For May 2025, we have asked the employment team at Tughans LLP to provide practical answers to unusual, sensitive or complex work-related queries. We call this feature “How do I handle it?”

The articles are aimed at HR professionals and other managers who may need to deal, from time to time, with the less commonplace disputes at work; issues that may, if handled incorrectly, lead to claims for discrimination, constructive dismissal or some other serious difficulty. 

Many employers provide equipment to employees so they can perform their role. This has become increasingly common with the growth in hybrid and remote working arrangements, with employees typically receiving company phones, laptops and other IT equipment. 

When an employee refuses to return company property, especially if the equipment is expensive, you may think the easiest solution is to deduct the cost from their final salary payments. However, you should be cautious with this approach, as deducting these costs may constitute an unlawful deduction from wages, which could result in a tribunal claim. 

The basic principles are that employers are only permitted to make deductions from an employee’s wages which are: 

1. authorised by statute;
2. permitted by the contract; or
3. made with the employee’s prior written consent. 
    

The first of these grounds covers deductions which you are required to make, like for tax and national insurance, and will not be helpful here. We will assume that you do not have the employee’s prior written consent to making deductions from their wages for the cost of equipment they are refusing to return. 

This leaves the second potential ground, where the deduction is permitted by the employee’s contract. You should check the employee’s contract for any applicable provisions regarding company property and deductions from wages. 

It is common for employment contracts to permit the employer to make deductions from an employee’s wages for any amount which the employee owes to the company. However, this will not allow you to make deductions for company property which has not been returned, because there is no specific amount owed by the employee. If you deduct the cost of the unreturned equipment, the employee would be entitled to bring a claim for the deducted amount as an unlawful deduction from wages claim in the tribunal. 

However, if the employment contract does provide express permission for you to deduct the cost of unreturned equipment, you should be able to rely on this clause as grounds for making a lawful deduction from their wages, though you should carefully consider the specific wording on the exact cost you are deducting i.e. is this based on the equipment’s original or current value. 

The employment contract is likely to include a separate clause where the employee agrees to return all company property on the termination of employment. If the employee refuses to return the property, they are breaching this contractual agreement, and you may have grounds for a civil claim for breach of contract. In practice, this may not be an attractive option given the time and cost involved in pursuing such a claim. It is important to remember that this obligation to return company property is separate to your obligation to make the final salary payments; and if you have made these payments, this will strengthen your position in any eventual civil action, as there will be nothing outstanding on the company’s part to prevent return of its property. Outside of a claim based on the contract itself, there is the option of bringing a civil claim for “trespass to goods.” 

In these circumstances, you might want to report the issue to the police as theft. The police will often take the view that the company property was originally provided under a contractual agreement, making return of same a civil rather than criminal matter. In practice, it can still be useful to threaten that you will report the employee. 

If the employment contract does permit you to make deductions in these circumstances, it may be prudent to write to the employee to notify them that you intend to make the deductions unless the property is returned within a specified period. It is often helpful to arrange collection rather than rely on the employee to return it themselves. 

If the employment contract does not permit these deductions, the legal position is unfortunately more complicated. It would still be best practice to write to the employee and demand that they return the company’s property or make it available for collection. You could threaten the prospect of civil action or reporting them to the police. 

If this approach does not work, you will have to take the next step towards a civil claim, by issuing a formal final warning known as a “letter before action.” This will usually be sent by your solicitors and may prompt the employee to return the equipment given the imminent threat of legal action. 

If you are negotiating settlement terms with the employee regarding the termination of their employment, you can stipulate that any ex-gratia payment is contingent on the safe return of the company property within a specified period. 

More generally, this issue highlights the importance of having robust data security measures in place which allow you to remotely disable company IT equipment. This should greatly reduce the risk that employees can continue to access or misuse your confidential information, and more practically, decreases the attractiveness of trying to keep their company owned devices.