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 his trade and nature of job. Tools are issued on a "tool issue card"; one copy is held by the employee and second copy is with the tool room. The employees hold the tool with them till 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 employee reports loss of tool (most of these "lost tools" are costly & essential for his work) while he is doing his post resignation out going/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 reason?
c) Is an inquiry required before making any such deduction?
d) Will a letter from employee acknowledging the loss and agreeing to recovery from his FFS sufficient to make the deduction?
Would appreciate some advice in this.
Thanks & Regards,
Arun
From India, Kochi
45We are an EPC company and we issue tools as required to employees based on his trade and nature of job. Tools are issued on a "tool issue card"; one copy is held by the employee and second copy is with the tool room. The employees hold the tool with them till 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 employee reports loss of tool (most of these "lost tools" are costly & essential for his work) while he is doing his post resignation out going/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 reason?
c) Is an inquiry required before making any such deduction?
d) Will a letter from employee acknowledging the loss and agreeing to recovery from his FFS sufficient to make the deduction?
Would appreciate some advice in this.
Thanks & Regards,
Arun
From India, Kochi
It is not disputed that any tool lost due to an an employee's negligence is a misconduct and the cost of it shall be recovered from him. But 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 and 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 also 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 alternative. But the right to recover the cost of a tool lost due to negligence of an employee is always there with the employer. Only thing is that he should exercise this right only by following principles of natural justice.
From India, Kannur
From India, Kannur
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 new tool, you can recover 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 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 settlment 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. Question of initiation of disciplinary proceedings shall arise only if he is arrogant and/or refute the charges of loss or damage of tool, evelled against him
d) Will a letter from employee acknowledging the loss and agreeing to recovery from his FFS sufficient to make the deduction?
Ans: That is enough, and keep his letter alongwith his full & final settlement sheet, duly acknowledged by him.
Now, I have a question. What if the cost of tool is higher than the amount payable to him?
(You can not touch his PF dues and Gratuity amount).
From India, Aizawl
a) What is the correct procedure to do a cost recovery (WDV of the lost tool) from the employee?
Ans: If it is new tool, you can recover 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 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 settlment 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. Question of initiation of disciplinary proceedings shall arise only if he is arrogant and/or refute the charges of loss or damage of tool, evelled against him
d) Will a letter from employee acknowledging the loss and agreeing to recovery from his FFS sufficient to make the deduction?
Ans: That is enough, and keep his letter alongwith his full & final settlement sheet, duly acknowledged by him.
Now, I have a question. What if the cost of tool is higher than the amount payable to him?
(You can not touch his PF dues and Gratuity amount).
From India, Aizawl
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 value of loss being more that 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 that 50% of GROSS in deduction" still apply?
Regards
Arun
From India, Kochi
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 value of loss being more that 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 that 50% of GROSS in deduction" still apply?
Regards
Arun
From India, Kochi
The provision relating to maximum deduction of 50% of wages itself is a misleading one. There are employees who are contributing to PF 100% of their salary! Moreover, when we have to deduct the cost of lost items from a resigned employee, we cannot do it in instalments though in respect of employee on rolls, we can split it in two or three instalments according to the requirements.
From India, Kannur
From India, Kannur
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