Is it legal for the company to arbitrarily reduce the salary of the employee in Vietnam?

Hello, Lawnet would like to answer the following:

1. Is it legal for the company to arbitrarily reduce the salary of the employee in Vietnam?

According to the provisions in Article 33 of the Labor Code 2019 on revisions to employment contracts:

- During the performance of an employment contract, any party who wishes to revise the employment contract shall notify the other party of the revisions at least 03 working days in advance.

- In case where an agreement is reached between the parties, the revisions shall be made by signing an annex to the employment contract or signing a new employment contract.

- In case the two parties fail to reach an agreement on the revisions, they shall continue to perform the existing employment contract.

Thus, during the performance of the labor contract, the company is not allowed to arbitrarily cut or reduce the salary of employees. If the company wants to reduce the employee's salary due to inefficient work, there must be a notification, negotiation, and the consent of the employee.

At the same time, the amendment and supplement to the content of the labor contract shall be carried out by signing an appendix to the labor contract or concluding a new labor contract.

2. What are the penalties for arbitrarily reducing the salary of the employee in Vietnam?

According to the provisions of Clause 2, Article 17 of Decree 12/2022/ND-CP, penalties for violations of salary regulations are as follows:

The following fines shall be imposed upon an employer for commission of one of the following violations:

- Failing to pay salaries on schedule as prescribed by law;

- Failing to pay or insufficiently paying salaries to employees as agreed in their employment contracts;

- Failing to make or insufficiently making overtime pay;

- Failing to make or insufficiently making nightshift pay;

- Failing to pay or insufficiently paying work suspension allowances as prescribed by law;

- Restricting or interfering employees’ spending of their salaries;

- Forcing employees to spend their salaries on goods or services of the employer or any particular providers decided by the employer;

- Deducting from employees’ salaries in breach of law;

- Failing to pay or insufficiently paying salaries to employees how are reassigned to perform works which are not specified in their employment contracts or during a strike;

- Failing to make or insufficiently making payments to employees who, due to employment termination or job loss, have not taken or not entirely taken up their annual leave in compensation for their untaken leave days;

- Failing to make or insufficiently making advance payments to employees who temporarily leave their works in accordance with regulations of law;

- Failing to pay full salaries to employees who are not disciplined for their work suspension period:

+ 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.

At the same time, the company that violates the salary regulations also applies remedial measures as prescribed in Clause 5, Article 17 of Decree 12/2022/ND-CP:

- The employer that commits the violation specified in Clause 2 or Clause 3 of this Article is compelled to pay full salaries plus interests on late payments or insufficient payments of salary, which are calculated at the highest rate of the demand deposit interest rates publicly quoted by state-owned commercial banks on the date of penalty imposition, to employees.

- The employer that commits the violation specified in Clause 4 of this Article is compelled to pay full amounts of money equal to total sums of compulsory social insurance, compulsory health insurance, and unemployment insurance premiums payable plus interests on such amounts, which are calculated at the highest rate of the demand deposit interest rates publicly quoted by state-owned commercial banks on the date of penalty imposition, to employees.

Thus, if the company arbitrarily cuts or reduces the employee's salary from 1 to 10 people, they will be fined at least 5,000,000 VND. At the same time, the company is forced to pay the full salary plus the interest on the late payment or underpayment to the employees, calculated at the bank interest rate.

Best regards!

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