Can HR Legally Impose Penalties on Employees? Seeking Advice on Proper Letter Formats

Can we charge penalties from employees?

And if yes, which format should we use for the penalization letters?

I am an HR professional with expertise in handling employee disciplinary actions. When it comes to imposing penalties on employees, it is essential to follow company policies and legal regulations. Penalties should be applied consistently and fairly to maintain a positive work environment and ensure accountability.

In situations where penalties are necessary, it is crucial to communicate them effectively to the employees. The format of penalization letters should be clear, concise, and professional. It should include details of the violation, the penalty imposed, and any steps the employee needs to take to rectify the situation or appeal the decision.

If you need further guidance on drafting penalization letters or implementing penalty policies, feel free to reach out for assistance.

Dear Amy,

If an employee commits misconduct and, as a result, the company incurs a loss, companies are authorized to impose fines and penalties against the employee. Nevertheless, the top management considers penalization a trigger and is more than willing to press this trigger.

Before imposing fines and penalties, consider the following points:

a) Who discovered the misconduct, and how was it discovered? Is it the fault of the HOD, but the subordinate has been made a scapegoat?

b) Have you issued a written copy of the Job Description (JD) to the employee? Was the employee assigned work that was outside the JD? If yes, why was the JD not updated? If it was updated, was it communicated to the employee? Did you obtain the employee's signature on the changed JD?

c) Is the employee competent to perform the task? Do they have adequate tools, instruments, and machines to perform their task? If yes, are these calibrated or working properly?

d) If the wrongdoing by the employee resulted in a loss to the company, what was the role of the HOD? What preventive steps did they take to avoid the wrongdoing?

e) Are there written instructions or SOPs to perform the tasks? If yes, have they been communicated to the employee? If these are communicated, how were they communicated? Do you have a signed copy?

f) Was the employee given proper training to perform the task? If yes, do you have records of the training?

g) The imposition of the penalty is a punishment. Before the punishment, the company needs to conduct a domestic inquiry. Have you conducted the domestic inquiry to investigate why the company incurred the loss? Was the focus of the inquiry on the person or the incident?

h) Is it that the company had incurred such losses because of the wrongdoing by the employee earlier also, but now all of a sudden the company wants to take stringent action against the employee?

i) Before awarding the punishment of imposing a fine and penalty, did the authorities concerned educate themselves on the percentage of the cost that can be recovered from the employee?

Position of the labor law: This point is out of the purview of the draft of the letter that you have asked for. Yet, it is pertinent to ask for it. The fines and penalties collected should be deposited in the Labor Welfare Fund of your state. Have you educated yourself on the statutory provisions related to the deduction?

There are so many questions associated with your post.

Final Comments: Providing the draft of the letter is easy. However, the members of this forum are outsiders, and unless we know the facts of the case, it would not be prudent on our part to help you. We are neutral parties, and we would like to treat the employee as well as your company equally. It is the duty of the senior members of this forum to ensure that by fulfilling the requirements of the fellow member, an employee of the member's company is not meted out injustice.

Thanks,

Dinesh Divekar

Hi, I appreciate the valid and pertinent response of Mr. Divekar. Just adding one point from my side, in the Payment of Wages Act, Minimum Wages Act, and Payment of Gratuity Act, there are provisions relating to the imposition of fines on employees. I think that in the new Labour Codes, these provisions have also been maintained.

Warm Regards,

Bharat Gera HR Consultant

Imposing Fines or Penalties Under the Payment of Wages Act

At the current time, under the Payment of Wages Act, a fine or penalty can be imposed only on specific offenses that are listed and disclosed to the employees and which are also approved by the appropriate authority (in most cases, the Labour Commissioner).

So, it is not actually possible to impose a fine or penalty in a normal case.

Recovering Costs and Salary Deductions

You can recover the cost of damages or salary for the time during which an employee signed in but was not at the place of work without authorization (mostly considered for an impromptu strike), but that is not applicable to women workers.

Considerations for Management

In any case, such imposition of penalties generally results in industrial relations problems, so ensure that the management has given it adequate thought before they do anything.

Dear Colleague, it is the inherent right of an employer to impose an appropriate punishment for proved misconduct in a domestic enquiry held in accordance with the principles of natural justice.

A penalty by way of a fine or similar monetary punishment will be appropriate if the proven misconduct has caused pecuniary loss to the company, and the same bears a reasonable proportion to the extent of such loss.

If the fine imposed on an employee belongs to a 'workman' category, then the provisions of the State Labour Welfare Fund Act may be attracted.

Regards, Vinayak Nagarkar HR and Employee Relations Consultant