A common situation
A manufacturing company in Hai Phong discovered that Mr. K., a machine operator, had carelessly damaged an expensive piece of equipment. The board wanted to deduct 5 million VND from his monthly salary until the damage was fully compensated. Mr. K. wondered: is that lawful? When may an employer deduct wages, and when may it not?
Short answer
An employer may deduct wages, but in ONE case only: to obtain compensation for damage caused by the employee who has damaged or lost the employer’s tools, equipment, or property — under Article 102.1 in conjunction with Article 129 of the 2019 Labor Code.
By contrast, an employer must never deduct wages to punish violations of internal regulations, lateness, or missed KPIs, or to repay debts owed to third parties. These are completely different matters.
The only case where wage deduction is allowed
Article 102 of the 2019 Labor Code (“Wage deduction”) provides that an employer may deduct an employee’s monthly salary only to compensate for damage caused by damaging the employer’s tools, equipment, or property, as provided in Article 129 of the same Code. Specifically:
- An employee who negligently damages tools or equipment with non-serious damage (not exceeding 10 months of regional minimum wage) must compensate up to 3 months of salary.
- An employee who loses the employer’s tools, equipment, or property must compensate accordingly.
- An employee is exempt from compensation when the damage results from force majeure.
The 30% cap and how it is calculated
- The monthly deduction must not exceed 30% of the employee’s actual monthly salary after mandatory contributions (social insurance, health insurance, unemployment insurance) and personal income tax have been withheld (Article 102.3). Note: the 30% base is the net salary after mandatory deductions, not the gross salary.
- The employee must be informed of the reason for the wage deduction (Article 102.2).
Cases where wage deduction is strictly PROHIBITED
- Deducting wages to punish violations of internal regulations, lateness, or missed KPIs: banned by Article 127.2 of the Labor Code — “fining or cutting salary as a substitute for labor discipline” is prohibited. Moreover, the four forms of labor discipline in Article 124 (reprimand, wage-raise deferral, demotion, dismissal) do not include “wage deduction”.
- Deducting wages to repay debts owed to third parties (for example, deducting salary to pay the employee’s bank loans or personal debts): outside the scope of Article 102.
Checklist for employers
- Deduct wages only when there is actual property damage covered by Article 129 (damaged or lost tools, equipment, or property).
- Never use wage deduction to handle violations of internal regulations — that is an unlawful fine.
- Each monthly deduction must not exceed 30% of the net salary after mandatory social, health, and unemployment insurance and personal income tax.
- Clearly inform the employee of the reason for the deduction.
- Determine the correct compensation level: for non-serious negligence, up to 3 months of salary; no compensation for force majeure.
Employee rights
- Request the employer to state the reason for the deduction and the basis of the claimed damage.
- Refuse the deduction if it exceeds 30% per month or is used to punish violations of internal regulations.
- No compensation is owed when the damage results from force majeure.
Contact us
If your company needs a lawful procedure for handling damage compensation, or if you are an employee facing an unlawful wage deduction, FLAT Law Firm is ready to advise. Contact: contact us.
The information in this article is for general reference only and does not replace legal advice for your specific case.
Transparency note: The legal content of this article has been reviewed by the FLAW AI Legal Council and approved by the owner before publication. This article is not the opinion of a human lawyer who has reviewed your case.