Approaches to Wage Adjustment in Enterprises and Related Points to Note
2026/10/09
- I-GLOCAL.CO.,LTD. Ho Chi Minh City Office
- Nguyen Thi Thuy Nhi
Executive Summary
① Aim of the article — Among efforts to optimize personnel costs, it covers wage adjustments a company implements collectively for all employees or a specific group, organizing the conditions, procedures, and points to note for each method (adjustments by individual agreement are out of scope).
② How wage structures are recorded — Under Articles 90 and 21 of the Labor Code, wages comprise the base wage, allowances, and other supplementary payments. Recording in the labor contract is broadly either “direct recording” or “reference recording” (referring to other documents), and this determines the degree of flexibility. Changing the base wage always requires employee consent.
③ Procedures for adjusting allowances — Direct recording requires employee consent (via a contract appendix or new contract, Article 33). For reference recording: (a) referring to the collective bargaining agreement requires the full process of collective bargaining, a majority (>50%) vote, and notification to the authorities (Articles 76, 77, 82), leaving little company discretion; (b) referring to internal regulations or the internal labor regulations gives greater discretion, but amending the internal labor regulations requires dialogue and consultation, and re-registration for companies with 10+ employees (Articles 118, 119).
④ Risks if not properly handled — Adjustments lacking a legal basis or proper procedure invite legal risks: an order to restore the original wage, make-up of the shortfall plus late-payment interest, administrative penalties under Decree No. 12/2022/ND-CP, and severance obligations arising from an employee’s unilateral termination (Article 35). Beyond the law, a lack of transparency or dialogue can damage labor relations, raising turnover and lowering productivity.
⑤ Recommended actions — Designing a rational wage structure in advance is key to retaining flexibility for future adjustments. Even without a legal obligation, giving advance notice of the purpose, reasons, and schedule, offering direct explanation, and collecting and responding to employees’ views help secure understanding and maintain stable labor relations.
Introduction
Optimizing personnel costs, and the review of wages in particular, has become an urgent issue for many companies amid today’s rapidly changing business environment. However, adjusting employees’ wages is a highly sensitive matter, and careful consideration from both the legal and practical standpoints is required in order to avoid labor disputes and legal risks. This article organizes the conditions and procedures for each of the wage-adjustment methods commonly used in practice.
Note that this article covers adjustments that a company implements collectively for all employees or a specific group of employees; adjustments made by individual agreement with individual employees are outside its scope.
1. Legal provisions on wages and how wage structures are recorded in practice
Under Article 90 of the Labor Code, wages are the amount that the employer pays to the employee, as agreed, in return for work, comprising the base wage according to the job or position, allowances, and other supplementary payments. Article 21 of the Labor Code requires all of these to be recorded in the labor contract. In practice, the way wages are recorded in a labor contract falls broadly into the following two methods.
- (i) Direct recording: a method in which the base wage, allowances, and other supplementary payments are recorded directly in the labor contract as amounts or percentages.
- (ii) Reference recording: a method in which only the amount of the base wage is recorded in the labor contract, while allowances and other supplementary payments are referred to other documents, such as the collective bargaining agreement, the internal labor regulations, or the company’s internal regulations.
In principle, changing the content of a labor contract requires the agreement of both parties. Since the “base wage” is recorded as a specific amount under either recording method, changing it always requires the employee’s consent. For “allowances and other supplementary payments,” on the other hand, the extent to which a company may make changes on its own differs depending on the recording method. The adjustment procedures and points to note for each method are analyzed below.
２.Analysis of wage-adjustment methods (allowances and other supplementary payments)
The legal basis and implementation procedure for a wage adjustment differ depending on the method by which the wage structure is recorded and the type of document to which the wage-structure item refers. Specifically, they are as follows.
2-1 Where recorded directly in the labor contract
In the case of direct recording, because such content forms part of what has been agreed in the labor contract, any adjustment requires the employee’s consent. In accordance with Article 33 of the Labor Code, it must be effected through an appendix to the labor contract or the conclusion of a new labor contract.
2-2 Where recorded by reference
In the case of reference recording, the adjustment procedure and the degree of the company’s discretion can be classified into the following two groups.
a. Documents requiring collective agreement (where reference is made to the collective bargaining agreement)
Because a collective bargaining agreement is concluded through negotiation and agreement between the company and the collective of employees, adjusting a wage-structure item that refers to it requires going through the entire process: collective bargaining, consultation of all employees, conclusion upon an affirmative vote by more than 50% (a majority), and notification to the labor administration authority under Articles 76, 77, and 82 of the Labor Code. Because this series of steps is required, it takes a long time to implement and leaves little room for the company to proceed on its own.
b. Documents with managerial discretion (where reference is made to internal regulations or the internal labor regulations)
Where reference is made to a document in this category, the company can carry out wage adjustments relatively freely. However, in light of Articles 63, 104, and 118 of the Labor Code, the following points require attention in order to implement them lawfully.
First, where reference is made to internal regulations. The “internal regulations” here mean the financial regulations, the wage/bonus regulations, the HR regulations, or equivalent regulations, which set out the eligible persons, conditions, and payment amounts for wages, allowances, subsidies, and supplementary payments. For these regulations, under current law the company is not obliged to conduct a workplace dialogue procedure or to consult the grassroots employee representative organization before making changes, so it can revise the content proactively and flexibly according to actual circumstances.
Second, where reference is made to the internal labor regulations. Under Article 118 of the Labor Code, before amending the internal labor regulations, conducting a workplace dialogue and consulting the employee representative organization are mandatory. In addition, a company employing 10 or more employees must complete a re-registration procedure under Article 119 of the Labor Code after the amendment, which differs greatly from amending internal regulations. Note that, in practice, recording allowance provisions in the internal labor regulations is not common, as the internal labor regulations mainly set out matters relating to labor discipline.
3.Impact assessment and compliance risks in implementation
Where a wage adjustment is made without a sufficient legal basis, or without following the prescribed procedures analyzed in Section 2, mainly the following two types of risk may arise.
First, as legal risks when a dispute arises: (i) an order to restore the original wage level where the adjustment is found to breach the labor contract or to be procedurally defective; (ii) the obligation to fully make up the shortfall in wages from the time of the violation onward, together with late-payment interest; (iii) administrative penalties under Decree No. 12/2022/ND-CP (the amount of which is determined according to the nature of the violation and the number of employees affected); and (iv) the obligation to pay severance allowance and the like arising from the employee’s exercise of the right to unilaterally terminate the labor contract under Article 35 of the Labor Code.
Second, a wage adjustment that lacks transparency and is not accompanied by sufficient consultation with employees carries risks for labor relations, even where it is not a legal obligation. Specifically, where employees feel that a wage policy has been imposed on them unilaterally, trust in the company is quickly lost, tending to lead to collective dissatisfaction, higher turnover, and lower labor productivity. This impact is especially likely to appear prominently during the period in which the adjustment is being implemented.
Even where dialogue is not legally required, it is advisable for the company, as a voluntary measure, to: (1) give advance notice of the purpose, reasons, and schedule of the adjustment; (2) set up opportunities for direct explanation to the employees concerned or to departmental representatives; and (3) collect and formally respond to employees’ opinions. Although these are not legal obligations, they are essential to building consensus and maintaining stable labor relations in connection with a wage adjustment.
Conclusion
A company’s flexibility in adjusting wages is greatly influenced not only by the legal provisions but also by the design of its labor contracts and internal regulations. Building a rational wage structure is an issue that should be considered early, in preparation for future adjustments.
However, fluctuations in allowances may cause anxiety among employees and may affect retention rates and work motivation. Therefore, in addition to putting the institutional framework in place, carefully explaining the background and purpose of an adjustment and obtaining the employees’ understanding and acceptance will help maintain stable labor relations.
Reference
・Labor Code 2019
Related Reports
・Key Considerations on Employers’ Withholding and Deduction of Wage Payments
