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When is a Vietnamese company allowed to withhold employees’ salaries? Regulations on withholding employees’ salaries are a complex legal matter under labor law. A company is only allowed to withhold an employee’s salary in certain special cases clearly stipulated in the 2019 Labor Code and accompanying implementation guidelines.
What is salary withholding?
Salary withholding is an action where the employer temporarily withholds payment of an employee’s wages, usually for the purpose of addressing issues such as compensation for material damages or to fulfill other financial obligations of the employee as prescribed by law.
According to the 2019 Labor Code, withholding an employee’s salary is a restricted practice and cannot be applied arbitrarily. Specifically, under wage regulations, an employer has the right to withhold a portion of an employee’s salary only with mutual consent or when clearly stipulated by law. For example, cases of salary withholding may include situations where the employee damages company property.
When is a Vietnamese company allowed to withhold employees’ salaries?
A company is only allowed to withhold an employee’s salary in certain special cases clearly stipulated in the 2019 Labor Code and the implementing documents such as Decree 145/2020/ND-CP. Specifically, the circumstances in which a company may withhold a portion of an employee’s salary include:
1. Compensation for Material Damages to the Company
According to Article 129 of the 2019 Labor Code, when an employee causes damage to the company, the employer has the right to request compensation from the employee. In such cases, the company may withhold a portion of the employee’s salary to cover the damages, but no more than 30% of the employee’s monthly salary after mandatory deductions like social insurance, health insurance, and personal income tax.
2. Fulfilling Other Financial Obligations of the Employee
When required by competent state authorities, such as for the enforcement of court rulings, tax authorities, or other relevant bodies, the company may withhold a portion of the employee’s salary to meet their financial obligations (e.g., tax debt, administrative fines, compensation for damages, or repayment of debts according to court or enforcement orders). The deduction rate is determined by the enforcement order of the relevant state authority.
3. Force Majeure Circumstances
Article 97 of the 2019 Labor Code states that employers are responsible for paying employees in full and on time. However, in force majeure circumstances such as natural disasters, fires, dangerous epidemics, war, or other unforeseen, uncontrollable events, if the employer has exhausted all remedies but still cannot pay salaries on time, they have the right to delay payment. Nonetheless, salary withholding in such cases cannot exceed 30 days.
If the company delays payment for less than 15 days, no interest is due on the late payment. If the delay exceeds 15 days, the company must pay interest on the late salary based on the one-month deposit interest rate at the bank where the company holds its payroll account.
In situations of force majeure that prevent timely payment, the employer must notify the employees of the delay, explain the reason for it, and commit to a specific timeline for payment once the situation is resolved.
Although the law permits salary delays in force majeure circumstances, the employer is responsible for taking all measures to minimize the delay and ensure the protection of employee rights. This includes not only compensating for late payments but also paying the corresponding interest when required.
4. By Agreement with the Employee
In other cases, if there is an agreement between the employer and the employee (for example, an agreement to delay salary payment for a specific period due to a valid reason), the company may withhold the employee’s salary based on mutual consent.
Can an employer withhold an employee’s salary upon resignation?
According to Article 48 of the 2019 Labor Code, when a labor contract is terminated, the employer is responsible for fully settling all payments related to the employee’s entitlements, including any remaining salary, severance pay (if applicable), and other dues within 14 days from the date of termination. In certain special cases, such as natural disasters, fires, or other force majeure reasons, this payment period may be extended but not beyond 30 days.
Without legal grounds as specified above, employers are not permitted to withhold an employee’s salary after their resignation. Withholding salary without valid justification or in violation of the law could be considered a breach of labor regulations, and the employee has the right to file a complaint or take legal action.
If an employer intentionally withholds an employee’s salary without legal grounds, the employee may file a complaint with the relevant authorities, such as the Labor Inspectorate, or pursue legal action in court for resolution. Under Article 188 of the Labor Code, such actions by the employer could lead to administrative penalties or compensation to the employee.
Consultation on Regulations Regarding Employee Salary Withholding in Vietnam
At DCNH Law, we offer in-depth advisory services on legal regulations concerning employee salary withholding to assist businesses in understanding and complying with Vietnam’s current labor laws. Salary withholding is a sensitive matter and must be handled in accordance with legal provisions to avoid labor disputes and protect the rights of both the business and the employees.
Under the 2019 Labor Code, businesses are only allowed to withhold employees’ salaries in specific cases, such as when an employee causes material damage to the company, or when there is an enforcement order from authorities regarding the employee’s financial obligations. However, the amount withheld must not exceed 30% of the total monthly salary and can only be applied when there is clear legal justification.
We assist businesses in understanding the lawful conditions for salary withholding and the correct procedures for implementing this process transparently and in compliance with the law. In addition, we provide advice on labor dispute resolution processes and offer solutions to mitigate potential legal risks that may arise from improper salary withholding practices.
With extensive experience in labor law, the legal team at DCNH Law will support businesses not only in ensuring legal compliance but also in fostering harmonious, fair, and sustainable labor relations.
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DCNH LAW
Address: 38B Tran Nhat Duat, Phuoc Hoa ward, Nha Trang city, Khanh Hoa province, Vietnam.
Phone: (+84) 343320223 – 974278893
Email: [email protected]
