Contents
I. Can a company facing economic difficulties unilaterally reduce the salaries of its employees?
The response from HTLaw is negative, as indicated by the following:
Pursuant to Article 94 of the 2019 Labor Code:
“Article 94. Principle of wage payment
Employers must directly, fully, and timely pay wages to employees. In cases where employees cannot receive wages directly, employers may pay wages to individuals duly authorized by the employees.
Employers must not restrict or interfere with the employees’ right to decide on their wage expenditures. They must not coerce employees to spend wages on purchasing goods or using services from the employer or other entities designated by the employer.”
Thus, employers are obligated to directly, fully, and timely pay wages to employees in accordance with the agreement within the corresponding labor contract for the work performed.
Furthermore, Article 33 of the 2019 Labor Code stipulates:
“Article 33. Amendment and supplementation of labor contracts
During the execution of a labor contract, if either party requests to amend or supplement the content of the labor contract, they must inform the other party at least 03 working days in advance regarding the content to be amended or supplemented.
In cases of mutual agreement, the amendment or supplementation of the labor contract shall be executed through the signing of an appendix to the labor contract or the establishment of a new labor contract.
If the parties do not reach an agreement on the amendment or supplementation of the labor contract, the originally concluded labor contract shall continue to be executed.”
It is evident that if the intention is to reduce an employee’s wage, the company must notify the employee at least 03 days in advance. If the employee agrees to the wage reduction, the parties can agree to sign an appendix to the labor contract or a new contract to adjust the wage level. However, if the employee does not agree, the company must still pay the wage as agreed upon in the signed labor contract, and an arbitrary reduction of wages is not permissible.
II. Now, assuming a company unilaterally reduces an employee's wage, can the company be subject to penalties?
The answer is affirmative, based on Section 2 of Article 17 of Decree No. 12/2022/NĐ-CP:
“2. Fine for employers committing any of the following acts: Failure to pay wages promptly in accordance with legal regulations; failure to pay or underpay wages to employees as agreed upon in the labor contract; failure to pay or underpay overtime wages; failure to pay or underpay night-shift wages; failure to pay or underpay wages during a suspension of work as stipulated by law; restricting or interfering with the employees’ right to decide on wage expenditures; coercing employees to spend wages on purchasing goods or using services from the employer or other designated entities; improperly deducting wages from employees in violation of legal regulations; failure to pay or underpay wages as prescribed to employees temporarily assigned to different tasks than those stated in the labor contract or during a strike; failure to pay or underpay wages for unused annual leave or remaining annual leave days upon termination or loss of employment; failure to provide advances or inadequate advances for wages during temporary suspension of work as stipulated by law; failure to pay adequate wages during a temporary suspension of work when the employee is not subject to labor discipline according to one of the following levels: …
(a) From 5,000,000 VND to 10,000,000 VND for violations involving 01 to 10 employees;
(b) From 10,000,000 VND to 20,000,000 VND for violations involving 11 to 50 employees;
(c) From 20,000,000 VND to 30,000,000 VND for violations involving 51 to 100 employees;
(d) From 30,000,000 VND to 40,000,000 VND for violations involving 101 to 300 employees;
(e) From 40,000,000 VND to 50,000,000 VND for violations involving 301 or more employees.”
Furthermore, the provisions in Section 1 of Article 6 of Decree No. 12/2022/NĐ-CP state:
“1. The prescribed fine levels for violations of the provisions in Chapters II, III, and IV of this Decree shall apply to individuals, except as provided for in Sections 1, 2, 3, 5 of Article 7; Sections 3, 4, 6 of Article 13; Section 2 of Article 25; Section 1 of Article 26; Sections 1, 5, 6, 7 of Article 27; Section 8 of Article 39; Section 5 of Article 41; Sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 of Article 42; Sections 1, 2, 3, 4, 5, 6, 7, 8 of Article 43; Sections 1, 2, 3, 4, 5, 6 of Article 45; Section 3 of Article 46 of this Decree. The prescribed fine level for organizations shall be twice the fine level for individuals.”
Consequently, according to the above regulations, if a company arbitrarily reduces an employee’s wage, it can be fined from 5,000,000 VND to 10,000,000 VND for individuals and from 10,000,000 VND to 20,000,000 VND for organizations.
III. Hence, what should employees do to safeguard their rights?
Employees have the right to unilaterally terminate the labor contract without prior notice if the company arbitrarily reduces their wages, as per Section 2 of Article 35 of the 2019 Labor Code, which stipulates that:
“…
(b) Failure to fully pay or pay wages on time, except as provided in Section 4 of Article 97 of this Code;
…”
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