Dinesh Divekar
Business Mentor, Consultant And Trainer
Recruitment/talent Acquisition, Career Counselling
Hr Officer
+1 Other

Thread Started by #Sonal@SS

Hi All,
I am HR in SME IT company in Pune, One employee placed a wrong order of the product and the company faced a loss of Rs 50000/-
Now what action can be taken against the employee??? What are the policies in this term ??
3rd August 2015 From India, undefined
Dear Sonal,

Ordering wrong product or accumulation of inventory is a common problem in the manufacturing sector. Since you are from IT company, wherein purchase department is a service department, you are taking that seriously. If your formula is followed in manufacturing company, then probably there would be disciplinary action against procurement professional in every month!

Since yours is IT company, the person involved may not be from purchase department.

As far as disciplinary action is concerned, order domestic enquiry. Give chance to the employee to prove his point and if the employee is found guilty then you may award him suitable punishment like demotion, withholding annual increment etc. Termination would be too severe punishment.

You may have temptation to impose penalty and recover the losses from the employee. Wrong decisions happen everywhere and by everybody. But then singling out the employee and levying penalty to recover the losses, at least partially if not fully, would be anti-labour policy.

Personal Experience: - By the way, I have trained procurement professionals of one of the top-notch IT companies of India. Much to my horror, I came to know that company imported UPS batteries unnecessarily thereby losing INR 6 million! Whom to hold responsible for such a massive loss?


Dinesh Divekar

3rd August 2015 From India, Bangalore
Hello Sir,
Thank you for the response.
The Employee is Technical Support Executive and are incharge of placing orders for the clients on webdevelopment and web hosting plans on server. He was aware about the consequences but he says it was bimistakely placed..
Now the director wants to know what are the policies in this Case or any punishment or charges as company lost a big amount of Rs. 50,000/- .
Should i give a last warning to employee and warn others .
3rd August 2015 From India, undefined
Dear Sonal,
About punishment or recovery of losses, I have given reply in my previous post. If you recover percentage of losses then do not deduct the amount from the employee's salary. Tell the employee to deposit the amount to Acct Department. Let Acct give him receipt after depositing the money.
If you tell the employee to deposit the amount then you will be able to keep the salary roll neat and clean. Any deductions attract attention of the labour officers during their inspections.
Dinesh Divekar
3rd August 2015 From India, Bangalore
The company needs to have systems in place which will result in a cross check of employees work,so that financial losses/wrong orders do not get placed.
It is equally a systemic error that an order could be placed and no one is there to verify,authenticate before transaction can proceed.
Token recovery can be made to establish responsibility and awareness.
3rd August 2015 From India, Pune
Hello Sonal,

Can you pl give the purchase process in your Company?

Any Company......be it small or big.......has MORE THAN ONE person involved in the Purchasing OR Ordering: Initiator, Dept Head, and if needed [depends on either the cost OR the size of the company], the Big Boss. Earlier it used to be a paper trail, but now it's all on the system.

Now don't tell me that this employee of the level of a Technical Support Executive can do Ordering on HIS OWN, WITHOUT any Authorizations/Approvals.

If this indeed is the case, then it's high time you changed the Ordering Processes within your Company to ensure this doesn't repeat. The idea is NOT being able to trust the employee [though this surely is one of the unsaid reasons always], it's more to do with recognizing the fact that 'any person can make mistakes & the mistakes have to be caught BEFORE they can do any damage'. Such multiple steps act as a vetting mechanism.

As far as what to do with this employee, I agree with Nathrao's suggestion reg taking a 'token recovery'.......@ his level, 50 K would surely be a big burden to this employee. For all you know, the move MAY boomerang IF you ask him for 50 K.

Just as one expects the employee to bear the flak & responsibility for this lapse, so too must the Organization........as there's an element of systemic failure too in this.


4th August 2015 From India, Hyderabad
This incident should serve as a warning to all businesses who have purchasing functions.

It is not strictly a HR matter, as these matters relate to the financial management of a company or business, and such a discussion would be more appropriate on CiteFin. HR is only going to get involve when a mistake results in some form of "punishment" for an employee.

As Taj has pointed out, EVERY organisation should have in place a system of checks and balances in regard to spending the company's money. That goes without saying. If you are aware that your organisation does not have the necessary spending approval flow in place, then, as a HR person responsible for the welfare of your employees, you should strongly recommend to management, that they implement this immediately.

Simply put, discretionary spending by employees should be at a very low level, just for emergency purchases only. Spending approvals for higher amounts, should reside with senior management. Other than simple basics like stationery, tea room supplies etc, no purchasing should take place without at least two written quotes from prospective suppliers, and all major purchasing to be put out to competitive tender. All purchasing should have a clear, documented recommendation, and approval paper trail, BEFORE anything is done.

A financial approval flow is normally in place to prevent fraud, though even that is no foolproof as crooks can be very ingenious, and find ways to circumvent the system. The OP has not indicated whether this was a genuine mistake. As Dinesh has pointed out, an investigation should take place before any sanctions.

If this turns out to be a genuine mistake, then already you have subjected this employee to a great deal of distress, quite apart from his own remorse over his mistake.

Disclosure - Nearly all the jobs I have held in the last 40 years involved purchasing functions, including one job involving spending upwards of $65 million dollars a year, so I have a very good knowledge of this - and never once failed an audit of my work. However, I should point out that in many places, the staff hated my guts, because I never deviated once from the rules, and did everything by the book!
5th August 2015 From Australia, Melbourne
Further to my comments above.
In the overall scheme of things, is this really a big deal?
I note that the loss to the company is INR50,000, about $US783.
According to the web, a 16gb Iphone 6 in India costs INR53,000.
I am not making light of the company loss, just asking the question.
5th August 2015 From Australia, Melbourne
Aussie John,
The company has failed to put in place a flow chart of work where work done by someone gets automatically checked by another person.
It is a procedural mistake which has resulted in wrong purchase.
Now finding a scapegoat is not a good way to overcome mistakes which has resulted in a wasted purchase worth Rs50000.
Better put in place suitable systems.
5th August 2015 From India, Pune
Hello John,
I fully agree with you on ALL the aspects you mentioned EXCEPT one.
Frankly, the comparision with INR & UD$ wasn't the right one.
For someone taking a salary of INR 10-12 K p.m., INR 50K is surely burdensome---JUST AS---US$ 50K is for someone taking a salary of US$ 10-12K p.m.
And, as per the latest Stats.......or more of guesstimates....smartphones are ONLY ~12-15% [~110-120 million] of all the mobile users in India [~900 Million] out of the population of ~1.2 Billion--with the primary limiting factor being costs. No wonder many Smartphone makers are working-out plans to introduce models that cost </= INR 5K in India.
I guess it was like comparing Apples with Oranges here (vis-a-vis the situations) :-)
5th August 2015 From India, Hyderabad
I take your point, Taj. I was just trying to find some perspective on the amount, if you understand what I mean. But I fully understand the nexus between wages in India, and the amount in question. It would be an enormous burden on the worker in question to repay the amount.
6th August 2015 From Australia, Melbourne
Agree wholeheartedly Nathrao. Good governance and proper systems go a long way towards mitigating problems.
Sadly, scapegoating will never go away, as there will always be unscrupulous and incompetent management seeking to find ways to cover their own shortcomings.
6th August 2015 From Australia, Melbourne
Introduction of a simple system of preparing bills/vouchers wherein there will be a person who PREPARES the document and another person in the chain who CHECKS it will reduce mistakes.
Work flow needs to be designed carefully so as incorporate internal checks on the documents.
Even if the office has limited number of staff this system can run efficiently.
We read of fighter aircraft crashing due to Human error, the government sometimes blames the pilot for error and orders recovery of taken amount from the pilot concerned so as to establish accountability for errors.
Rest of the value of aircraft is then written off in government a/cs and subsequently audited.
6th August 2015 From India, Pune
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