Key factors to bear in mind when dealing with wage disputes in the labour sector

Wages are one of the most important issues in labour relationships. However, in practice, it is common that employees and employers find themselves against each other regarding wage issues. Resolving these disputes requires legal knowledge and goodwill from both parties. This article will delve into key factors to bear in mind when dealing with wage disputes in the labor sector.

Definition of wage dispute and common issues in wage disputes

The current labour regulations do not provide a specific definition of wage disputes in labour sector. Article 179 of The Labour Code 2019 stipulates: “Labour disputes are disputes concerning the rights, benefits and obligations arising between parties during the process of establishing, performing or terminating labour relations; disputes between labour representative organisations; disputes arising from relationships directly related to labour relations”.

Based on the aforementioned definition, it can be understood that wage dispute in labor sector is a labour dispute over the employees’ right to receive wages and the employer’s obligation to pay wages in the labour relationship.

In a labour relationship, employees are often considered the weaker party due to the dependence, management and administration of the employer. Below are some fundamental wage issues often subject to wage disputes in the labour sector:

Regarding the determination of wages

Wages are the amount of money that the employer must pay to the employees for performing the work as agreed[1], including: salary according to the job or job title, salary allowances and other additional benefits[2]. The determination of wages is very important, because wages are the basis for determining benefits for employees such as social insurance contributions, overtime wages, job-loss allowances, unemployment benefits, compensation in case of illegal termination of employement contracts. In addition, wages are also the basis for determining the employee’s personal income tax payment.

Due to the important nature of wages, disputes related to wages often arise between employees and companies, especially when the basis for determining wages is not clearly defined in the employment contract.

Regarding the minimum wage

Wages by job or job title should not be lower than the minimum wage. In particular, in the case of agreed wages paid by products, employees and employers should pay attention to the minimum wage. The minimum wage set by the Government by region is as follows[3]:

Region	Minimum monthly wages (Unit: dong/month)	Minimum hourly wages Unit: dong/hour)
Region I	4,680,000	22,500
Region II	4,160,000	20,000
Region III	3,640,000	17,500
Region IV	3,250,000	15,600

Regarding wages payment principles

The employer must ensure wages are paid directly, fully, equally and timely to employees without discrimination based on gender for those performing work of equal value[4]. Some companies employ wage deduction approach without fully adhering to the labour disciplinary procedures, as well as the procedures for claiming compensation for damages and material responsibilities. If the wage deduction is applied to all employees in general, it may lead to collective labour disputes related to such reduction of wages.

Regarding the payment of overtime wages

Overtime wage rate is at least equal to 150% on weekdays, 200% on weekly holidays, and 300% on public holidays, Tet holidays paid leaves.[5] However, in practice, many companies do not pay overtime wages or just ignore it, defaulting to not paying wages for the hours that the employees work overtime.

Strictly comply with employement contracts, wage scales, payrolls, democratic regulations, labour agreements and other policies of enterprises in industrial relations on wages. Compliance with regulations and policies issued by enterprises will help employers have a solid legal basis to negotiate and resolve any dispute related to wages, avoiding unnecessary escalation and tension.

Key factors to bear in mind when dealing with wage disputes in the labour sector

Wage disputes in the labour sector can either be an individual labour dispute – that is, a dispute between an employee and an employer, or a collective dispute over rights or interests between one or more representative organisations of employees and the employer or one or more organizations of employers.

When a wage dispute in the labour sector arises, both employees and the employer should note some points as follows:

To determine the type of labour dispute

It is essential to determine the wage dispute in the labour sector that enterprises are facing are individual labour disputes or collective labour disputes. In case of a collective labour dispute, the employer should immediately carry out procedures for dialogue and collective bargaining so that it can promptly negotiate and remove disputes between the company and the employees’ collective onwage issues. If the collective labour disputes over wages is not well and promptly settled, the collective employees may go on strikes, adversely affecting the business operation of the company.

For example: On 11 April 2023, at the Saitex International Co., Ltd in Dong Nai, a collective work stoppage occurred. Out of the total of 2,626 employees, 300 joined the work stoppage. The reason for this strike by the 300 workers was due to the company imposing a 15% wage deduction for damaging products and not being able to deliver them. Right after that, the Mediation Team of Bien Hoa City had to work with the company’s Board of Directors and the Local Trade Union Executive Committee on this issue. In the end, the company agreed to withdraw the prior issued notice demanding compensation for damaged products which ranged from 15% to 25% of wages. After the announcement of the agreement, on the afternoon of 11 April, 100% of the employees who participated in the work stoppage returned to their normal work at 2 PM.[6]

Comply with the procedures to settle wage disputes in the labour sector

Labour laws encompass specific requirements related to the settlement of disputes related to labour relationship in general and wage disputes in the labour sector in particular. When there is a labour dispute, the parties need to determine their legal position under the relevant regulations to determine the dispute settlement process that they must follow. Below is an overview of dispute resolution procedures under current laws.

Negotiation

Negotiating before bringing wage disputes in the labour sector to the Court or competent dispute settlement agencies is essential to resolve any arising disagreements, mitigating unnecessary waste of time, expenses, and efforts for all parties involved.

Because this method is relatively simple, cost-effective, not bound by complicated legal procedures, it is often preferred choice for both parties to resolve wage disputes in the labour sector.

Mediation by labour mediator

It is not always possible for the parties to a labour relationship to bring a lawsuit against the other party to the Court. For individual wage disputes in the labour sector, it is required to initiate the mediation procedure with the labour mediator first. Only if the mediation fails or falls under exceptional circumstances such as handling labour discipline, dismissal or unilateral termination of the employment contract, compensation for damages, claiming benefits upon termination of the employment contract,[7] the parties are entitled to request the Labor Arbitration Council[8] or request the Court to settle.

Labour arbitration council

This dispute settlement method is only implemented if the parties agree to choose a labour arbitration council to resolve wage disputes in the labour sector. In addition, it should be noted that the parties only have the right to request the labour arbitration council to settle individual wage disputes in the labour sector in the following cases: (i) where it is not required to go through the mediation procedure, (ii) in case the time limit for requesting the mediation expires and the Labour mediator does not conduct mediation, (iii) the mediation fails.

When the parties request the labour arbitration council to settle their dispute, they cannotsimultaneously request the Court to settle the dispute, except for the case specified in Article 189.4 of the Labour Code 2019.[9]

Court

One or both parties to a wage labour dispute may initiate a lawsuit asking the Court to resolve the dispute. Similar to the mediation procedure by the labour mediator, the parties only have the right to request the Court to settle the individual wage disputes in the labour sector in the followingcases: (i) Where it is not required to go through the mediation procedure, (ii) The time limit for requesting the mediation expires and the labour mediator does not conduct Mediation, (iii) The mediation fails, (iv) the time limit specified in Article 189.2 of the Labour Code 2019  expires, the Labour arbitration council is not established, (v) the time limit specified in Article 189.3 of the Labour Code 2019  expires, the Labour arbitration council does not issue a decision to resolve the dispute (vi) One of the parties does not implement the dispute resolution decision of the Labour arbitration council.

The statutory time limit for requesting the Court to settle a labour dispute is 01 year from the date of discovering an act in which the disputing party believes that their legal rights are violated.[10]

The above is an overview of Key factors to bear in mind when dealing with wage disputes in the labour sector. If you have difficulties in finding a Law Firm to advise and support in the relevant legal field, please contact us. Phuoc & Partners is a professional consulting firm established in Vietnam and currently has nearly 100 members working in three offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners is also rated as one of the leading consulting firms specialising in business law in Vietnam that has leading practice areas in the legal market such as Labour and Employment, Taxation, Merger and acquisition, Litigation. We are confident in providing customers with optimal and effective service.

 

[1] Article 90 of the Labour Code 2019

[2] Article 90 of the Labour Code 2019

[3] Clause 1 Article 3 of Decree 38/2022/ND-CP

[4] Article 90 of the Labour Code 2019

[5] Article 98 of the Labour Code 2019

[6] https://dantri.com.vn/lao-dong-viec-lam/300-cong-nhan-ngung-viec-tap-the-vi-bi-tru-25-luong-20230412075440615.htm

[7] Other types of disputes that are not required to go through conciliation procedures by labor mediators are specified in Article 188.1 of the Labour Code 2019

[8] According to Article 189 of the Labour Code 2019

[9] Article 188.7, Article 189 and Article 193.4 of the Labour Code 2019

[10] Article 189, Article 190.3 and Article 194.3 of the Labour Code 2019