How Can We Deduct Salary for Damages Caused by a Workman's Negligence?

A workman/driver, while driving a tractor, damaged the company's property. The cost of the damage is Rs. 2500. The cost of the damage is to be recovered from the workman. How can it be deducted from his salary/wages? What is the process to deduct the fine or any formalities to be followed?

Conduct the inquiry and assess the cost of damage (which you say is Rs 2,500/-). You can impose a fine on the employee, but you cannot recover the entire cost of damage from the employee. The amount recovered from the employee has to be deposited into the Karnataka State Labour Welfare Fund (KSLWF). You cannot keep the amount for yourself.

It may be noted that the Supreme Court and various high courts have given rulings on recovering the entire amount from the employee. In the recent past, the famous news channel "Times Now" had to pay Rs 100 crore as the cost of defamation. This was due to a small mistake of their news team. It was not possible to recover even 1% of the amount from the employees. Obviously, they had to forgo these charges.

Thanks,
Dinesh V Divekar

In my view, the best approach is to conduct a domestic inquiry and conclude by stating, "Taking a lenient view, this driver caused this for the first time, and hence he shall be left with a strong warning not to repeat this, on the condition that he shall repair the damage at his own cost."

Regards,
Kumar.S.

During the course of work, some damage is inevitable in any business, industry, or manufacturing activity. What is important is the record of that person to ascertain whether it was done intentionally or during the course of work.

A damage of about Rs. 2500 is negligible for a company, and such damages are always taken into consideration. However, it would be a sizable portion of the workman's salary. Good companies do not recover such INCIDENTAL DAMAGES from the employees.

I shudder to think if management behaves in such Shylockian ways to recover it from the employees. I have worked in industries where the cost of equipment and even some losses run into several lakhs of rupees. A workman would have to pawn all his coming generations as SLAVES to the management should it think of recovering such damages from workmen.

As an easy example, think of a driver driving a Rolls Royce which meets with an accident and is damaged, or a pilot flying a Boeing 787 and by mistake overshoots the runway and gets damaged. In both these examples, the employees will take several generations to repay the damages!

Warm regards.

I appreciate the comments of some seniors suggesting not to recover. Being an industry, some damage, accidents, or mishaps are bound to happen. The decision-making of the company's management seems to have become biased, trying to teach the worker a lesson through this recovery. However, such actions do not work in the real world.

Alternative Disciplinary Actions

Instead, you can implement Japanese-style punishments, such as not allowing the individual to drive for six months or imposing a three-month ban on regular activities, assigning them to non-routine work at the site of the damage. This approach teaches individuals to respect their surroundings and instills a sense of responsibility for their actions while on duty. Training and learning are other methods you can continuously employ to enhance the responsibility demonstrated by employees, not just one individual.

Empathy while taking disciplinary actions is a good idea, as sometimes these are necessary.

Regards.

First of all, we should understand the motto of a penalty, whether it is for recovery or for teaching a lesson to avoid recurrence. It is commonly understood that Rs 2,500/- is not a huge amount that an employer cannot bear. Therefore, the aspect that remains is 'lesson teaching for avoiding recurrence,' which can be conveyed through a confession in a common meeting, an Advisory Note, a Charge Sheet, etc.

Refer to Disciplinary Actions

Please refer to any source mentioned in the Disciplinary Actions for Misconduct under Model Standing Orders.

Regards,
Suraj

As our members commented, review the situation to determine whether the driver acted in a negligent manner or not. If the accident or damage occurred beyond the driver's control, then a lenient view should be taken.

If the accident or damage occurred due to a violation of rules or negligent driving, recovery to a certain extent is appropriate as this should serve as a message for other violators.

You can levy a penalty for damage caused by 'intent,' but it is very difficult to prove the same. A written warning seems enough in such cases. Why waste time and effort in meaningless investigations? I am sure there are some important business issues in your company which deserve an investment in time.

Recently, our company lost around 15 lakhs due to the negligence of some workers. We have levied a fine of Rs. 500-1000 only to showcase their mistake and as a warning for them to be careful in the future.

Recovering the Cost of Damage

Recovering the cost of damage is legal, and if the management is satisfied, the same can be done. I saw some comments about depositing the same with the Welfare Fund, which is not correct. As long as the management investigates and proves the damage is caused by negligence and a decision is taken to recover, the recovered amount comes to the management and not to the welfare fund. In the case of levying a fine, then it goes to the Welfare Fund.

Steps to Recover the Cost of Damage

1. Ensure a proper enquiry is conducted to prove negligence.
2. If negligence is proven, decide whether the recovery of cost is a must.
3. If the management still feels recovery is to be made, issue a letter.
4. If monthly recovery is to be made, ensure you comply with the Payment of Wages Act.
5. If you are levying a fine, the same needs to be deposited with the Welfare Fund.
6. The cost of damage can be recovered in monthly installments, or from bonuses or even from gratuity.

Regards,
T. Sivasankaran

I agree with the comments of Shri T. Sivasankaran, except for the recovery of damages from Gratuity. We cannot recover anything from Gratuity.

Regards,
Ramesh Rao. R

Dear Team, As suggested by some of our senior members, find out the root cause through inquiry. If you still feel that a fine is to be imposed on him, you may do so as per the guidelines given in The Payment of Wages Act, 1936. I am appending Section 8 of The Payment of Wages Act, 1936 for your ready reference.

Section 8 of the Payment of Wages Act, 1936

Section 8 of the Payment of Wages Act, 1936 discusses imposing fines on employees/workmen as follows:

Sub-Sec (1): No fine shall be imposed on any employed person save in respect of such acts and omissions on his part as the employer, with the previous approval of the appropriate Government or of the prescribed authority, may have specified by notice under sub-section (2).

Sub-Sec (2): A notice specifying such acts and omissions shall be exhibited in the prescribed manner on the premises in which the employment is carried on or in the case of persons employed upon a railway (otherwise than in a factory) at the prescribed place or places.

Sub-Sec (3): No fine shall be imposed on any employed person until he has been given an opportunity to show cause against the fine, or otherwise than in accordance with such procedure as may be prescribed for the imposition of fines.

Sub-Sec (4): The total amount of fine which may be imposed in any one wage period on any employed person shall not exceed an amount equal to three percent of the wages payable to him in respect of that wage period.

Sub-Sec (5): No fine shall be imposed on any employed person who is under the age of fifteen years.

Sub-Sec (6): No fine imposed on any employed person shall be recovered from him by installments or after the expiry of ninety days from the day on which it was imposed.

Sub-Sec (7): Every fine shall be deemed to have been imposed on the day of the act or omission in respect of which it was imposed.

Sub-Sec (8): All fines and all realizations thereof shall be recorded in a register to be kept by the person responsible for the payment of wages under section 3 in such a form as may be prescribed; and all such realizations shall be applied only to such purposes beneficial to the persons employed in the factory or establishment as are approved by the prescribed authority.

Explanation: When the persons employed upon or in any railway, factory, or industrial or other establishment are part only of a staff employed under the same management, all such realizations may be credited to a common fund maintained for the staff as a whole, provided that the fund shall be applied only to such purposes as are approved by the prescribed authority.

I hope this may clear your doubts on the procedure of imposing fines on employees/workers. Please remember that those employees who are drawing a monthly salary of Rs. 18,000/- per month are covered under The Payment of Wages Act, 1936.

Regards,
P. Vathiraj

Exemption from Payment of Wages Act Procedures

The procedure of the Payment of Wages Act need not be followed if his salary is above Rs. 18,000 per month.

Regards,
Varghese Mathew

Understanding the Difference: Recovery of Cost vs. Imposing a Fine

Recovery of cost is different from imposing a fine. A fine is a punishment, whereas the recovery of costs due to negligence is not punitive. After a thorough investigation, one can recover the costs as well as impose a fine. This is the legal position. I will not delve into whether it is desirable or not in this forum. The conference management must apply their collective wisdom in making a decision. Advice based on the information provided in this forum is not advisable.

Clarifying the Distinction

I want to reiterate that a fine is distinct from the recovery of costs due to damages caused by an employee.

For example, if a cashier takes Rs 10,000 from the cash and it is discovered, the management collects the money from him. However, this does not mean that action should not be taken against him. Even after the money is recovered from him, he could still be dismissed following an investigation.

Regards,
T. Sivasankaran

Thank you for providing a real-life case. This is the point I was emphasizing. Even though it was a case of negligence, the management cannot and should not recover the cost from the employees. No courts of law would allow this. At worst, the management can dismiss such employees.

Warm regards.

Before deducting, the worker should be informed in writing about the damages caused to the company, and he should be asked to show cause why Rs 2500 should not be recovered from him. Then, you should get his reply, and based on that, you can direct that the same amount may be recovered from his next salary in full or in installments of 5 or ten. If he does not accept that he has caused damage by his negligent driving, then you will have to prove that there was dereliction on the part of the driver/worker by conducting an inquiry.

Regards,
Madhu.T.K

It is a different thing if the management of a company intends to get all their old equipment replaced with new ones by recovering the latest cost of old equipment, which gets damaged by employees while working on them. There would be no depreciation of fixed assets, no need to allocate funds for investment in new equipment, and the only cost a company would incur would be the cost of raw materials! Salary, in any case, would be accounted for out of the recoveries from employees.

However, in my opinion, courts may come in the way of such illegal recoveries from workmen.

In Delhi & NCR, I find that company vehicles are routinely bumped, and their lights or car bodies get damaged in the heavy traffic of the city. However, I am yet to know of a case where all the cost of repairs or replacement has been recovered from the company drivers. Whatever possible is recovered from the insurance, and the remaining is borne by the company. In case such incidents are frequent, the driver is warned or removed; but recovering damages is unheard of.

About the other cases like that of employees embezzling cash; then it becomes a criminal offense. To avoid this, the employees may agree to make good the loss. If they refuse, then the management cannot forcefully recover money from them.

At best, the management can lodge a criminal case and let the law take its course.

To conclude, management cannot decide the quantum or the justification of such recovery nor can forcefully recover money from its employees. To do so forcefully would amount to a criminal offense.

As HR professionals, we should give proper, just, and legal advice to the management on such issues.

Warm regards.

First of all, just because the damage occurred while driving does not necessarily imply negligence on the part of the driver unless a proper domestic inquiry is conducted. It could be due to defective fitting by the maintenance department or the poor quality of materials, all of which could be uncovered during the inquiry process. Furthermore, if the level of guilt is determined, the punishment should align with the company's guidelines or the model standing orders.

This is a suggestion only.

Regards,
B.K. Mohanty
Advisor & Senior Consultant

Regarding the Payment of Wages, only a certain percentage of the amount is permissible to recover in the Head Fine, and it should be deposited with the State Welfare Fund Board. In your case, you are within your rights to conduct a Domestic Enquiry by providing every opportunity to the delinquent employee while observing the Principles of Natural Justice.

It is your prerogative to decide on a suitable punishment based on the findings of the Enquiry Officer, which could range from a warning, suspension, or dismissal as appropriate. However, giving the delinquent employee a chance to correct their behavior would be beneficial.

Regards,
Jagdish K.
Kochi
[Phone Number Removed For Privacy Reasons]

It is true that the damages can be recovered by the workman. However, before that, the company has to get approval from the appropriate authority (in Kerala, it is the labor commissioner) for all the Acts which are liable for fines and damages from the workmen's salary. At the same time, the company has to display the Acts which are liable for fines and damages in the prescribed format on the premises where the employment is carried out. If the damages caused by the employee are mentioned in the list of Acts liable for fines and damages, then the company can deduct the amount from the salary. If it is not mentioned, then you cannot deduct the amount from the workmen.

The amount deducted shall not be more than 3% of the monthly salary given to the workmen. The deducted amount has to be deposited in the common fund for the welfare of the workmen.