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Material liability in Vietnamese labor law refers to the employee’s responsibility to compensate the employer for damage to property or loss of tools and equipment during the performance of their work.
What is material liability?
Material liability in labor law refers to the obligation of employees to compensate the employer for damages to property incurred during the course of work. This typically applies in cases where employees cause damage by violating the employer’s regulations, resulting in the loss, damage, or unusability of assets.
Examples of material liability
Example of material liability for unintentional error
Mr. A is a warehouse employee at Company X, responsible for managing and preserving goods in the warehouse. During his work, he failed to comply with safety procedures for storing goods, leading to damage to a batch of goods valued at VND 50 million. After Company X conducted an investigation, it was concluded that the damage was caused by Mr. A’s negligence, not intentional, but it resulted in significant loss to the company.
According to the provisions of the Labor Code, Mr. A may be held materially liable for this damage. Since the damage amounts to VND 100 million, the company requires Mr. A to compensate for the full amount of the loss, but it will be gradually deducted from his monthly salary.
This is an example of applying material liability in cases where the employee unintentionally causes property damage to the employer.
Example of material liability for intentional error
Ms. C is a worker in the production department of Factory D, where there are clear regulations regarding the use of materials to manufacture products. Each shift, every worker is only allowed to use a certain amount of materials to ensure efficiency and cost savings in production. However, due to a personal conflict with the manager, Ms. C intentionally overused materials beyond the permitted limit. Specifically, Ms. C deliberately used twice the required amount of materials to produce the products, resulting in losses to the factory with a total value of wasted materials amounting to VND 30 million.
After discovering this behavior, Factory D determined that this was an intentional act of wasting materials, violating internal regulations. As a result, Ms. C is held materially liable and must compensate for the full amount of wasted materials, equivalent to VND 30 million.
Regulations on material liability in Vietnamese labor law
When employees damage tools, equipment, or commit other acts that cause property damage to the employer, they must compensate in accordance with the law and the employer’s internal labor regulations, as follows:
In cases of loss or damage to tools and equipment:
Employees, whether unintentionally or intentionally, who lose or damage the company’s tools or equipment during work must compensate for part or all of the damage’s value. The specific compensation amount will depend on the extent of the damage and the regulations outlined in the internal labor rules.
For example, if an employee damages a computer due to improper use, they may be required to compensate an amount equivalent to the repair or replacement cost of the computer. If the damage is not severe, the compensation may not exceed three months’ salary of the employee.
In cases of excessive consumption of materials beyond the allowed limit:
If an employee uses materials exceeding the prescribed limit without a reasonable justification, they will be required to compensate for the excess consumption. This applies when the excess use results from personal fault, not production requirements.
For instance, if a worker uses more production materials than necessary and causes wastage, they must compensate for the wasted materials.
In other cases of property damage:
If an employee engages in actions that result in damage to company property, such as loss of goods or damage caused by improper storage, they will be held liable to compensate for the entire or partial value of the property, in accordance with agreements or legal regulations.
Principles of handling material liability in labor law
In cases where the employee causes minor damage due to negligence, with a value not exceeding 10 times the regional minimum wage announced by the Government at the employee’s place of work, the employee will be required to compensate a maximum of 3 months’ salary. This is the highest level of compensation an employee must bear in the event of minor damage caused by negligence, not intentional misconduct.
Compensation will be carried out by gradually deducting from the employee’s monthly salary. The amount deducted each month will not exceed 30% of the employee’s monthly salary after mandatory contributions, such as social insurance, health insurance, unemployment insurance, and personal income tax, have been deducted.
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