Guide to Docking employee pay

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.

I recommend: . 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.

I recommend: 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.

I recommend: : 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.

I recommend: 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.

I recommend: 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.