Welcome to this HR Blast from Jaluch. Here we look at the issue of fining staff. Can you fine staff? How much can you fine staff? When might fining staff get you into legal hot water. Read on!
If the contractual relationship you have with your staff (whether they be an employee, workers or self employed) is set up in the right way, then you may be surprised to know that you have an astonishing amount of freedom to fine staff. You can make deductions from their pay for a whole variety of reasons ranging from uniforms, damages, not giving notice, absences, parking fines and much more!
It is very common for contracts of employment to state that staff have to repay the company for any loss/damage that is outside of normal wear and tear, and occasionally that staff have to pay for their uniforms/Company equipment (although clearly it’s then theirs to keep if they leave). If you give staff uniforms/equipment, we strongly recommend introducing a clause covering this in your contract/contractual documentation if you don’t already have one included.
Not giving notice/note giving sufficient notice when resigning
Although uncommon to see in contracts, you could in theory include a contractual clause which states that if a member of staff resigns and doesn’t give notice, or doesn’t give sufficient notice then you will make a deduction from their final pay equivalent to the damages you have incurred (e.g. from the cost of arranging cover to complete the work, or for the value of lost business).
In order to do this, you will need to include an express clause in their contract of employment giving you the right to do so, and make it clear that you will only seek to recoup the losses that you incurred as a result of the employee leaving without giving their due notice.
The trouble with this is that many employers come unstuck quantifying their losses as this is often difficult to do in practice and however much you are upset, angry, irritated or frustrated by your employee, you cannot include your emotional distress or stress resulting from their hasty departure! However, for some high risk roles you may consider including this clause, even if it’s only as a deterrent!
Fines for absence
There have been some recent media reports regarding some companies who have imposed fines on staff for not turning up for work without giving sufficient notice, or (in the case of self employed workers) for not finding a substitute. For Companies who suffer from a very high level of short term absence, and struggle to manage their constantly ill (or should we say ‘ill’) staff then this may seem like an attractive option, but it needs to be very carefully considered given that a scheme like this will of course encourage presenteeism (i.e. employees turning up to work when unwell and potentially infecting others!) And of course, not to mention that such a scheme needs to be very carefully planned to ensure that you aren’t disadvantaging those with pregnancy or disability related absences, which of course would be discrimination!
Perhaps a better, easier solution is to reward those with low absence and ensure that you have a very tightly worded short term absence management policy which uses The Bradford Factor (or similar) to closely manage absences.
If you have individuals that drive on Company business, either using their own vehicles or Company vehicles, then we strongly recommend that you have a comprehensive Driving Policy which includes full details of who is responsible for the payment of fines such as speeding fines or parking fines.
The consequences of not spelling this out can be protracted and frustrating grievances about who is responsible or even tribunal claims seeking redress for monies deducted from pay unlawfully (in the eyes of the employee).
As with so many of the policies in your staff handbook, setting out who is responsible for what can save hours of management time as well as avoiding demotivation of employees that often results from a perception that their colleagues are being treated unfairly.
Short Payments from Customers
Although we almost never see this clause in a contract, in theory if you wanted, you could choose to include a provision in a contract which specified that the member of staff was subject to making up any losses from customers who didn’t pay or didn’t pay correctly. Whilst we have heard of some instances of this happening, this is generally done without a contractual right to do so and would therefore be regarded as an unlawful deduction of wages if the employee took their complaint to the Employment Tribunal Claim.
And if you’re tempted to drop into your contract lots of clauses allowing you to fine your employees for all sorts of things including short payments from customers, just take a moment to check that your contract will not impact your ability to recruit or retain your staff, or otherwise to demotivate them which could for example then impact customer service.
Fines/deductions for Poor Performance and Conduct
In general, the member of staff must know what they are earning prior to completing the work (unless it’s piecemeal work) and so it would be difficult to make deductions for conduct or performance on the spot, unless there is a specific contractual provision allowing you to do so. However, one way that is often used to get around this is to consider making bonuses/commission payments or other financial benefits you offer subject to certain conduct/performance goals. For instance, the individual can be excluded from the bonus, or have the bonus reduced by a certain amount as a result of poor conduct or performance e.g. errors.
The impact of fines/deductions on the employment relationship?
As we have established above, you do have a significant amount of freedom to fine staff and make deductions (provided that the contractual documentation gives you the right to do so). However, whilst making deductions and fining staff may possibly be quite satisfying in some circumstances (e.g. when you are recouping some of the money the employee has cost you as in the case of them leaving without giving notice), as demonstrated by some of the examples above it needs some serious consideration before implementing/continuing such a scheme. Schemes such as these, send a very strong message about the type of culture you have – which may arguably be perceived as a culture that’s old fashioned, punitive rather than supportive, without flexibility and where money is the organisation’s priority (over and above vision, development, engagement, customer service and so on). This may suit you, but equally it may not, especially if you are in a sector where it is hard to recruit and retain good staff.
An alternative to fines?
Another way to achieve a similar result is of course to reward good behaviour rather than punish poor behaviour e.g. offer bonuses for low absence, although clearly this isn’t always practical and may not always achieve exactly the solution that you are after.
In some circumstances, it may be appropriate and sensible to implement schemes that recoup some losses, or act as a deterrent to poor behaviour, but we recommend using caution and thinking it through very carefully to ensure that you aren’t going to disadvantage anyone unfairly or unlawfully by the implementation of such a scheme (e.g. some of the absence schemes can result in direct discrimination on grounds of disability)
Avoid bad PR…
Always consider the adverse impact it could have on your reputation if someone decides to negatively publicise your scheme on social media or in the newspapers. Fining staff is clearly viewed very dimly indeed, as demonstrated by the following examples that have received a lot of negative press attention:
- Newcross Healthcare Solutions fined Staff who phoned in sick £50. After campaigns by UNISON and Compassion in Care, who argued that this raised a serious risk that workers would turn up to work whilst ill putting elderly patients at risk, they have now announced that they will scrap the scheme by April 2019.
- DPD classes its drivers as self employed and as such they aren’t paid for holiday or sick pay and are fined for absences at a rate of £150 per day if they fail to find a colleague to cover their shift. As a result, one worker consistently cancelled his hospital appointments for complications with his diabetes and rather than face the fines, and after collapsing twice at work, fell into a diabetic coma and very sadly passed away in January 2019.
- KPMG have recently announced that they will fine any staff £100 if they fail to complete and submit their timesheet paperwork in time, and that this money will come out of their bonus. They have noted that there would be flexibility for people who are unable to complete them due to illness or out of the office for other reasons.
Although our favourite was:
A real estate firm in China in the Southern city of Guangzhou that fined employees for not walking at least 6000 steps a day! Employees were fined the equivalent of 0.1 pence for every step that they fail to make when trying to reach their target!
Any tough employee issues to manage? Jaluch is here to help. No contract required, fast, friendly and pragmatic support on HR issues for UK employers. Never over complicating things and supporting employers for nearly two decades we have a great reputation, long standing clients and are especially know for the commercial approach we take to HR management. Get in touch!