Aside from the disciplinary measures prescribed in the 2019 Labor Code, some companies would like to have more practical measures to apply to disciplined employees. After exchanging with many companies, money is clearly the most practical measure that companies wish to include. Thus, whether it is lawful to reduce a certain amount of money from the employee is of great concern to companies.
Reduction of Salary Allowances
Depending on the nature of the job, position, title of the employee, each company will have different types of allowances, e.g., position allowance and responsibility allowance are the two types of allowances for employees holding the leadership and management positions. Hence, it is reasonable expectation that companies have stricter and more realistic sanctions to ensure the directors and managers are highly responsible for their works. However, in the event of violations that result in the application of disciplinary measures, companies are not allowed to reduce these allowances.
Firstly, under Article 129 of the 2019 Labor Code, material responsibility is an employee’s responsibility in compensating for damages. If an employee is disciplined but does not cause excessive damage or loss to tools, work equipment, assets or attrition of material or have other actions that damage the companies’ assets, they will not have to bear material responsibility.
Secondly, according to Article 90 of the 2019 Labor Code and Article 3.5 (b) of Circular No. 10/2020/TT-BLDTBXH of the Ministry of Labor, Invalids and Social Affairs, ‘salary allowance’ (comprising salary allowances that offset factors on labor conditions, complexity of the job, living conditions, level of labor attraction as well as salary allowances attached to the working process and results of the work of the employees) is also part of the ‘salary’. The current Vietnamese labor law does not permit any disciplinary measure that involves reducing the salary of employees.
On the other hand, only when employees damage tools, equipment or commit other actions that damage the asset of the company due to negligence, with the value of no more than 10 times the regional minimum monthly wage provided by the Government applied at the employee’s workplace, the employee is required to compensate with the maximum of 03 month’s worth of salary and is deducted from their salary every month as prescribed in Article 102.3 and Article 129 of the 2019 Labor Code. It should be noted that the nature of ‘deduct’ in this case is still ‘compensation’ for the damage caused to the company’s assets, not ‘reducing salary’ from the employees.
Reduction of Bonuses
Bonus is the amount of money rewarded by the employer to the employee based on the annual business result and the amount of work performed by the employee. The employer is at the sole discretion to decide this amount.
As such, the employer is entitled to reduce the bonus of disciplined employees. However, in order to have clear ground for application and avoid any dispute with the employees, the reduction of bonuses and the amount of reduction should be prescribed in the internal labor regulations.
Under no circumstances are the employers permitted to deduct the salary and salary allowance of the employees, even if they commit a violation resulting in disciplinary measures. ‘Salary deduction’ is also a form of salary reduction in practice; however, this is not ‘reduction’ but instead a form of conditional compensation. Hence, in order to balance interests and enhance responsibility of the employees at work, the employers may consider the number of bonuses in accordance with the employee’s performance specifically provided in the internal labor regulations.
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