Docking employee pay

Use this disciplinary tool with caution

By Judy Rakowsky, Freelance writer/editor

Docking an employee’s pay may become necessary for disciplinary reasons, such as theft, chronic absenteeism, tardiness or other improper behavior. It also can be invoked when discipline is not involved, such as when an employee takes leave beyond allotted amounts. But beware, docking can cause an employer greater losses than the portions deducted for missed work time when: 1. The employee is exempt from overtime and took off part of one day. 2. The reduced pay total falls below minimum wage. 3. The exempt employee is being punished for the quality or quantity of work.

Avoid legal trouble

A number of federal laws can render the docking of pay illegal or turn it into an unwise choice for the employer. Essentially, employers cannot reduce pay to less than minimum wage no matter the reason.
Try: . Brush up on the requirements of the Fair Labor Standards Act, which entitle hourly employees to overtime. Employers cannot reduce pay for jury duty, military leave or time off allowed under the federal family leave law.

Reducing pay for exempt employees can be a minefield

Docking an exempt employee effectively turns a salaried employee into an hourly employee entitled to overtime pay, which can cost the employer much more in the long run.
Try: Consider the wide-ranging consequences of docking exempt employees. Given the restrictions, it is advisable to have an exempt employee make up absences of less than one day than to pursue reducing his pay.

Set a clear policy

Craft a policy for docking pay for tardiness, etc. and add it to the employee handbook.
Try: : Review sample policies used by other employers and adapt one to your workplace. There is software available to help develop the employee handbook.

Document everything

You never know when routine leave requests, tardiness or unexcused absences will become the underpinnings of a disciplinary process. So you must save every relevant e-mail and piece of paper.
Try: Keep all information and forms concerning requests and the outcome. Record the actions and the events leading to your decision in each case. Accounting software programs like Quickbooks can help track hours and other details, and make it easier to figure out what the employee’s paycheck should be.

Be careful about passing on losses

It might seem appropriate to pass on the cost of lost or damaged equipment to the employee at fault. But it may not make sense economically because of the limitation on paying workers at least minimum wage. Neither can an employer deny overtime pay to a worker who has been reckless.
Try: Create a policy on lost or damaged equipment that is consistent whether an hourly or exempt worker is involved. Economically, the employer is better off assuming the loss on behalf of the worker.

It is better to try to work out the problem and persuade an employee to change his behavior before resorting to discipline and reducing his pay.
An employer must make clear that a leave request was denied before starting any disciplinary action.
If you ask for a doctor’s statement from one employee to excuse an absence you must be consistent and not single out some employees for that documentation.
Keep all documentation in a separate location from the employee personnel files and back up any electronic records.