Supply Chain Innovation

Monetary Penalties Used as Discipline in Vietnam

Publication date: 
Tuesday, June 28, 2016

During the 2015 factory assessment cycle in Vietnam, FLA assessors identified a number of instances of monetary penalties used as discipline.  Because of how these deductions were designed and implemented, they may not appear to brands to violate the FLA Workplace Code of Conduct as obviously as a direct salary deduction would.  However, any disciplinary penalty that reduces a worker’s pay constitutes a violation of the FLA Code (benchmark 2, “Monetary Fines and Penalties” under “Harassment or Abuse”).

FLA assessors detected instances of the following monetary penalties:

1) Deduction of in-kind benefits – The FLA’s definition of compensation includes basic contracted wages, cash benefits, and all in-kind benefits.   The prohibition against monetary penalties used as discipline includes all components of a worker’s compensation; therefore, when FLA assessors have found meal allowances revoked from workers as a form of discipline, they have marked this as a Code violation that requires immediate action.

2) Suspension of raises – Some factories define wage levels based on a worker’s tenure, providing raises at defined intervals, such as six months or one year after hire.  When raises are structured like this, the FLA Code forbids withholding any regularly scheduled time-bound pay increases as a form of workplace discipline.  Although this practice is permitted by local law, in the context of the FLA Code, such a disciplinary measure is considered to be just the same as reducing a worker’s pay.

3) Denial of bonuses – Any bonuses tied to a performance measure, such as an attendance bonus or productivity bonus, may not be revoked for disciplinary reasons unrelated to the purpose of the bonus.  Factories are permitted to design specific disciplinary bonuses to reward or sanction certain behaviors (for example, a bonus earned only by workers who receive no workplace discipline for a determined period of time), but the parameters of these bonuses must be clearly explained in the factory’s policies and procedures.

Each of these violations represents a serious harm for workers’ livelihoods.  When workplace discipline must occur, it must follow a progressive system of escalation (as explained in benchmark 27 of the “Employment Relationship” code element) that does not affect workers’ wellbeing in the form of monetary fines or penalties.

The FLA encourages all affiliated brands to engage with suppliers to ensure that factory managers understand what is included in the FLA’s definition of compensation, and that the three types of penalties identified above are not permitted.  When such penalties are found, by an FLA assessor, or by a brand’s internal monitoring program, the practice must be halted immediately, and affected workers must be provided with compensation for lost benefits, wages, or bonuses.