AM writes: One of my employees failed to follow procedures and damaged expensive company equipment. Can I make the employee pay for the damage?
As the technological needs of businesses increase, the sums invested in equipment are rocketing, writes Peter Done, managing director of Peninsula.
If a worker is responsible for damage, the employer may believe it can simply take the cost of repair from that individual. But this is not straightforward.
Deductions can be made from wages only when there is a legal right to do so: for example, with tax and national insurance or if there is a contractual right consented to in advance.
Examine the employee’s contract of employment to see whether there is a clause for damage to company property, as it is unlikely they will consent to paying for an expensive repair. If there is no such clause, and no consent has been given, the deduction cannot be made from wages regardless of whether the damage was intentional or accidental. Any attempt at recovering costs will be an unlawful deduction of wages.
If there is a contractual right, it will be possible to recover the costs from the employee’s salary. However, the deductions clause must be reasonable and any penalty clauses stating a sum to be taken regardless of the actual costs of repair will be unenforceable. It will never be possible to deduct more than the damage’s cost.
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Even if there is a clause, employers must ensure they are acting reasonably in making the deductions. What is reasonable will be viewed on a case-by-case basis. First, ensure a full investigation has taken place to prove the employee damaged the property by not following procedures.
Once certain, the employer should discuss making wage deductions with the worker. The individual circumstances of the employee need to be ascertained to calculate a reasonable amount to be deducted. Simply taking the whole cost of the damage in one go, or refusing to tailor any repayment scheme to that employee, is likely to be an unreasonable deduction.
Tax issues on a secondment
JM writes: My company has offices around the UK. We have asked a staff member to move to another city for a 12-month project. We want to cover their regular journeys home, plus rental costs. Can we do this without triggering a large tax bill? Must we pay rent directly?
This is not uncommon as more businesses are requiring employees to operate from multiple locations, writes Jon Dawson, partner at Kingston Smith LLP. The key is determining if an employee has more than one permanent workplace, or if one workplace will qualify as temporary.
If one is temporary, you can cover accommodation and travel by reimbursing expenses. But you can reimburse only costs truly incurred; anything above that would be taxable as income. Copies of tickets, receipts and a rental agreement should suffice.
You do not need to draw up a contract directly with a landlord. The risk to your firm would be minimised if your employee entered into this arrangement. If they were to resign before the end of the tenancy, you could face extra costs.
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Update the contract with your employee to reflect the new arrangement, including its temporary status and detailing that any expenses apply only for the duration of this project. If the move becomes permanent you will need to stop reimbursing costs or start processing them through payroll as part of a larger salary package.
Kingston Smith LLP, the chartered accountant, and Peninsula, the employment law firm, can advise owner-managers on their problems. Send your questions to Business Doctor, The Sunday Times, 1 London Bridge Street, London SE1 9GF. Advice is given without legal responsibility.