Dear All,
I am working in the HR department of an MSME company. My MD wants to impose fines on employees for negligence and non-adherence to company rules. Please guide me, is it legally valid to impose fines in monetary terms.
From India, Mohali
Acknowledge(0)
Amend(0)
I am working in the HR department of an MSME company. My MD wants to impose fines on employees for negligence and non-adherence to company rules. Please guide me, is it legally valid to impose fines in monetary terms.
From India, Mohali
Acknowledge(0)Amend(0)
Dear Saloni,
Yes, your company can impose fines and penalties for the violation of the company's rules and regulations or for being negligent at work. However, please note the following:
a) The imposition of a fine or penalty is a punishment. The objective of the punishment is to correct the behavior of the employee. Therefore, please make sure that the amount of the fine or penalty should be a fraction of the loss caused to the company.
b) The aim of imposing the fine or penalty should not be the recovery of the losses caused to the company.
c) Before imposing the penalty, identify the causes of the negligence. Many times, the system is at fault but the blame is assigned to the people. Examples of this are:
i) Faulty work output because of the non-calibration of the tools or instruments
ii) Faulty work output as the machines are not maintained properly
iii) Faulty work output because of defective raw material
d) Only the top-most management is authorized to levy the penalty. As far as possible, it should not be delegated to the lower level.
e) As stated earlier, the objective of levying the penalty should be toward the correction of the behavior. What if the behavior does not improve despite imposing the penalty? In that case, the management is free to take harder disciplinary action. However, public reprimand of the defaulting worker should be avoided.
f) Please check the provisions of the Factory Act or Shops and Establishment Act of your state as applicable regarding the imposition of penalties and fines. In some states, the requirement is to deposit the amount to the Labor Welfare Fund (LWF). The company cannot retain the amount with them. Maintain the penalty register under the provisions of either act.
g) Raise a separate debit note for each case. Issue the debit note to the worker, and only then deduct the amount from the salary. If the worker deposits the amount voluntarily, then deduction through salary is not required. However, the entry in the penalty register has to be made.
f) Imposition of a fine or penalty is okay, but beyond a point, it does not work. Negligence at work shows that either the worker is not adequately motivated or unfit to work. Therefore, this factor also needs to be addressed. Possibly, you may have to review your recruitment practices.
Thanks,
Dinesh Divekar
From India, Bangalore
Acknowledge(0)Amend(0)
8035Yes, your company can impose fines and penalties for the violation of the company's rules and regulations or for being negligent at work. However, please note the following:
a) The imposition of a fine or penalty is a punishment. The objective of the punishment is to correct the behavior of the employee. Therefore, please make sure that the amount of the fine or penalty should be a fraction of the loss caused to the company.
b) The aim of imposing the fine or penalty should not be the recovery of the losses caused to the company.
c) Before imposing the penalty, identify the causes of the negligence. Many times, the system is at fault but the blame is assigned to the people. Examples of this are:
i) Faulty work output because of the non-calibration of the tools or instruments
ii) Faulty work output as the machines are not maintained properly
iii) Faulty work output because of defective raw material
d) Only the top-most management is authorized to levy the penalty. As far as possible, it should not be delegated to the lower level.
e) As stated earlier, the objective of levying the penalty should be toward the correction of the behavior. What if the behavior does not improve despite imposing the penalty? In that case, the management is free to take harder disciplinary action. However, public reprimand of the defaulting worker should be avoided.
f) Please check the provisions of the Factory Act or Shops and Establishment Act of your state as applicable regarding the imposition of penalties and fines. In some states, the requirement is to deposit the amount to the Labor Welfare Fund (LWF). The company cannot retain the amount with them. Maintain the penalty register under the provisions of either act.
g) Raise a separate debit note for each case. Issue the debit note to the worker, and only then deduct the amount from the salary. If the worker deposits the amount voluntarily, then deduction through salary is not required. However, the entry in the penalty register has to be made.
f) Imposition of a fine or penalty is okay, but beyond a point, it does not work. Negligence at work shows that either the worker is not adequately motivated or unfit to work. Therefore, this factor also needs to be addressed. Possibly, you may have to review your recruitment practices.
Thanks,
Dinesh Divekar
From India, Bangalore
Acknowledge(0)Amend(0)
Dear Saloni,
Of course, an employer can impose a fine on employees as a corrective measure. However, the employer should obtain approval from the specified authority under the Payment of Wages Act, 1936 for such actions involving employees falling under the PW Act, 1936 that warrant the imposition of fines. It would be advisable to review section 8 of the PW Act, 1936. The same requirement is stated under section 19 of the Code on Wages, 2019, which is expected to come into effect on April 1, 2021.
Thank you.
From India, Salem
Acknowledge(0)Amend(0)
Of course, an employer can impose a fine on employees as a corrective measure. However, the employer should obtain approval from the specified authority under the Payment of Wages Act, 1936 for such actions involving employees falling under the PW Act, 1936 that warrant the imposition of fines. It would be advisable to review section 8 of the PW Act, 1936. The same requirement is stated under section 19 of the Code on Wages, 2019, which is expected to come into effect on April 1, 2021.
Thank you.
From India, Salem
Acknowledge(0)Amend(0)Gathering data for an AI comment.... Sending emails to relevant members...
Looking for something specific? - Join & Be Part Of Our Community and get connected with the right people who can help. Our AI-powered platform provides real-time fact-checking, peer-reviewed insights, and a vast historical knowledge base to support your search.
Legal Clarification on Absconding Employee, Contract Labour Engagement & Leave Entitlement Ammen.pdf