Before docking an employee’s pay, make sure Payroll knows what’s fair and what’s not

Nobody really wants to dock an employee’s pay. But sometimes, it’s the only step you can take for the sake of your company’s bottom line – and in many cases, the person’s continued employment.

When it comes to docking an employee’s pay, the Fair Labor Standards Act (FLSA) says exempt employees’ pay cannot be affected by the number of hours worked or the quality of their work.

However: There are a few situations when it’s perfectly legal to dock exempt employees’ pay.

Payroll needs to know the basics

Make sure your Payroll staffers understand the rule by testing their knowledge. Have them decide whether the following statements are True or False. Then check their responses against the correct answers below (scroll down):

1. It’s permissible for an employer to deduct an exempt employee’s pay for a disciplinary suspension.

2. Employers can legally deduct an exempt employee’s pay when he or she is on a business trip.

3. Paying an exempt employee on Family and Medical Leave Act (FMLA) leave at an hourly rate is permissible.

THE ANSWERS

1. True. Under the FLSA, it’s legal to dole out unpaid disciplinary suspensions of one or more days to exempt employees who violate workplace rules. That’s if you have a written disciplinary policy in place that states as much and applies to all of your employees.

2. False. The FLSA prohibits companies from docking pay or running the clock on paid time off benefits when a worker’s absence is related to a business trip for the company. This common mistake can lead to employees losing their exempt status and becoming eligible for overtime pay.

3. True. You can convert a salaried employee to an hourly rate during the time he or she is on reduced-workweek FMLA leave without destroying the person’s exempt status.