So, can businesses cut employee salaries to reduce business costs during this period? The article below will provide some information on this issue.

Employee Salary Reduction: Key Salary Issues to Know

1. Basis for Salary Payment

In this article, NPlaw will provide information related to the issue of "Employee Salary Reduction" so that businesses can balance their income and expenditure plans in preparation for future business development strategies.

Pursuant to Clause 1, Article 90 of the Labor Code 2019, salary is the amount of money that an employer pays an employee according to an agreement for performing work, including the salary level based on job or title, salary allowances, and other additional payments. And Clause 1, Article 95 of the Labor Code 2019 stipulates that employers shall pay salaries to employees based on the agreed-upon salary, labor productivity, and quality of work performance.

Based on the above provisions, if employees, even while working from home, still ensure labor productivity and maintain the quality of work performance, then the employer must pay the agreed-upon salary to the employee in full and on time. If the employer does not have any agreement with the employee regarding salary reduction and payment deadlines, then the employer has violated the provisions of the Labor Code.

2. Can Businesses Owe or Withhold Employee Salaries?

Pursuant to the principles of salary payment stipulated in Article 94 of the Labor Code 2019, employers must pay salaries directly, in full, and on time to employees. If an employee cannot receive salary directly, the employer may pay salary to a legally authorized person by the employee. If the employer and employee initially agreed to pay salary in cash, then at this stage, the employer may pay salary through the employee's personal bank account opened at a bank, pursuant to Clause 2, Article 96 of the Labor Code 2019.

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Employers cannot use the epidemic season as an excuse for not being able to directly pay employees, thus owing or reducing employee salaries. Businesses can only delay salary payments for no more than 30 days due to force majeure events. If salary payment is delayed for 15 days or more for reasons other than force majeure, the employer must compensate the employee with an amount at least equal to the interest on the delayed payment, calculated at the interest rate for 1-month term deposits published by the bank where the employer maintains the salary payment account at the time of payment.

Furthermore, pursuant to Clause 2, Article 16 of Decree No. 28/2020/ND-CP, the arbitrary delayed payment; non-payment; or insufficient payment of salaries to employees by businesses as agreed in the labor contract may result in administrative penalties with the following fine levels:

“a) From VND 5,000,000 to VND 10,000,000 for violations involving 01 to 10 employees;

b) From VND 10,000,000 to VND 20,000,000 for violations involving 11 to 50 employees;

c) From VND 20,000,000 to VND 30,000,000 for violations involving 51 to 100 employees;

d) From VND 30,000,000 to VND 40,000,000 for violations involving 101 to 300 employees;

dd) From VND 40,000,000 to VND 50,000,000 for violations involving 301 employees or more.”

Methods of Employee Salary Reduction Compliant with Legal Regulations

1. Transferring Employees to Different Work Compared to the Labor Contract

Pursuant to Article 29 of the Labor Code 2019, when facing sudden difficulties due to natural disasters, fires, dangerous epidemics, implementation of measures to prevent and overcome occupational accidents, occupational diseases, electricity or water incidents, or due to production and business needs, employers have the right to temporarily transfer employees to perform work different from that specified in the labor contract.

The salary of an employee when performing work different from that in the Labor Contract is stipulated as follows:

  • Maintain the salary of the old job for a period of 30 working days if the salary of the new job is lower than that of the old job.
  • The salary for the new job must be at least 85% of the salary of the old job and not lower than the minimum wage.

According to this regulation, businesses are allowed to pay a lower salary than the old job, but need to note some related contents for this form as follows:

The duration of employee transfer must ensure:

  • Not exceeding 60 cumulative days/year.
  • If exceeding 60 cumulative days/year, written consent from the employee must be obtained.

Must notify the employee at least 03 working days in advance, clearly stating the temporary work period and arranging work suitable for the employee's health and gender.

Must specifically stipulate in the labor regulations the cases where, due to production and business needs, the employer may temporarily transfer employees to perform work different from that in the labor contract.

2. Agreement to Amend or Supplement the Labor Contract

This seems to be the easiest form to implement at present, without being subject to many adjustments by the provisions of the Labor Code.

Pursuant to Clause 1, Article 33 of the Labor Code 2019: “During the performance of a labor contract, if either party requests to amend or supplement the contents of the labor contract, they must notify the other party at least 03 working days in advance of the proposed amendments or additions.”

Based on this regulation, employers and employees can renegotiate salary issues with each other, thereby helping businesses reduce a portion of operating costs during the current epidemic.

3. Temporary Suspension of Work

Pursuant to Clause 3, Article 99 of the Labor Code 2019, if due to electricity or water incidents not caused by the employer, or due to natural disasters, fires, dangerous epidemics, hostilities, relocation of operational premises at the request of competent state agencies, or for economic reasons, then the two parties shall agree on the salary for work suspension as follows:

  • For work suspensions of 14 working days or less, the salary for work suspension shall be agreed upon to be not lower than the minimum wage;
  • For work suspensions exceeding 14 working days, the salary for work suspension shall be agreed upon by both parties, but must ensure that the salary for work suspension during the first 14 days is not lower than the minimum wage.

Based on the above article, due to epidemics and requests from competent state agencies, businesses can choose the method of temporarily suspending employees' work to reduce the burden of costs. This form is also relatively easier to implement compared to the regulations on transferring employees to different work from the contract.

The regional minimum wage applicable to employees working in businesses, as stipulated in Article 3 of Decree No. 90/2019/ND-CP, is as follows:

  • A level of VND 4,420,000/month, applicable to businesses operating in Region I.
  • A level of VND 3,920,000/month, applicable to businesses operating in Region II.
  • A level of VND 3,430,000/month, applicable to businesses operating in Region III.
  • A level of VND 3,070,000/month, applicable to businesses operating in Region IV.

In Ho Chi Minh City, the minimum salary that a company must pay when temporarily suspending employees' work due to an epidemic is VND 4,420,000/month.

Additionally, according to Resolution No. 68/NQ-CP, employees working under labor contracts who have their work suspended pursuant to Clause 3, Article 99 of the Labor Code and are subject to medical quarantine or in areas blockaded at the request of competent state agencies for 14 days or more during the period from May 1, 2021, to December 31, 2021; and are participating in compulsory social insurance immediately prior to the work suspension, shall receive a one-time support of VND 1,000,000/person.

Above is an article about the forms of employee salary reduction compliant with Vietnamese law. Ngoc Phu Law Company Limited (NPlaw) specializes in providing comprehensive and professional legal services related to domestic and foreign Investment; Enterprises; Real Estate; Intellectual Property; Labor; Consulting on drafting, negotiating, and supporting the signing of commercial contracts, domestic and foreign service contracts; Consulting and supporting the procedures for obtaining various sub-licenses, etc. With a team of professionally trained lawyers and specialists, we are fully capable of advising and assisting clients in carrying out these procedures.