Question 76: May Employers arrange compensatory leave instead of paying Employees overtime salaries for public holidays?

Overtime salary for public holidays

Pursuant to the labour law, Employees are entitled to leave work for 10 days during the following holidays and New Year holidays[1]: (i) one day for Solar New Year (1 January); (ii) five days for Lunar New Year; (iii) one day for Victory Day (April 30th); (iv) one day for International Labour Day (May 1); (v) one day for National Day (September 2); and one day for Hung King’s death anniversary (10th day of the third lunar month.)

In cases where Employers require Employees to work overtime on the holidays as aforesaid and, if Employees so agree, Employers shall pay Employees overtime salaries[2] and holiday salaries[3]. In which:

Overtime pay = Hourly salary actually paid for normal working day x 300% (at least) x Number of overtime hours

The hourly salary actually paid for the normal working day is the actual salary paid for the work done by Employees during the overtime working month divided by the number of actual working hours in the month (no more than 208 hours for the jobs under normal working conditions and environment and excluding overtime hours)[4].

  • Holiday salary will be the salary recorded in LCs of the adjoiningly preceding month, divided by the number of ordinary working days in the month[5].

Thus, it can be simply understood that Employers are obliged to pay Employees 100% of the holiday salary plus at least 300% of the normal salary in case of requiring Employees to work on holidays.

Plan to arrange compensatory leave instead of paying overtime salary for holidays

The current Labor Code and guiding documents have not yet allowed Employers to arrange compensatory leave instead of paying overtime salaries for public holidays. Accordingly, compensatory leave is only allowed for in the following two cases:

  • Public holidays and Tet holidays falling on weekends[6]. In this case, Employees will enjoy compensatory leave on the following day; and
  • Employees work overtime for a consecutive period of up to 7 days in a month[7].

Therefore, arranging compensatory leave for Employees to take after overtime during holidays does not fall into the said two cases. Applying compensatory leave in lieu of overtime salary is not in accordance with the law related to the said content. In this regard, the expert of the Payroll Department under the DOLISA of Ho Chi Minh City commented that Employees should not be provided with compensatory leave rather than overtime salary.

The risk of compensatory leave arrangement beyond the said two cases may lead Employers to suffer the following administrative fines for failure to pay Employees overtime salaries[8]:

  • Between 10,000,000 and VND 20,000,000 for any breach involving between 1 to 10 Employees;
  • Between 20,000,000 and VND 40,000,000 for any breach involving between 11 and 50 Employees;
  • Between 40,000,000 and VND 60,000,000 for any breach involving between 51 and 100 Employees;
  • Between 60,000,000 and VND 80,000,000 for any breach involving between 101 and 300 Employees; and
  • Between 80,000,000 and VND 100,000,000 for any breach involving 301 Employees or more;

In addition, Employers are obliged to pay Employees full overtime salary plus the interest on the insufficient and/or late overtime payment calculated at the highest interest rate of demand deposits of the of state-owned commercial banks announced at the time of imposing penalties on the offense even if compensation leave has been provided to Employees because this leave period is not deemed as the fact that Employers have fulfilled their obligation to pay Employees overtime salary.

[1]Article 115.1 Labor Code

[2]Article 97.1 (c) Labor Code

[3]Article 26.2 Decree 05/2015/NĐ-CP dated 12/01/2015

[4]Article 14.4 (c) Circular 47/2015/TT-BLĐTBXH dated 16/11/2015 amending Circular 23/2015/TT-BLĐTBXH dated 23/06/2015

[5]Article 26.2 Decree 05/2015/NĐ-CP dated 12/01/2015

[6]Article 115.2 Labor Code

[7]Article 106.2 (c) Labor Code and Article 4.3 (a) Decree 45/2013/NĐ-CP dated 10/05/2013

[8]Article 13.3 Decree 95/2013/NĐ-CP dated 22/08/2013 as amended and supplemented by Decree 88/2015/NĐ-CP dated 07/10/2015