Repayment of relocation allowance

[EngineerMan]

As a small company of around 10, we recruited a graduate around 6 months ago. He needed to move to our location and set himself up with a place, so we offered a relocation allowance. (not a huge sum).
He's resigned now and is moving to a new job elsewhere. I'm after advice on our approach to him about repaying a portion of that relocation allowance. We were perhaps a little relaxed in our contract, in that there is no stipulation about repayment of the relocation allowance in there. Training expenses incurred in acquiring skills necessary to complete the job are covered, and there are details of the expected repayments in the staff handbook.

He has not incurred expenses involved in moving locally, as he rents a room in a shared house, and has not moved a significant amount of possessions here. He has had to pay a deposit, but provided he has been a reasonable tenant he should expect to have that returned.

I've offered to pay for his listed expenses incurred in relocating instead of pro-rating the allowance for the months of his first year that he has worked. He is concerned that this is 'not fair', as he has incurred few expenses that could be categorised as directly involved in relocation.

I recognise that as an employer, we could have been clearer about guidance regarding the type of expenses that could be funded, even through the money was clearly identified as a relocation allowance. We could also have been clearer that the allowance was not cash in his pocket that wouldn't need to be repaid.

He has now made written a letter of grievance, and I need to sit with him and talk this through in the next few days. Am I being unreasonable in requiring some of the relocation to be returned ?

[stevemLS]

Re: Repayment of relocation allowance

Your approach is entirely reasonable.

However, in the absence of specific provisions in his contract (or a side agreement) I fear you are on a hiding to nothing in trying to recover this money.

You can, of course, mention your disappointment at his attitude and lack of commitment in his reference, providing you are strictly factual and have evidence to back up what you say, if you tell him that you would feel obligated to include that in references then his attitude may change? Just a thought.

[EngineerMan]

Re: Repayment of relocation allowance

As he is still working his last month's notice, would it be unreasonable to deduct the relocation repayment from his last pay packet ?

[stevemLS]

Re: Repayment of relocation allowance

In the absence of explicit written agreement that would amount to an unlawful deduction, I am afraid. See s13 Employment Rights Act 1996 http://www.legislation.gov.uk/ukpga/1996/18/section/13 and s14 for exceptions http://www.legislation.gov.uk/ukpga/1996/18/section/14

[EngineerMan]

Re: Repayment of relocation allowance

I'm also a bit worried about the tax implications, as he has now indicated that the money provided as a relocation allowance was not spent on items as approved by HMRC. Effectively he is regarding it as a bonus, to spend how he likes, so it should probably be taxed as such ?

[stevemLS]

Re: Repayment of relocation allowance

Tax is not my area, sorry - HMRC guide here https://www.gov.uk/expenses-and-bene...ation/overview which I am guessing you will have seen.

He sounds a bit of a knob if he has openly been saying that he has not spent it on qualifying costs. How much are you talking about.

[wales01man]

Re: Repayment of relocation allowance

Form the outside this looks like you have a contract not clearly worded and he knows it you may have difficulty reclaiming this money .It may well be unlawful to deduct any money from his final payment you really need employment law advice .

The only way to reclaim any money may be legal action if its worth it otherwise this have been a lesson in how not to employ someone without a correct and legal contract,looks like you took him on trusting to much

[stevemLS]

Re: Repayment of relocation allowance

IMHO there is no basis to recover it even through legal action, the contract is silent on the matter.

I think the reference suggestion I gave you earlier may be your best lever.

[EngineerMan]

Re: Repayment of relocation allowance

Thanks everybody. The amount is not huge, at around 1500 in total, making it completely uneconomic to pursue any further. However, for a small company this has been an expensive and bad experience all round, from the agency fee for providing his details, time and effort in providing training, a lack of commitment and poor performance that means he was heading for dismissal anyway, to this mess where he simply doesn't want to pay back the money provided to allow him to relocate to start work. I know he has completed tasks that we did not otherwise have capacity to do, but it has been seriously expensive.

At the moment he is really quite naive, and I suspect the panic in the short term about being asked to pay back the relocation will overtake any thoughts about the potential effect on his efforts for the next job.

I really hate the hassle and risk in taking on new people. There is a clear message in a this though, that the contract details need to be better, and we will have to sort that out for any future recruits.

[stevemLS]

Re: Repayment of relocation allowance

How about showing him this as a potential reference.

"Dear

XXXXX was employed as YYYY from AAAA to BBBB.

As can be seen this was a period of XX months.

XXXX's lack of commitment was a disappointment to us. Illustrative of this was his refusal to repay relocation expenses provided to him.

We would not re-employ XXXX under any circumstances.

Yours etc"

People howl about not being able to give a bad reference which is just not right. So long as it is truthful and can be backed up by evidence, it is fine.

Brief, to the point and factual. (You would need one other piece of evidence to support the statement about lack of commitment - poor time keeping, something like that).

Has he already got somewhere to go?

And yes, you need to tighten up your paperwork!

Let us know how you go on?

[EngineerMan]

Re: Repayment of relocation allowance

He hasn't secured another job yet, but is off for interview today (unpaid leave, as he has already booked more holiday than he accumulated), which means he is even more worried about the cash I suspect. I think your indication of how his failure to deal appropriately or reasonably with his relocation expenses may be reflected in a reference is interesting, and we will think this over carefully.

I don't want to be vindictive, and there isn't time for petty revenge. There are lots of other things to do here, and we need to move on without absorbing any further energy, if only to complete projects that will bring cash into the business !

[EngineerMan]

Re: Repayment of relocation allowance

Well he's left now. I discussed this with him, and indicated that we would not be making deductions from his salary.

The bit I can't get over is that he sat across the table from me, and agreed that our approach, based on a pro-rate payment for the months he worked, was reasonable, and that he had expected to be asked to repay some of the money when he resigned, but he was not going to pay.

He then asked if I would be willing to provide a reference, and became quite agitated when I indicated that we would include information about his management of the relocation process, telling me that it would be illegal to provide a 'bad reference'. Things quietened down a little when I explained that we would only offer a a factual reference, based on verifiable information. He then told me that he would offer my details as a referee, because he 'trusts me' ! It was all I could do to refrain from laughing openly - although I did explain that I had told him what his reference would contain, and that he could trust me to do what I had told him. He left that meeting indicating that he would consider repaying the money, but yesterday left a letter stating the same again, that he believes that the absence of words in the contract means he doesn't need to pay anything.
I'm afraid at that point I didn't want to prolong things any further, so I asked him to leave his key and laptop and not to come back, also I made it clear that it would not be necessary for him to work the last day of his notice, but that we would of course pay it.

There is no tax implication for him, because it turns out that due to an administrative slip when he started, the initial allowance was paid as part of his salary anyway, and was not paid as reimbursement of expenses.

There we go - an expensive and salutary lesson for us. We will of course make sure our contract template is updated with suitable wording about expectation of repayments, and in future would only offer reimbursement of receipted expenses for relocation if required.

[wales01man]

Re: Repayment of relocation allowance

A lesson learnt there Time to move on I think you rather kept your cool there