Can Principal Employer withhold payments of the contractor on the grounds of suspicion of the contract labor involved in inventory theft at the principal employer's factory? A police complaint has been registered and the police are in the investigation. Can the PE hold the contractor's dues?
Please provide the letter format intimating the same reasons to the contractor
From India, Chennai
Please provide the letter format intimating the same reasons to the contractor
From India, Chennai
Principal employer has full right to recover the cost of any property owned by PE which is
damaged or missed or stolen by the contractor employees, from the bill of contractor.
But, if the item is stolen by contractor employee(s), this should be proved beyond any doubt.
Prior to recovery of money, PE must communicate to contractor in writing.
From India, Aizawl
624damaged or missed or stolen by the contractor employees, from the bill of contractor.
But, if the item is stolen by contractor employee(s), this should be proved beyond any doubt.
Prior to recovery of money, PE must communicate to contractor in writing.
From India, Aizawl
Dear Bindu Madhavi,
As stated by Mr Nair, you can recover the losses caused by the contractor or their staff. However, before doing this, I recommend you order the domestic enquiry. Let the culpability of the theft be established clearly. You cannot recover the losses on the grounds of "suspicion".
When the enquiry is ordered, send the formal letter to the contractor about the initiation of the enquiry. This will set the ground for your future correspondence.
Check the contract agreement with the contractor and find out whether any clause exists on the recovery of the losses.
Secondly, domestic enquiry should be conducted to investigate the lapses in the existing system. The focus of the enquiry should be on the system and not on the person. Your goal is not just to recover the money but to avoid the theft cases in future too.
Many times the theft cases happen because the proper records are not maintained or the security processes are inadequate. If the adequate controls are not established then theft cases are bound to happen. Therefore, after the enquiry, what remedial action needs to be taken that also you should think.
Thanks,
Dinesh Divekar
From India, Bangalore
As stated by Mr Nair, you can recover the losses caused by the contractor or their staff. However, before doing this, I recommend you order the domestic enquiry. Let the culpability of the theft be established clearly. You cannot recover the losses on the grounds of "suspicion".
When the enquiry is ordered, send the formal letter to the contractor about the initiation of the enquiry. This will set the ground for your future correspondence.
Check the contract agreement with the contractor and find out whether any clause exists on the recovery of the losses.
Secondly, domestic enquiry should be conducted to investigate the lapses in the existing system. The focus of the enquiry should be on the system and not on the person. Your goal is not just to recover the money but to avoid the theft cases in future too.
Many times the theft cases happen because the proper records are not maintained or the security processes are inadequate. If the adequate controls are not established then theft cases are bound to happen. Therefore, after the enquiry, what remedial action needs to be taken that also you should think.
Thanks,
Dinesh Divekar
From India, Bangalore
Thank you so much for the elaborated reply. Can you please provide me the letter format regarding holding of contractor payments until the investigation is completed.
From India, Chennai
From India, Chennai
Dear Bindu Madhavi Oruganti,
Withholding the contractor's entire payment pending completion of the enquiry will impact the disbursement of the salary of his other employees as well. Just because of one culprit, why punish other innocent persons? It would be against the principles of natural justice.
Secondly, please think what punishment you would have awarded if the defaulting employee were to be the regular employee? There is a tendency amongst the employer to show lieniency to their own employees and show harshness toward the contract employees. There should not be discrimination at all.
Coming back to your question on withholding the payment of the contractor. Identify the estimated losses because of the theft, identify what % of recovery is possible and withhold that much payment only. Not the entire payment.
Lastly, please check the provisions of the contract agreement also. While framing the contract, have you made the provisions to recover the losses arising out of theft?
Thanks,
Dinesh Divekar
From India, Bangalore
Withholding the contractor's entire payment pending completion of the enquiry will impact the disbursement of the salary of his other employees as well. Just because of one culprit, why punish other innocent persons? It would be against the principles of natural justice.
Secondly, please think what punishment you would have awarded if the defaulting employee were to be the regular employee? There is a tendency amongst the employer to show lieniency to their own employees and show harshness toward the contract employees. There should not be discrimination at all.
Coming back to your question on withholding the payment of the contractor. Identify the estimated losses because of the theft, identify what % of recovery is possible and withhold that much payment only. Not the entire payment.
Lastly, please check the provisions of the contract agreement also. While framing the contract, have you made the provisions to recover the losses arising out of theft?
Thanks,
Dinesh Divekar
From India, Bangalore
Thank you sir.
We don't have contract with them, but we have LOI with the Vendor wherein all the terms and conditions which includes the clauses about the remedial action against theft and misconduct of the employees deployed by the Contractor. can you please provide the letter format.
From India, Chennai
We don't have contract with them, but we have LOI with the Vendor wherein all the terms and conditions which includes the clauses about the remedial action against theft and misconduct of the employees deployed by the Contractor. can you please provide the letter format.
From India, Chennai
Dear Bindu,
E
I suggest following actions:
1 Since your LOL provide enabling remedial clauses for theft by the contractor's employee, you arrive at the ballpark figure of the amount involved in the theft and withhold that much amount pending investigation into the theft.
2. About drafting the letter to the contractor, advise you to attempt drafting and send for expert comments. This kind of spoon feeding is not appreciated.
3 Before taking the action of withholding contractor's pro rata payment, hold internal investigation to ascertain facts and satisfy yourself that there is prima facie case meriting action of withholding payments.
4.The suggestion to hold domestic enquiry by the Principal Employer is inappropriate as the theft is alleged to have been committed by the Contractor's employee. It is the contractor who should arrange to conduct the independent enquiry and share the findings report with PE for information.
5. Most important part is to ascertain the theft has taken place causing monetary losses and LOL empowers the company to withhold payements.
Regards,
Vinayak Nagarkar
HR and Employee Relations Consultant
From India, Mumbai
E
I suggest following actions:
1 Since your LOL provide enabling remedial clauses for theft by the contractor's employee, you arrive at the ballpark figure of the amount involved in the theft and withhold that much amount pending investigation into the theft.
2. About drafting the letter to the contractor, advise you to attempt drafting and send for expert comments. This kind of spoon feeding is not appreciated.
3 Before taking the action of withholding contractor's pro rata payment, hold internal investigation to ascertain facts and satisfy yourself that there is prima facie case meriting action of withholding payments.
4.The suggestion to hold domestic enquiry by the Principal Employer is inappropriate as the theft is alleged to have been committed by the Contractor's employee. It is the contractor who should arrange to conduct the independent enquiry and share the findings report with PE for information.
5. Most important part is to ascertain the theft has taken place causing monetary losses and LOL empowers the company to withhold payements.
Regards,
Vinayak Nagarkar
HR and Employee Relations Consultant
From India, Mumbai
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