Can the 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
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Please provide the letter format intimating the same reasons to the contractor.
From India, Chennai
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Principal employer has full right to recover the cost of any property owned by PE which is damaged, missed, or stolen by the contractor employees, from the bill of the contractor. However, if the item is stolen by contractor employee(s), this should be proved beyond any doubt. Prior to the recovery of money, PE must communicate to the contractor in writing.
From India, Aizawl
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699From India, Aizawl
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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, a 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 theft cases in the future too.
Many times, theft cases happen because the proper records are not maintained or the security processes are inadequate. If adequate controls are not established, then theft cases are bound to happen. Therefore, after the enquiry, consider what remedial action needs to be taken.
Thanks,
Dinesh Divekar
From India, Bangalore
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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, a 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 theft cases in the future too.
Many times, theft cases happen because the proper records are not maintained or the security processes are inadequate. If adequate controls are not established, then theft cases are bound to happen. Therefore, after the enquiry, consider what remedial action needs to be taken.
Thanks,
Dinesh Divekar
From India, Bangalore
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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
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From India, Chennai
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Dear Bindu Madhavi Oruganti,
Withholding the contractor's entire payment pending completion of the inquiry 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 about what punishment you would have awarded if the defaulting employee were the regular employee. There is a tendency among employers to show leniency to their own employees and show harshness toward contract employees. There should be no 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 percentage of recovery is possible, and withhold that much payment only, not the entire payment.
Lastly, please check the provisions of the contract agreement as well. When framing the contract, have you made provisions to recover losses arising out of theft?
Thanks,
Dinesh Divekar
From India, Bangalore
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Withholding the contractor's entire payment pending completion of the inquiry 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 about what punishment you would have awarded if the defaulting employee were the regular employee. There is a tendency among employers to show leniency to their own employees and show harshness toward contract employees. There should be no 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 percentage of recovery is possible, and withhold that much payment only, not the entire payment.
Lastly, please check the provisions of the contract agreement as well. When framing the contract, have you made provisions to recover losses arising out of theft?
Thanks,
Dinesh Divekar
From India, Bangalore
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Thank you, sir.
We don't have a contract with them, but we have a Letter of Intent (LOI) with the Vendor wherein all the terms and conditions, including the clauses about remedial action against theft and misconduct of the employees deployed by the Contractor, are outlined. Could you please provide the letter format?
From India, Chennai
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We don't have a contract with them, but we have a Letter of Intent (LOI) with the Vendor wherein all the terms and conditions, including the clauses about remedial action against theft and misconduct of the employees deployed by the Contractor, are outlined. Could you please provide the letter format?
From India, Chennai
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Dear Bindu,
I suggest the following actions:
1. Since your LOL provides enabling remedial clauses for theft by the contractor's employee, you should determine the ballpark figure of the amount involved in the theft and withhold that amount pending an investigation.
2. When drafting the letter to the contractor, I advise you to attempt the drafting and send it for expert comments. Spoon-feeding in this manner is not appreciated.
3. Before taking the action of withholding the contractor's pro rata payment, conduct an internal investigation to ascertain the facts and ensure there is a prima facie case warranting the withholding of payments.
4. The suggestion to hold a 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 an independent inquiry and share the findings report with the Principal Employer for information.
5. The most important part is to confirm that the theft has indeed occurred, resulting in monetary losses, and that the LOL empowers the company to withhold payments.
Regards,
Vinayak Nagarkar
HR and Employee Relations Consultant
From India, Mumbai
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I suggest the following actions:
1. Since your LOL provides enabling remedial clauses for theft by the contractor's employee, you should determine the ballpark figure of the amount involved in the theft and withhold that amount pending an investigation.
2. When drafting the letter to the contractor, I advise you to attempt the drafting and send it for expert comments. Spoon-feeding in this manner is not appreciated.
3. Before taking the action of withholding the contractor's pro rata payment, conduct an internal investigation to ascertain the facts and ensure there is a prima facie case warranting the withholding of payments.
4. The suggestion to hold a 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 an independent inquiry and share the findings report with the Principal Employer for information.
5. The most important part is to confirm that the theft has indeed occurred, resulting in monetary losses, and that the LOL empowers the company to withhold payments.
Regards,
Vinayak Nagarkar
HR and Employee Relations Consultant
From India, Mumbai
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