Salary deductions: Allowed circumstances & maximum deductions

Salary deduction is the employer’s deduction of part of the employee’s salary according to the provisions of law. This deduction is only made in certain cases and must strictly comply with the maximum deduction level. The Labor Code 2019 and its guiding documents regulate this issue. Follow the article below for more details!

General regulations on salaries

Salary is the amount of money an employer pays an employee according to an agreement to perform work. Salary includes salary according to job or title, salary allowances and other additional payments.

Salary payment principles are prescribed as follows:

• Employers must pay wages directly, fully and on time to employees. In case the employee cannot receive salary directly, the employer can pay salary to the person legally authorized by the employee.
• The employer must not restrict or interfere with the employee’s right to decide on salary spending; Employees must not be forced to spend their salary on purchasing goods or using services from the employer or another unit designated by the employer.

Salary payment form:

• The employer and employee agree on the form of payment based on time, product or piece of work.
• Salaries are paid in cash or through the employee’s personal account opened at the bank.
• In case the salary is paid through the employee’s personal account opened at a bank, the employer must pay fees related to opening the account and transferring the salary.

Salary payment term:

• Employees who are paid by the hour, day, or week are paid after the hour, day, or week of work or are paid in lump sum as agreed upon by both parties but must not exceed 15 days and must be paid in one lump sum.
• Employees who receive a monthly salary are paid once a month or once every half a month. The time of salary payment is agreed upon by both parties and must be set at a cyclical time.
• Employees who receive wages based on products or pieces of work are paid according to the agreement of both parties; If the work must be done for many months, the monthly salary will be advanced according to the amount of work done during the month.

In what cases can employers deduct salary?

Employers are only allowed to make deductions from employees’ wages in certain legal cases. Article 102 and Article 129 of the Labor Code  2019 specifically stipulate as follows:

The employer is only allowed to deduct the employee’s salary to compensate for damages caused by damaging the employer’s tools, equipment, and property, including the following cases:

• Employees who damage tools and equipment or commit other acts that cause damage to the employer’s property must compensate according to the provisions of law or the employer’s labor regulations. In case the employee causes non-serious damage due to negligence with a value not exceeding 10 months’ regional minimum wage announced by the Government applicable at the employee’s place of work, the employee must compensate at most 30 months’ salary and have it deducted monthly from the salary according to regulations.
• An employee who loses tools, equipment, property of the employer or other assets assigned by the employer or consumes materials beyond the allowed limit must compensate for partial or total damage according to current market prices or internal labor regulations; In case there is a liability contract, compensation must be made according to the liability contract; In cases caused by natural disasters, fires, enemy sabotages, dangerous epidemics, disasters, or events that objectively cannot be foreseen and cannot be overcome even though all necessary and permissible measures have been applied, compensation is not required.

Maximum salary deduction level according to current regulations

The maximum salary deduction level is regulated to ensure that the employee’s remaining income after deduction is enough to maintain a minimum living. The deduction level for each case is different, but must meet the following conditions:

• The monthly salary deduction must not exceed 30% of the employee’s actual monthly salary after deductions for mandatory social insurance, health insurance, unemployment insurance, and personal income tax.
• Employees have the right to know the reasons for deductions from their wages.

Penalties for illegal salary deductions

According to Clause 2 and Clause 5, Article 17 of Decree 12/2022/ND-CP, when employers illegally deduct employees’ wages, they will be fined at the following levels:

• From 5,000,000 VND to 10,000,000 VND for violations from 01 person to 10 employees;
• From 10,000,000 VND to 20,000,000 VND for violations from 11 to 50 employees;
• From 20,000,000 VND to 30,000,000 VND for violations from 51 to 100 employees;
• From 30,000,000 VND to 40,000,000 VND for violations from 101 to 300 employees;
• From 40,000,000 VND to 50,000,000 VND for violations of 301 or more employees.

In addition, the employer must also take remedial measures to force the employer to return the entire illegally deducted salary to the employee, plus interest on the illegally deducted salary calculated at the highest demand deposit interest rate of the commercial bank where the employer opens the payroll account.

Note: The above fine level only applies to individuals. The fine for organizations is 2 times the fine for individuals (Clause 1, Article 6 of the Decree 12/2022/ND-CP).

Thus, if the employer commits acts such as salary deduction beyond the prescribed limit, deducting without a legitimate reason or salary deduction without notifying the employee, etc., they may be fined from 5,000,000 VND to 100,000,000 VND depending on the case and must also take remedial measures.

In-depth consulting on labor at Long Phan Consulting Company

Long Phan Consulting Company with a team of experienced experts in the field of labor, we provide comprehensive consulting services including:

• Labor law consulting: Labor contracts, rights and obligations of employees and employers, wages, insurance, welfare regimes.
• Consulting and drafting labor contracts: Probationary contracts, fixed-term and indefinite labor contracts, contracts for foreign workers.
• Consulting on resolving labor disputes: Dismissal, unilateral contract termination, disputes over salary, benefits, compensation for damages.
• Consulting on work permit procedures: Work permits for foreigners, work permit extension, work permit exemption.
• Consulting on social insurance and welfare regimes: Maternity, sickness, retirement, unemployment benefits, handling insurance disputes.
• Consulting on labor discipline and contract termination: Handling disciplinary violations, legal dismissal, and termination of contracts according to regulations.
• Consulting on developing labor regulations and collective labor agreements: Developing and registering labor regulations, consulting on negotiating and signing collective labor agreements.

Long Phan Consulting Company supports businesses and employees in complying with the law, ensuring the legal rights of all parties and limiting risks in labor relations.

Frequently asked questions about salary deductions

Below are some frequently asked questions that we have compiled during the consultation process, please refer to:

The company damaged the laptop I was using for work, can the company deduct my salary?

No. If the damage occurs during the normal course of work and is not due to your intentional fault or gross negligence, the company is not allowed to deduct wages. In case you are at fault, the salary deduction must comply with the regulations on compensation for damages.

Can a company’s labor regulations stipulate a salary deduction rate higher than 30%?

No. The maximum deduction of 30% of the actual salary paid after deducting mandatory amounts is a regulation of the Labor Code, labor regulations must not be contrary to this regulation.

What should an agreement on salary deductions to repay advances include?

The agreement should clearly state: advance amount, advance period, amount deducted each month, start and end time of deduction, and confirm the employee’s consent.

What role do unions play in resolving disputes over salary deductions?

If the company has a local union, workers can complain to the union. Trade unions are responsible for representing and protecting the rights of workers and participating in the process of negotiation and conciliation of disputes.

What is the process for resolving disputes about salary deductions?

Step 1: Complain internally to the employer.

Step 2: If not resolved satisfactorily, complain to the Department/Department of Home Affairs.

Step 3: Mediation at the labor conciliation agency.

Step 4: File a lawsuit at the People’s Court.

How is “actual salary” different from “gross salary”?

“Actual salary” is the amount of salary the employee actually receives after deducting social insurance, health insurance, unemployment insurance, personal income tax and other legal deductions. “Gross salary” is the entire salary amount before deductions.

If I do not agree to the salary deduction, what should I do?

First of all, you should talk directly with the employer to clarify the reason for the deduction. If an agreement cannot be reached, you can make a complaint according to the procedure stated in question 6.

Besides the above mentioned cases, is the company allowed to deduct my salary for any other reason?

No. In addition to cases of compensation for damages, repayment of advances, and mandatory payments, employers are not allowed to arbitrarily salary deductions for any other reason except in the case of a court decision or judgment.

Can the company withhold my entire salary to offset debt?

Are not. Withholding the entire salary is a violation of the law, except in cases where it is done according to a Court Decision/Judgment.

I lost my employee card, can the company deduct my salary to replace the card?

This depends on the company’s labor regulations and the agreement between the two parties. If the rules clearly stipulate compensation for card replacement costs, and you have agreed to this rule, the company can make a deduction, but the deduction must be reasonable and not exceed 30% of actual salary.

Conclude

Salary deduction is a complex issue, directly related to the rights of employees and the obligations of employers. It is extremely important to understand the legal regulations on cases where deductions are allowed and the maximum level of deductions. For detailed advice and protection of legal rights, please contact Long Phan Consulting Company via the hotline: 0906735386.