My company is a manufacturing firm, and I have come to know that one of our employees has a separate company with his wife. Additionally, one person from the store department of our company, who is responsible for purchasing, is involved with him in procuring the items we require as raw materials without disclosing the employee's identity and his company, and is taking a commission from him. This situation has been ongoing for the last 6-7 months.
As an HR professional, I seek advice on the steps I should take regarding this issue.
From India, Noida
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1As an HR professional, I seek advice on the steps I should take regarding this issue.
From India, Noida
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Hi, Who is responsible for the Stores/Purchase department? Is it the same person who received a commission from the vendor?
There should be a standard operating procedure (SOP) for the Stores Department, and before selecting a vendor, three competitive quotes should have been obtained, correct? Was this criterion followed in your organization?
Is the vendor company registered under the name of your employee or their spouse?
Please verify if raw materials were purchased at prices higher than market rates to facilitate commissions to the Stores personnel.
If such practices are identified, the Stores personnel should receive a strict warning or face disciplinary action based on the extent of the financial loss incurred.
From India, Madras
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There should be a standard operating procedure (SOP) for the Stores Department, and before selecting a vendor, three competitive quotes should have been obtained, correct? Was this criterion followed in your organization?
Is the vendor company registered under the name of your employee or their spouse?
Please verify if raw materials were purchased at prices higher than market rates to facilitate commissions to the Stores personnel.
If such practices are identified, the Stores personnel should receive a strict warning or face disciplinary action based on the extent of the financial loss incurred.
From India, Madras
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Current Vendor Identification System and Procedures
Basically, the present system and procedure in vogue give leverage to anybody in charge of vendor identification to choose their preferred vendors. The system and procedure are responsible and reinforce the procedure to curb such practices.
Ensuring Effective Vendor Identification
Ensure an effective system and procedure are in place for identifying vendors/suppliers for your manufacturing. Assign responsibility to senior members (as members of the vendor identifying group) to reassess the current vendors. Implement a service condition for all employees not to engage in any business with the firm, either directly or indirectly, while in service. Make it mandatory to declare any involvement. Some organizations may encourage such vendors based on quality, quantity, and service, considering the organizational needs.
Job Rotation for Conflict of Interest Management
Shift the current in-charge who identified the so-called vendor (employee) to another location through job rotation.
From India, Madras
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Basically, the present system and procedure in vogue give leverage to anybody in charge of vendor identification to choose their preferred vendors. The system and procedure are responsible and reinforce the procedure to curb such practices.
Ensuring Effective Vendor Identification
Ensure an effective system and procedure are in place for identifying vendors/suppliers for your manufacturing. Assign responsibility to senior members (as members of the vendor identifying group) to reassess the current vendors. Implement a service condition for all employees not to engage in any business with the firm, either directly or indirectly, while in service. Make it mandatory to declare any involvement. Some organizations may encourage such vendors based on quality, quantity, and service, considering the organizational needs.
Job Rotation for Conflict of Interest Management
Shift the current in-charge who identified the so-called vendor (employee) to another location through job rotation.
From India, Madras
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Action Against a Secret Vendor
The production manager and his wife are both directors of the company. Please advise on what action can be taken regarding the production manager, who has become a secret vendor of the company. The person responsible for making purchases is accountable for the store department.
From India, Noida
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The production manager and his wife are both directors of the company. Please advise on what action can be taken regarding the production manager, who has become a secret vendor of the company. The person responsible for making purchases is accountable for the store department.
From India, Noida
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Hi, Please check the appointment order issued to the Production Manager.
There should be a clause stating that "during the service period, the employee should not engage, directly or indirectly, in any other business or part-time work, or accept any form of employment. They should refrain from engaging in any business activity."
If there is a clause similar to the above, any violation would constitute a breach of contract by the Production Manager, amounting to severe misconduct. Even if such a clause is absent, if the Production Manager is found to be operating another company while employed and maintaining a secret business relationship with your company, disciplinary action can be considered. You are advised to issue a show-cause notice to the Production Manager, questioning why disciplinary action should not be initiated against them.
From India, Madras
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There should be a clause stating that "during the service period, the employee should not engage, directly or indirectly, in any other business or part-time work, or accept any form of employment. They should refrain from engaging in any business activity."
If there is a clause similar to the above, any violation would constitute a breach of contract by the Production Manager, amounting to severe misconduct. Even if such a clause is absent, if the Production Manager is found to be operating another company while employed and maintaining a secret business relationship with your company, disciplinary action can be considered. You are advised to issue a show-cause notice to the Production Manager, questioning why disciplinary action should not be initiated against them.
From India, Madras
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I got to know today that the person responsible for purchases and one of the sales managers of the company are involved in the matter. They were found guilty of taking a commission on the orders we were placing with the production manager's company.
Legal or Immediate Action?
Please tell me, should I proceed further legally and sue these three employees? How can I do that? What's the process?
Or should I just terminate all three immediately?
From India, Noida
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Legal or Immediate Action?
Please tell me, should I proceed further legally and sue these three employees? How can I do that? What's the process?
Or should I just terminate all three immediately?
From India, Noida
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Hi, it seems like you're outlining a scenario or requesting advice on a situation related to stores/purchase department practices, vendor selection, and potential conflicts of interest. While I can provide general guidance, it's important to note that specific details may vary based on company policies, industry regulations, and legal considerations. Here are some general points to consider:
Responsibility for Stores/Purchase Department:
In most organizations, the head of the Stores or Purchase Department is responsible for procurement activities. The person responsible for selecting vendors and negotiating contracts should act in the best interest of the company.
Standard Operating Procedures (SOPs):
Establishing clear SOPs for the Stores Department is crucial. These SOPs should outline the process for vendor selection, procurement, and commission-related activities. It's common practice to obtain multiple competitive quotes before finalizing a vendor.
Vendor Selection Process:
Following a competitive bidding process helps ensure fair pricing and quality standards. Transparency in vendor selection can help mitigate the risk of favoritism or conflicts of interest.
Vendor Ownership:
It's generally considered a conflict of interest if an employee or their close associate (like a spouse) owns the vendor company. Companies often have policies in place to disclose such relationships.
Price and Commission Investigation:
If there are suspicions of raw materials being procured beyond market price for commission purposes, it's essential to conduct a thorough investigation. Disciplinary actions, warnings, or job rotation may be considered based on the findings.
System and Procedure Reinforcement:
Regular reviews of procurement processes and continuous improvement are essential. Strengthening internal controls and audits can help prevent and detect irregularities.
Employee Involvement in Business:
Many organizations have policies prohibiting employees from engaging in business with the company directly or indirectly without proper disclosure. Employees may be required to declare any conflicts of interest.
Job Rotation:
Job rotation can be a good practice to prevent undue influence and maintain transparency in vendor selection. Rotation should be done based on a well-defined policy and should not be perceived as a punitive measure without proper investigation. It's crucial to consult with legal and HR experts within your organization to ensure that any actions taken align with company policies, employment laws, and ethical standards.
Thanks,
From India, Bangalore
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Responsibility for Stores/Purchase Department:
In most organizations, the head of the Stores or Purchase Department is responsible for procurement activities. The person responsible for selecting vendors and negotiating contracts should act in the best interest of the company.
Standard Operating Procedures (SOPs):
Establishing clear SOPs for the Stores Department is crucial. These SOPs should outline the process for vendor selection, procurement, and commission-related activities. It's common practice to obtain multiple competitive quotes before finalizing a vendor.
Vendor Selection Process:
Following a competitive bidding process helps ensure fair pricing and quality standards. Transparency in vendor selection can help mitigate the risk of favoritism or conflicts of interest.
Vendor Ownership:
It's generally considered a conflict of interest if an employee or their close associate (like a spouse) owns the vendor company. Companies often have policies in place to disclose such relationships.
Price and Commission Investigation:
If there are suspicions of raw materials being procured beyond market price for commission purposes, it's essential to conduct a thorough investigation. Disciplinary actions, warnings, or job rotation may be considered based on the findings.
System and Procedure Reinforcement:
Regular reviews of procurement processes and continuous improvement are essential. Strengthening internal controls and audits can help prevent and detect irregularities.
Employee Involvement in Business:
Many organizations have policies prohibiting employees from engaging in business with the company directly or indirectly without proper disclosure. Employees may be required to declare any conflicts of interest.
Job Rotation:
Job rotation can be a good practice to prevent undue influence and maintain transparency in vendor selection. Rotation should be done based on a well-defined policy and should not be perceived as a punitive measure without proper investigation. It's crucial to consult with legal and HR experts within your organization to ensure that any actions taken align with company policies, employment laws, and ethical standards.
Thanks,
From India, Bangalore
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Hi, you cannot terminate them directly. Issue them a show cause notice, frame the charges against them properly, and ask for their explanation as to why disciplinary action should not be initiated against them.
From India, Madras
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From India, Madras
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After issuing a show cause notice to them, what should I do? Please tell me the entire process after that. They don't have anything to say in their favor.
Then, what should I do? Do I need to go to a lawyer and take legal action against them?
From India, Noida
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Then, what should I do? Do I need to go to a lawyer and take legal action against them?
From India, Noida
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Hi, After issuing a show cause notice, employees need to submit an explanation letter. Thereafter, conduct a domestic enquiry. If the charges against them are proven during the enquiry, you can proceed with termination.
From India, Madras
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From India, Madras
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This can all happen provided you have management's support, as you are saying that they are the directors of the company. If they are directors of the company, you would require management's support to do anything. You might come to know that the management knows it all and is okay about it.
Regards,
Astha
From India, Vadodara
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Regards,
Astha
From India, Vadodara
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