Issue 260525 – Rules on Employee Salary Deductions

Dear Valued Clients,

Salary is not only a fundamental right but also the primary source of income for employees (“Employees”). In practice, however, Employees do not always receive the full salary agreed upon in their contracts, as certain amounts may be deducted before payment. Salary deduction is a sensitive issue that can easily lead to labor disputes if the employer (“Employer”) fails to comply with legal regulations.

The following article aims to clarify the current legal provisions regarding salary deductions, helping to protect the legitimate rights and interests of both parties in the employment relationship.

1. Concept of Salary Deduction

Under current law, there is no specific definition of “Salary Deduction.” However, based on the provisions of the Labor Code 2019, it can be understood as the Employer’s action of retaining a portion of the Employee’s salary to compensate for damages caused by the Employee to the Employer’s tools, equipment, or assets.

2. Conditions for Salary Deduction

Pursuant to Clause 1, Article 129 of the Labor Code 2019, the Employer is only permitted to deduct the Employee’s salary in the following cases:

• The Employee damages tools or equipment, or commits other acts causing damage to the Employer’s assets;
• The Employee loses tools, equipment, or assets of the Employer, or other assets assigned by the Employer, or consumes materials in excess of the permitted limits.

Furthermore, pursuant to Clause 2, Article 129 of the Labor Code 2019, the Employee must be informed of the reason for their salary deduction.

3. Statutory Limits on Salary Deduction

To ensure that Employees maintain sufficient financial means for their livelihood, the law sets limits on deductions. Specifically, pursuant to Clause 3, Article 102 of the Labor Code 2019, the monthly salary deduction shall not exceed 30% of the Employee’s actual salary after the payment of compulsory social insurance, health insurance, unemployment insurance, and personal income tax.

4. Penalties for Violations Regarding Salary Deductions

Pursuant to Clause 2, Article 17 of Decree No. 12/2022/ND-CP, an Employer who performs salary deductions in violation of the law shall be subject to administrative fines ranging from VND 5,000,000 to VND 50,000,000, depending on the number of affected employees:

• VND 5,000,000 to VND 10,000,000: For violations involving 01 to 10 employees;
• VND 10,000,000 to VND 20,000,000: For violations involving 11 to 50 employees;
• VND 20,000,000 to VND 30,000,000: For violations involving 51 to 100 employees;
• VND 30,000,000 to VND 40,000,000: For violations involving 101 to 300 employees;
• VND 40,000,000 to VND 50,000,000: For violations involving 301 employees or more.

Additionally, the Employer is required to implement remedial measures according to Clause 5, Article 17 of Decree No. 12/2022/ND-CP, including:

• Paying the full outstanding salary plus interest on the underpaid amount, calculated at the highest demand deposit interest rate announced by state-owned commercial banks at the time of the penalty;
• Paying the full amount equivalent to the compulsory social insurance, health insurance, and unemployment insurance contributions, plus interest.

Conclusion

Based on the aforementioned analysis, it is established that salary deduction is a vital legal mechanism designed to protect the material interests of Employers against damages caused by Employees. However, to safeguard social security and ensure a minimum standard of living for Employees, the law has established strict technical barriers regarding both the conditions and the limits of such deductions.

Mastering these regulations not only assists Employees in protecting their legitimate rights but also enables Employers to exercise their personnel management rights correctly. Any arbitrary or groundless deduction, or any deduction exceeding the prescribed 30% limit, shall be deemed a violation of the law and subject to rigorous administrative sanctions and corresponding reimbursement obligations.

In the context of increasingly stringent legal labor relations, absolute compliance with salary-related regulations is the key factor for parties to establish a transparent, harmonious, and sustainable working environment.

Sincerely,

ENT Law LLC