Can employers reduce allowances since the increase of regional minimum wage in Vietnam?

Allowance is the amount of money that the employer supports the employee to compensate for the agreed working conditions. So, when increasing the regional minimum wage, can the employer reduce allowances in Vietnam?

Can employers reduce allowances since the increase of regional minimum wage in Vietnam? (Source: Internet)

1. Employer's obligation in applying regional minimum wage increase in Vietnam

According to Clause 3, Article 3 of Decree 38/2022/ND-CP on the application of regional areas determined according to the place of operation of the employer as follows:

- An employer located in a specific subregion shall apply the respective statutory minimum wage applied thereto. 

- In the event that an employer has its affiliates and/or branches located in different subregions to which different statutory minimum wages apply, such affiliates and/or branches must apply the respective statutory minimum wages applied thereto.

- If an employer is located in an industrial park or export processing zone located in the territory containing two or more subregions to which different statutory minimum wages apply, the highest statutory minimum wage shall apply.

- If an employer is located in a subregion which is renamed or divided, the statutory minimum wage applied to that subregion before it is renamed or divided shall still apply until new regulations promulgated by the Government come into force.

- If an employer is located in a subregion which is converted or established from a subregion or by consolidation of two or more subregions to which different statutory minimum wages apply, it shall apply the highest statutory minimum wage.

- In case an employer is located in a provincial city which is established from one or more subregions in the region IV, it shall apply the statutory minimum wage applied to the remaining provincial cities in Clause 3 of the Appendix issued with Decree 38/2022/ND-CP.

2. Employers' responsibilities when raising regional minimum wages in Vietnam

According to Clause 3, Article 5 of Decree 38/2022/ND-CP, employers have the following responsibilities:

- Employees shall review and make appropriate modifications to their agreements in employment contracts, collective bargaining agreements as well as other regulations and rules; are not allowed to cut or reduce any overtime pay, nightshift pay, perquisites and other benefits paid to employees as prescribed by Vietnam's Labor Code.

- Agreements or commitments under employment contracts, collective bargaining agreements or other lawfully concluded agreements that are more advantageous to employees than the provisions of this Decree 38/2022/ND-CP shall remain valid, unless otherwise agreed upon between the parties.

Thus, when increasing the minimum wage in the region, the employer is not allowed to arbitrarily reduce the employee's allowance, but must follow the provisions already agreed upon.

Chi Nhan

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