Question:
Due to a violation of company regulations, my employer issued a decision to deduct 20% of my monthly salary as a “disciplinary penalty.” Is it lawful for the company to impose disciplinary measures in the form of salary deductions? Under what circumstances is the company allowed to deduct my salary?
Answer:
The use of monetary fines or salary deductions as a form of disciplinary action is one of the most common misunderstandings in labor relations. Pursuant to Article 124 of the 2019 Labor Code, an employer is only permitted to apply four specific disciplinary measures, namely: reprimand; deferral of wage increase for up to 06 months; demotion; or dismissal. Accordingly, the law does not allow employers to impose salary deductions or monetary fines as a substitute for disciplinary action in response to violations of internal labor regulations.
However, in practice, there are situations where an employee’s income may be reduced under certain conditions. This, however, is referred to as a “salary deduction for compensation of damages” rather than a “disciplinary penalty.” Under Articles 102 and 129 of the Labor Code, salary deductions may only be applied where the employee damages tools, equipment, or otherwise causes material loss to the employer’s property. If the damage is not serious and results from negligence, and the value does not exceed 10 months of the regional minimum wage, the maximum compensation shall be limited to 03 months’ salary. In cases involving loss of property or excessive consumption of materials beyond prescribed norms, the employee must compensate partially or fully based on market value or the company’s internal regulations.
To protect employees’ livelihoods, Article 102 also imposes strict limits on salary deductions. Specifically, the total monthly deduction must not exceed 30% of the employee’s net salary after mandatory insurance contributions and personal income tax have been withheld. At the same time, the employee has the right to be clearly informed of the specific reasons for such deductions. Therefore, if your violation only relates to working hours or workplace conduct and does not cause any material damage, the company is not permitted to deduct any portion of your salary under the guise of disciplinary action.
