Is it mandatory to increase wages each year for employees in Vietnam? Is there a penalty for not increasing wages for employees according to the agreement?
Is the employer mandatory to increase wages each year for employees in Vietnam?
According to the provisions of Clause 6, Article 3 of Circular 10/2020/TT-BLDTBXH of Vietnam stipulating advancement in pay step, pay raise: as agreed by the contracting parties concerning conditions, time, pay rate after advancement in pay step, pay raise, or as regulated in the collective bargaining agreement, or as stipulated by the employer.
However, Article 90 of the 2019 Labor Code of Vietnam also stipulates that the salary according to the job or title must not be lower than the statutory minimum wages.
Thus, according to the above regulations, the employer is not required to increase the salary for employees every year. Except for the case where the region-based minimum wage increases, the employer is required to increase the salary for employees so that the minimum salary must be equal to the region-based minimum wage.
Is it mandatory to increase wages each year for employees in Vietnam? Is there a penalty for not increasing wages for employees according to the agreement?
How to handle when enterprises fail to increase salaries to employees as agreed?
- According to the provisions of Clause 2, Article 17 of Decree 12/2022/ND-CP of Vietnam, if the employer does not increase the employee's salary as previously agreed, he or she may be administratively penalized for failing to pay or insufficiently paying salaries to employees as agreed in their employment contracts. To be specific:
+ A fine ranging from VND 5.000.000 to VND 10.000.000 shall be imposed if the violation involves 01 - 10 employees;
+ A fine ranging from VND 10.000.000 to VND 20.000.000 shall be imposed if the violation involves 11 - 50 employees;
+ A fine ranging from VND 20.000.000 to VND 30.000.000 shall be imposed if the violation involves 51 - 100 employees;
+ A fine ranging from VND 30.000.000 to VND 40.000.000 shall be imposed if the violation involves 101 - 300 employees;
+ A fine ranging from VND 40.000.000 to VND 50.000.000 shall be imposed if the violation involves 301 employees or more.
Simultaneously, the following fines shall be imposed upon an employer for paying their employees’ salaries which are lower than the statutory minimum wages announced by the Government:
+ A fine ranging from VND 20.000.000 to VND 30.000.000 shall be imposed if the violation involves 01 - 10 employees;
+ A fine ranging from VND 30.000.000 to VND 50.000.000 shall be imposed if the violation involves 11 - 50 employees;
+ A fine ranging from VND 50.000.000 to VND 75.000.000 shall be imposed if the violation involves 51 employees or more.
Note: The fines for administrative violations shall be imposed upon violating individuals. The fine imposed upon an organization is twice as much as that imposed upon an individual for committing the same administrative violation as prescribed in Clause 1, Article 6 of Decree No. 12/2022/ND-CP of Vietnam.
What are the regulations on salary payment rules to employees?
Pursuant to Article 94 of the 2019 Labor Code of Vietnam stipulating that employers must pay wages to employees according to the following two rules:
- Employers shall directly, fully and punctually pay salaries to their employees. In the cases where an employee is not able to directly receive his/her salary, the employer may pay it through a person legally authorized by the employee.
- Employers must not restrict or interfere with their employees’ spending of their salaries; must not force their employees to spend their salaries on goods or services of the employers or any particular providers decided by the employers.
In addition, the salary payment time is specified in Article 97 of the 2019 Labor Code of Vietnam as follows:
Salary payment time:
- An employer who receives an hourly, daily or weekly salary shall be paid after every working hour, day or week respectively, or shall receive a sum within not more than 15 days as agreed by both parties.
- An employee who receives a monthly or bi-weekly salary shall be paid after every month or every two weeks respectively. The payment time shall be periodic and agreed upon by both parties.
- An employee who receives a piece rate or a fixed amount shall be paid as agreed by both parties. In case a task cannot be completed within one month, the employee shall receive a monthly advance payment based on the amount of work done in the month.
- In case of a force majeure event in which the employer is unable to pay the employee on schedule after all remedial measures have been implemented, the salary shall be paid within 30 days. In case a salary is paid at least 15 days behind schedule, the employer shall pay the employee a compensation that is worth at least the interest on the amount paid behind schedule at the latest 1-month interest rate quoted by the bank at which the employee’s salary account is opened.
Thus, only when due to force majeure, the employer can pay salaries later than the agreed time limit, however, it must not be more than 30 days late, or he/she will be penalized and have to pay compensation for employees.
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