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This page last updated 15 April 2007  

Handling Instances of Suspected Financial Irregularity - a guide to best practice
A Press Release from the Industrial Society of Great Britain

The Legal Background

Serious financial irregularities are generally treated as Gross Misconduct. This is because any type of fraudulent action by an employee goes to the root of the employment relationship which is based on the implied duty of mutual trust and confidence.


Where financial irregularity has occurred the first step is to suspend, on full pay, the individual or individuals suspected as soon as the issue has come to light. Normally the individual will be given an explanation of the allegations at the time of the suspension, which will be followed up in writing soon after, with full details.


It is extremely important that a thorough and impartial investigation then takes place without undue delay. This may take the form of examining any relevant paperwork and accounts and interviewing witnesses and the employee/s against whom the allegation have been made.

In the interests of fairness to all concerned, it is important that confidentiality is strictly maintained and that the investigation is not drawn out unnecessarily. The investigator should be an individual who will not be involved in making the final decision on whether action should be taken against the individual.

It should always be borne in mind that however damning the evidence against the employee/s may look at the outset of the investigation, judgements must not be made until after a thorough investigation has been carried out. For this reason, nothing should be done which makes it difficult or impossible for the individual/s to return to work if the allegation proves to be unfounded. This makes the issue of what to tell work colleagues a difficult one. If possible the true reason for the absence should not be given at this time. Where news of the suspension has got out, the wisest course is to emphasise to colleagues that the suspension is to allow the investigation into the allegations to take place, and that no judgements should be made against colleagues who may be found innocent of any wrongdoing.

The Report

When the investigation is concluded a written report will generally be prepared. This will summarise the evidence, distinguish between fact and opinion and draw general conclusions. The purpose of the report is not to judge the guilt or innocence of the employee, but to present sufficient evidence for a judgements to be made. The purpose of the hearing is not to establish guilt or innocence as in a court of law, but to attempt to establish the likelihood or probability of whether wrongdoing took place.

The Disciplinary Hearing

Notice of the hearing should be given to the suspended employee soon after the conclusion of the investigation. This should remind him/her of their right to representation, give full details of the case to be answered and the time and place of the meeting. The meeting should be timed to take place without undue delay but allowing sufficient time for the individual and their representative to prepare adequately for the hearing.

The hearing should begin with an explanation of the allegations and the evidence. The employee, assisted by their representative, should then be given the opportunity to state their case, answering in full the allegations made and questioning any witnesses who have given evidence. Full notes of the meeting will be made. The hearing would then normally be adjourned to allow the panel making the decision, time to consider what has been said and any evidence presented.

If possible, the decision should be reached on the same day and the hearing reconvened to explain the decision to the individual and his/her representative. Where a decision cannot be reached on the same day, for example because complex financial evidence needs to be analysed, the hearing should be reconvened and the individual told that more time is required.

Written communication of the decision should give a full explanation of the reasons for the decision and the significant pieces of evidence which led to it. If the decision is that the allegations are founded and that the individual should be dismissed, the dismissal takes effect from the time that the decision is received by the employee. As the dismissal is on the grounds of gross misconduct no notice or pay in lieu of notice is given.

The Industrial Society is an independent, not for profit, campaigning body with 80 years experience in management and training. Everything we do, from training to consultancy, publishing and advocacy, is driven by a commitment to improve working life. To this end The Industrial Society seeks out and promotes best practice.For further information about best practice on personnel issues, Please contact Julie Amber, Product Group Manager, Human Resource Management and Development on 0171 479 1000.

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