What to Do If an Employee Fails to Return Company Property Upon Termination

When an employee leaves without returning company property - such as laptops, mobile phones, or office keys - it can lead to significant costs and security concerns for your business.

Proactively addressing this potential issue with a robust property management process and well-drafted employment contracts can mitigate these risks.

Below, we outline practical steps to safeguard your assets and explore legal avenues if property remains unreturned.

Downloadable UK Company Equipment Use and Return Policy

To help you establish clear guidelines on the use and return of company property, download our Company Equipment Use and Return Policy. This template sets out clear expectations for employees, supporting both compliance and asset protection.

Proactive Measures

Establishing clear expectations around the return of company property can help prevent issues.

Here are some best practices:

1. Advance Reminders: Notify employees nearing the end of their employment, in writing, that they must return all company items by their last day. Use a property return checklist to document items such as laptops, phones, and other equipment.

2. Signed Confirmation: Require a signed declaration from employees confirming that all company property has been returned and that any company data on personal devices has been deleted. This document can be valuable if further steps are required later.

3. Regular Audits and Inventory: Conduct periodic audits of company equipment to ensure all items are accounted for and in working condition. Regular tracking prevents surprises at the end of employment.

Essential Employment Contract Clauses

Under the Employment Rights Act 1996, deductions from wages must be authorised by the employment contract, by statute, or by employee consent.

Therefore, including specific clauses in employment contracts is essential to legally protect your business if company property isn’t returned.

Key clauses to consider:

1. Return of Property Clause: This clause should make it clear that employees are obligated to return all company property on or before their last day of employment.

2. Deductions Clause: To recover the cost of unreturned property, include a clause permitting deductions from the employee’s final salary. Without such a clause or written agreement, any unauthorised deduction could lead to a tribunal claim for unlawful deduction of wages.

3. Clarity on Fair Replacement Value: Specify that any deductions will be limited to the item’s replacement value in its current condition, not the original purchase price. Attempting to claim an inflated replacement amount could render the deductions clause unenforceable.

Downloadable UK Failure To Return Property Letter Template

Download our free Failure to Return Property Letter template to help you formally request the return of company property from former employees, setting clear expectations and outlining potential next steps.

Deduction from Final Salary

If a departing employee fails to return company property, deducting the item’s value from their final salary can be a straightforward solution - provided that you have included a deduction clause in the employment contract.

Deducting wages without contractual authorisation may lead to an unlawful deduction claim, where the employee could receive repayment of the deducted amount plus any additional financial losses incurred.

To remain compliant, only deduct the fair market value of the item rather than the replacement cost.

Civil Claims for Recovery of Company Property

If the contract doesn’t cover deductions, you may pursue a civil claim to recover unreturned property. Two types of civil claims are available:

1. Breach of Contract: If your employment contract obligates property return, you can file a breach of contract claim, potentially recovering damages or obtaining an injunction.

2. Trespass to Goods: If no return obligation exists in the contract, consider a trespass to goods claim, allowing you to recoup the item’s value.

Civil Claim Process

The first step is often a ‘letter before action’ informing the employee that legal proceedings will begin if property isn’t returned within 7 days.

This approach is frequently enough to motivate action without further legal intervention.

Note that only the actual financial loss can be recovered through such claims, as courts typically don’t award damages for business disruption caused by unreturned items.

Criminal Charges

As a last resort, reporting the incident to the police is an option, though property initially provided voluntarily is rarely investigated as theft.

However, you can mention this step in communications with the employee to encourage compliance.

Tips for Employers

1. Review Employment Contracts: Ensure contracts contain a clause allowing deductions from final salary for unreturned items, providing legal recourse if property isn’t returned.

2. Inventory and Documentation: Maintain a detailed log of company property issued to employees, noting models, serial numbers, and condition to support any claims.

3. Exit Checklist: Formalise an exit checklist including property return, ensuring that employees return all items in a documented process.

4. Policy Clarity: Clarify company property policies in employee handbooks, and remind employees of these policies during exit interviews to reinforce obligations.

5. IT Security Measures: Use remote wiping and revoke access to systems on the employee’s last day to safeguard digital information.

6. Consider Small Claims Court: For items of lower value, pursuing claims in Small Claims Court may be a practical and cost-effective approach.

7. Periodic Audits: Conduct regular audits to verify that employees possess and properly use allocated company property, ensuring compliance with security protocols.