CHARGING INTEREST ON SALARY ADVANCE, IS THE COMPANY ENTITLED TO?

Requesting for salary advance is a lawful and essential right, enabling employees to address temporary financial difficulties. However, are there legal limits on the maximum advance an employee can request, and is it permissible for the company to charge interest on the advanced amount?

In which situations can employees request a salary advance?

Under the provisions of Labor Code 2019, employees are entitled to request a salary advance from their employer when necessary to address personal matters. The applicable advance amount and conditions are governed by specific legal requirements, as detailed below:

Salary advance under mutual agreement

Respecting and prioritizing the principle of contractual freedom, employees and employers may negotiate flexible terms for salary advances, including the amount, repayment timeline, and related conditions, provided such agreements do not contravene legal prohibitions. However, to ensure transparency and protect legitimate rights and interests, all essential terms should be clearly documented and carried out on a voluntary basis.

Salary advances in cases of piece rate or a fixed amount wage payments

For employees receiving wages piece of rate or a fixed amount is implemented according to mutually agreed terms between the parties.

However, if the completion timeline for calculating wages extends over several months, employees are entitled to monthly salary advances corresponding to the amount of work completed during each month.

Salary advances for employees temporarily absent to fulfill civic obligations

Người lao động tạm thời nghỉ việc để thực hiện nghĩa vụ công dân được tạm ứng lương nếu thời gian nghỉ kéo dài từ 01 tuần trở lên. Employees who temporarily leave work to fulfill civic obligations are entitled to request salary advances if the absence extends for a period from one week.

The advance amount is calculated based on the number of days absent for such obligations, with a maximum limit equivalent to one month’s salary as stipulated in the labor contract. In such cases, the employee is required to reimburse the advanced amount.

It is important to note that this provision does not apply to employees enlisted for military service under the Law on Conscription.

Salary advance in case of employee annual leave

In the event of annual leave (or paid leave), if the salary payment period has not yet arrived, employees have the right to request a salary advance in accordance with the applicable regulations.

The minimum amount for the salary advance in this case will be equivalent to the salary for the days of leave taken.

Advance salary when employees are temporarily suspended from work

The company has the right to temporarily suspend the employee’s work when the violation has complicated circumstances, and it is considered that allowing the employee to continue working will make verification difficult. Note, the maximum period of work suspension is 15 days in normal cases and 90 days in special cases.

The applicable salary advance is equivalent to 50% of the employee’s salary before work suspension.

The company calculates interest on advance salary, right or wrong?

Pursuant to Clause 1, Article 101 of Labor Code 2019:

“An employee may receive an interest-free salary advance in accordance with conditions agreed on by the two parties.”

Thus, although the parties’ agreement on the conditions for applying a salary advance is preferred, the company’s calculation of interest on the salary advance is not allowed.

How is the fine for violating regulations on salary advance?

In addition to the purpose of ensuring harmonious labor relationships and promoting employee trust and working spirit, compliance with regulations on salary advances is a mandatory legal requirement for enterprise.

Non-compliance or incomplete compliance may result in administrative sanctions depending on the behavior and level of the respective specific violation. In particular, the maximum fine can be up to 100 million VND, pursuant to Clause 2, Article 17 of Decree 12/2022/ND-CP.

>> DELAY IN SALARY PAYMENT, RIGHTS OF EMPLOYEES? https://linconlaw.vn/delay-in-salary-payment-rights-of-employees/

>> COMPANY PAYS SALARY IN FOREIGN CURRENCY, PERMITTED OR NOT? https://linconlaw.vn/company-pays-salary-in-foreign-currency-permitted-or-not/