Dear Members,
I need some guidance on the recovery of monies for the loss of tools by an employee.
We are an EPC company, and we issue tools as required to employees based on their trade and the nature of the job. Tools are issued on a "tool issue card"; one copy is held by the employee, and the second copy is with the tool room. The employees hold the tool with them until it is returned for repair, recalled for half-yearly safety checks, or resignation.
My issue is when an employee loses a tool. What I have observed is that the employee reports the loss of the tool (most of these "lost tools" are costly and essential for his work) while he is doing his post-resignation outgoing/FFS.
My questions/doubts are:
a) What is the correct procedure to do a cost recovery (WDV of the lost tool) from the employee?
b) Can the amount be deducted from his FFS with or without assigning a reason?
c) Is an inquiry required before making any such deduction?
d) Will a letter from the employee acknowledging the loss and agreeing to recovery from his FFS be sufficient to make the deduction?
Would appreciate some advice on this.
Thanks & Regards,
Arun
From India, Kochi
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47I need some guidance on the recovery of monies for the loss of tools by an employee.
We are an EPC company, and we issue tools as required to employees based on their trade and the nature of the job. Tools are issued on a "tool issue card"; one copy is held by the employee, and the second copy is with the tool room. The employees hold the tool with them until it is returned for repair, recalled for half-yearly safety checks, or resignation.
My issue is when an employee loses a tool. What I have observed is that the employee reports the loss of the tool (most of these "lost tools" are costly and essential for his work) while he is doing his post-resignation outgoing/FFS.
My questions/doubts are:
a) What is the correct procedure to do a cost recovery (WDV of the lost tool) from the employee?
b) Can the amount be deducted from his FFS with or without assigning a reason?
c) Is an inquiry required before making any such deduction?
d) Will a letter from the employee acknowledging the loss and agreeing to recovery from his FFS be sufficient to make the deduction?
Would appreciate some advice on this.
Thanks & Regards,
Arun
From India, Kochi
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It is not disputed that any tool lost due to an employee's negligence is misconduct, and the cost of it shall be recovered from him. However, without offering him an opportunity to be heard, you should not deduct the cost from the salary. Normally, it will take time because you have to issue a show cause notice, give him time to reply, and if he denies any dereliction on his part, then you have to take it forward for a domestic enquiry and so on.
In the case of an employee who is serving the notice period, the same procedures should be followed. At the same time, if he admits the charge, then you can finish it with an order that the cost of the tool will be deducted from the salary payable. If the amount involved is higher than the amount payable at the time of exit, you will have to find an alternative. But the right to recover the cost of a tool lost due to the negligence of an employee is always there with the employer. The only thing is that he should exercise this right only by following the principles of natural justice.
From India, Kannur
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In the case of an employee who is serving the notice period, the same procedures should be followed. At the same time, if he admits the charge, then you can finish it with an order that the cost of the tool will be deducted from the salary payable. If the amount involved is higher than the amount payable at the time of exit, you will have to find an alternative. But the right to recover the cost of a tool lost due to the negligence of an employee is always there with the employer. The only thing is that he should exercise this right only by following the principles of natural justice.
From India, Kannur
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Your point-wise reply is given below:
a) What is the correct procedure to do a cost recovery (WDV of the lost tool) from the employee?
Ans: If it is a new tool, you can recover the full cost. If the tool is old, applicable depreciation could be applied.
b) Can the amount be deducted from his FFS with or without assigning a reason?
Ans: Yes, the amount could be adjusted in his Full & Final Settlement dues. But please give details of such adjustment or justification of deduction in his Final settlement sheet, for the information of the employee.
c) Is an inquiry required before making any such deduction?
Not necessary if he admits the mistake and agrees to recover the cost from the amount payable to him. The question of initiation of disciplinary proceedings shall arise only if he is arrogant and/or refutes the charges of loss or damage of the tool leveled against him.
d) Will a letter from the employee acknowledging the loss and agreeing to recovery from his FFS be sufficient to make the deduction?
Ans: That is enough, and keep his letter along with his full & final settlement sheet, duly acknowledged by him.
Now, I have a question. What if the cost of the tool is higher than the amount payable to him?
(You cannot touch his PF dues and Gratuity amount).
From India, Aizawl
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a) What is the correct procedure to do a cost recovery (WDV of the lost tool) from the employee?
Ans: If it is a new tool, you can recover the full cost. If the tool is old, applicable depreciation could be applied.
b) Can the amount be deducted from his FFS with or without assigning a reason?
Ans: Yes, the amount could be adjusted in his Full & Final Settlement dues. But please give details of such adjustment or justification of deduction in his Final settlement sheet, for the information of the employee.
c) Is an inquiry required before making any such deduction?
Not necessary if he admits the mistake and agrees to recover the cost from the amount payable to him. The question of initiation of disciplinary proceedings shall arise only if he is arrogant and/or refutes the charges of loss or damage of the tool leveled against him.
d) Will a letter from the employee acknowledging the loss and agreeing to recovery from his FFS be sufficient to make the deduction?
Ans: That is enough, and keep his letter along with his full & final settlement sheet, duly acknowledged by him.
Now, I have a question. What if the cost of the tool is higher than the amount payable to him?
(You cannot touch his PF dues and Gratuity amount).
From India, Aizawl
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Dear Madhu Sir and Radhakrishnan Sir,
Thank you for your valuable inputs. The problem I face is that the discovery of this "loss" happens too late, and we are left with little or no reaction time to follow the principles of natural justice; so we end up writing off the loss; and I want to stop that. I guess I will have to institute some process to find such losses earlier and institute proper recovery procedures.
As regards the value of the loss being more than what can be recovered from the employee, I guess we will have to recover what is possible and absorb the rest.
One more question in this regard - will the upper limit of "not more than 50% of GROSS in deduction" still apply?
Regards, Arun
From India, Kochi
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Thank you for your valuable inputs. The problem I face is that the discovery of this "loss" happens too late, and we are left with little or no reaction time to follow the principles of natural justice; so we end up writing off the loss; and I want to stop that. I guess I will have to institute some process to find such losses earlier and institute proper recovery procedures.
As regards the value of the loss being more than what can be recovered from the employee, I guess we will have to recover what is possible and absorb the rest.
One more question in this regard - will the upper limit of "not more than 50% of GROSS in deduction" still apply?
Regards, Arun
From India, Kochi
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The provision relating to the maximum deduction of 50% of wages itself is misleading. There are employees who contribute 100% of their salary to PF! Moreover, when we have to deduct the cost of lost items from a resigned employee, we cannot do it in installments. However, concerning employees on the payroll, we can split it into two or three installments according to the requirements.
From India, Kannur
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From India, Kannur
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