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How much can be deducted from a dismissed employee’s salary for material damage?
How much can be deducted from a dismissed employee’s salary for material damage?
One of the situations often encountered in practice is when an employee causes damage to the employer and then leaves the job.
Example: A driver-forwarder of the “XX” confectionery company (who had signed a full material liability agreement) collected cash from customers for the goods sold and misappropriated AZN 1,000. After this fact became known, the employer terminated his employment in accordance with the law. Upon termination, the employee was calculated AZN 450 for the days worked and AZN 200 as compensation for unused vacation days.
In such a case, how much can be deducted from him for the material damage? Can the employer, when terminating the employment contract due to misappropriation, withhold all payments from the employee?
In practice, we often hear from employers that, due to insufficient knowledge of labor law and an emotional approach to the matter, they make no payments at all to the employee in such cases.
First, several questions need to be addressed:
1. To what extent is the employee liable for the damage caused?
2. If the employee is liable, what portion of the payable amounts can be withheld to cover the damage?
3. What is the correct procedure and process for withholding the damage?
The Labor Code provides several important provisions regarding liability for damages. These can be reviewed under two categories: material damage and moral (non-material) damage.
Material and non-material damage can be classified as follows:
- Material damage caused by the employee to the employer;
- Material damage caused by the employer to the employee;
- Damage caused by the employer to the property owner;
- Non-material damage caused by one party to the other.
An employer operating under an employment contract with the property owner is fully liable for damage caused to the property owner through unlawful actions, as defined by this Code and other normative legal acts. That is, unless a full material liability agreement is signed, and except in cases where a criminal act is involved, an employee is liable for damages caused to the employer only up to the amount of their average monthly wage. In the given example, since a full material liability agreement was signed, the damage may be recovered in full from the employee (Article 200 of the Labor Code).
However, regarding the procedure of recovery, it must be noted that if the employee refuses to voluntarily reimburse the damage, even in cases of full material liability, any amount exceeding the employee’s average monthly wage may only be recovered through a court decision (Article 205 of the Labor Code).
Article 175 of the Labor Code regulates the cases and procedures for deductions from wages. According to this article, the employer may order deductions from the employee’s salary (except for cases of full liability) for damages caused through the employee’s fault, provided that the amount does not exceed the employee’s average monthly wage. But what are the limits?
The most common mistake is attempting to deduct the entire amount at once. It must be understood that even if, in this example, the employee’s average monthly wage is AZN 800, the full AZN 650 cannot be deducted at once. According to the law, the total deductions made from wages in such cases cannot exceed 20% of the employee’s payable salary. Thus, only AZN 130 may be deducted:
650 × 20% = AZN 130.
The remaining AZN 870 may only be recovered by court order, based on an enforcement document.
Regardless of whether the employee bears full liability or liability limited to their average monthly wage, the legal restrictions on deductions must be observed. Article 176 of the Labor Code sets the limits for wage deductions: 20%, 50%, and 70% of wages, depending on the case.
20% of wages
The total deductions from wages at each payment date may not exceed 20% of the employee’s payable salary. Unless otherwise provided, no more than 20% may be withheld.
50% of wages
In certain cases provided for by legislation, deductions may total up to 50% of the employee’s salary. According to Article 65 of the Law “On Enforcement”, the total deductions from the debtor’s wages or equivalent income under enforcement proceedings cannot exceed 50%. Where several enforcement documents exist, the debtor must retain at least 50% of their earnings.
70% of wages
Deductions may total up to 70% of wages in the following cases:
- child support (alimony);
- compensation for harm to health;
- compensation to dependents for loss of a breadwinner;
- compensation for damage caused by a crime.
If the damage is caused by the employee in cases of full liability and exceeds the average monthly wage, and the employee refuses voluntary payment, the employer may seek recovery through the courts.
Thus, whether the employee is liable within the limit of the average wage or under full liability, without a court decision the total deductions from wages cannot exceed 20% of the employee’s payable salary.
In the given example, since the employment contract was terminated, as for the remaining damage, it should be noted that termination of the employment relationship after the damage is caused does not release the guilty party from material liability. The party at fault remains obliged to compensate for the damage, regardless of any criminal, administrative, or other liability. However, this must be done through court proceedings. Failure by the employer to follow this procedure may result in employee complaints and administrative fines for responsible officials under Article 192 of the Code of Administrative Offenses, ranging from AZN 700 to AZN 1,500.
One of the situations often encountered in practice is when an employee causes damage to the employer and then leaves the job.
Example: A driver-forwarder of the “XX” confectionery company (who had signed a full material liability agreement) collected cash from customers for the goods sold and misappropriated AZN 1,000. After this fact became known, the employer terminated his employment in accordance with the law. Upon termination, the employee was calculated AZN 450 for the days worked and AZN 200 as compensation for unused vacation days.
In such a case, how much can be deducted from him for the material damage? Can the employer, when terminating the employment contract due to misappropriation, withhold all payments from the employee?
In practice, we often hear from employers that, due to insufficient knowledge of labor law and an emotional approach to the matter, they make no payments at all to the employee in such cases.
First, several questions need to be addressed:
1. To what extent is the employee liable for the damage caused?
2. If the employee is liable, what portion of the payable amounts can be withheld to cover the damage?
3. What is the correct procedure and process for withholding the damage?
The Labor Code provides several important provisions regarding liability for damages. These can be reviewed under two categories: material damage and moral (non-material) damage.
Material and non-material damage can be classified as follows:
- Material damage caused by the employee to the employer;
- Material damage caused by the employer to the employee;
- Damage caused by the employer to the property owner;
- Non-material damage caused by one party to the other.
An employer operating under an employment contract with the property owner is fully liable for damage caused to the property owner through unlawful actions, as defined by this Code and other normative legal acts. That is, unless a full material liability agreement is signed, and except in cases where a criminal act is involved, an employee is liable for damages caused to the employer only up to the amount of their average monthly wage. In the given example, since a full material liability agreement was signed, the damage may be recovered in full from the employee (Article 200 of the Labor Code).
However, regarding the procedure of recovery, it must be noted that if the employee refuses to voluntarily reimburse the damage, even in cases of full material liability, any amount exceeding the employee’s average monthly wage may only be recovered through a court decision (Article 205 of the Labor Code).
Article 175 of the Labor Code regulates the cases and procedures for deductions from wages. According to this article, the employer may order deductions from the employee’s salary (except for cases of full liability) for damages caused through the employee’s fault, provided that the amount does not exceed the employee’s average monthly wage. But what are the limits?
The most common mistake is attempting to deduct the entire amount at once. It must be understood that even if, in this example, the employee’s average monthly wage is AZN 800, the full AZN 650 cannot be deducted at once. According to the law, the total deductions made from wages in such cases cannot exceed 20% of the employee’s payable salary. Thus, only AZN 130 may be deducted:
650 × 20% = AZN 130.
The remaining AZN 870 may only be recovered by court order, based on an enforcement document.
Regardless of whether the employee bears full liability or liability limited to their average monthly wage, the legal restrictions on deductions must be observed. Article 176 of the Labor Code sets the limits for wage deductions: 20%, 50%, and 70% of wages, depending on the case.
20% of wages
The total deductions from wages at each payment date may not exceed 20% of the employee’s payable salary. Unless otherwise provided, no more than 20% may be withheld.
50% of wages
In certain cases provided for by legislation, deductions may total up to 50% of the employee’s salary. According to Article 65 of the Law “On Enforcement”, the total deductions from the debtor’s wages or equivalent income under enforcement proceedings cannot exceed 50%. Where several enforcement documents exist, the debtor must retain at least 50% of their earnings.
70% of wages
Deductions may total up to 70% of wages in the following cases:
- child support (alimony);
- compensation for harm to health;
- compensation to dependents for loss of a breadwinner;
- compensation for damage caused by a crime.
If the damage is caused by the employee in cases of full liability and exceeds the average monthly wage, and the employee refuses voluntary payment, the employer may seek recovery through the courts.
Thus, whether the employee is liable within the limit of the average wage or under full liability, without a court decision the total deductions from wages cannot exceed 20% of the employee’s payable salary.
In the given example, since the employment contract was terminated, as for the remaining damage, it should be noted that termination of the employment relationship after the damage is caused does not release the guilty party from material liability. The party at fault remains obliged to compensate for the damage, regardless of any criminal, administrative, or other liability. However, this must be done through court proceedings. Failure by the employer to follow this procedure may result in employee complaints and administrative fines for responsible officials under Article 192 of the Code of Administrative Offenses, ranging from AZN 700 to AZN 1,500.