Is an employee liable for business damages?

Employees can be entrusted with different types of company property in the course of their employment, from company uniform, to laptops, mobile phones, and company cars. While accidents can happen, employers may be able to recoup the cost to fix or replace the item if the damage is the result of an employee’s wilful act, carelessness, or negligence.

Whether you have the right to make employees pay for damage depends on several factors and it is important to be clear on when you can – and cannot – make an employee pay for damages, to avoid a legal complaint for deduction of wages without the right to do so.

The law sets out specific situations where an employer is allowed to automatically make deductions from an employee’s wages. This is a finite list and does not allow for any deductions that have not been previously discussed or agreed with the individual. This includes cases of theft, failure to return a uniform, property damage, or failure to return company equipment.

Additionally, if there is a contractual clause allowing deductions, or the employee gives written consent, deductions made cannot reduce the employee’s wage enough for it to fall below the national minimum wage, unless:

  • The deduction is because of NI contributions or income tax.
  • It is a repayment of an advance of wages or a loan.
  • It is repayment of an accidental wages overpayment.
  • The employee is buying share options or shares in the company.
  • If the employee has caused damage and their contract of employment allows for the deduction (retail workers have additional protections limiting deductions of more than 10% of their gross wage).

To establish if a deduction would be allowed, you should first look at the employee’s contract of employment and identify if there is a clause or term allowing you to deduct money from their wages, and in which circumstances, such as in relation to both purposeful damage and accidental damage.

The amount deducted per pay period must be reasonable with respect to the employee’s earnings.

If you cannot find any similar style of worded clause, the second option is to seek the employee’s written consent to cover the costs of the damage. In practice, this is likely to be difficult. Repair or replacement may be extremely expensive, and the employee could be reluctant to pay, particularly if the damage resulted from an unfortunate accident. If you obtain their consent, this should be recorded in writing, signed, and dated. You should also keep a record of the agreement.

If you have any concerns about this subject contact us at we can discuss.

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