumes materials exceeding the allowable limit, they must compensate for the damage either partially or entirely based on market prices or internal labor regulations.

Thus, the company is only allowed to deduct employees’ wages to compensate for damage caused to tools, equipment, or company property, or for excessive consumption of materials beyond the permitted limit.

2. Regulations on deducting employees’ wages

According to Article 102 and Article 129 of the Labor Code 2019, deducting employees’ wages to compensate for damages must also adhere to the following regulations:

• Amount of compensation for damages

– In case the damage caused by an employee is not serious, not deliberate, and is worth less than 10 months’ region-based minimum wage announced by the Government, the employee shall have to pay a compensation of not more than his/her 03 months’ salary, which shall be monthly deducted from his/her salary. Any monthly deduction shall not exceed 30% of the net monthly salary of the employee, after the deduction of insurance premiums.

– In cases where materials are consumed beyond the permitted limit, the employee shall pay compensation for damage in full or in part at the market price or as stipulated in the internal labor regulations or the responsibility contract (if any).

– In case this is caused by a natural disaster, fire, war, major epidemic, calamity, or another force majeure event that is unforeseeable and insurmountable, and all necessary measures and possibilities for avoidance have been taken, the compensation shall be exempted.

• Notification of reasons for wage deductions: Employees have the right to know the reasons for the deduction of their wages, and the deduction must be communicated transparently.

3. Handling violations in cases where the company deducts employees’ wages against legal regulations

• According to Clause 3, Article 19 of Decree 12/2022/NĐ-CP, apart from the cases permitted to deduct wages as mentioned in section 1, companies engaging in arbitrary deduction of employees’ wages may face administrative penalties ranging from 20,000,000 VND to 40,000,000 VND. Employers using fines or wage cuts instead of applying labor disciplinary measures may face these penalties.

• Additionally, according to Clause 4, Article 19 of Decree 12/2022/NĐ-CP, measures to remedy the consequences of wage cuts instead of labor disciplinary measures include compelling the employer to return collected amounts or pay full salaries to employees.

4. Solutions for companies

• Enhance legal awareness: Companies and employees need to be trained on legal regulations related to wage deductions and labor discipline to avoid violations and protect rights.

• Implement fair procedures: Procedures for handling discipline and wage deductions should be fair, transparent, and consistent, ensuring that employees have the opportunity to explain and protect their rights.

• Seek legal advice from lawyers or legal experts: Companies and employees should seek support from lawyers or legal experts to advise and assist with legal issues related to labor. Lawyers or legal experts can help companies assess and manage legal risks, ensuring compliance with legal regulations.

Companies must strictly adhere to legal regulations regarding wage deductions to protect employees’ rights and maintain a fair and transparent working environment. Applying effective and transparent disciplinary measures, along with creating a positive work environment and consulting legal experts, will help companies develop sustainably and build trust among employees.

The above article, ” Is the company allowed to deduct employees’ wages?” is presented by TNTP for our valued readers. If you have any issues for discussion, please contact TNTP for assistance.

Best regards,