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Deducting Pay from Salaried Employees

Our company requires that some salaried employees “clock in and out”. We pay no overtime. Is it Ok to deduct from their pay if they work less than 40 hours?

The federal Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments.

Under the FLSA, employees are either non-exempt or exempt.

Non-exempt employees must be paid for all hours worked and are subject to overtime and minimum wage requirements prescribed by the FLSA. Conversely, exempt employees receive a fixed predetermined salary and are excluded from overtime pay provisions.

A salaried employee is often an exempt employee. However, it’s important to point out that salary and hourly paid are compensation terms. Though uncommon, it’s possible for a non-exempt employee to receive a salary.

Let’s assume you’re referring to an exempt employee as defined under the FLSA.
Exempt employees receive a fixed predetermined salary for any week during which work is performed regardless of the quantity or quality of such work. There is no requirement to compensate exempt employees for additional hours worked or overtime.

However, deductions from an exempt employee’s salary are permissible in only limited circumstances including:

• When an employee is absent from work for one or more full days for personal reasons other than sickness or disability;
• For absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness and the employee has exhausted such paid leave;
• To offset amounts employees receive as jury or witness fees, or for temporary military duty pay;
• For penalties imposed in good faith for infractions of safety rules of major significance;
• For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions;
• In the employee’s initial or terminal week of employment if the employee does not work the full week, or
• For unpaid leave taken by the employee under the federal Family and Medical Leave Act.

If the absence isn’t covered by any of the above situations then exempt employees must receive their full salary for the workweek.

It’s permissible to require exempt employees to clock in/out. It’s also permissible to require only select exempt employees to clock in/out. However, make certain there is a justifiable business reason for doing so. Otherwise, there is an increased risk for a discrimination claim.

For example, there is one employee whose performance is not up to standard or seems to be coming in late or leaving early too often. So, there is concern she is not working the required number of hours; thus, a more stringent time keeping system (i.e. clocking in/out) is required of this one employee to better track her time worked.


This entry was posted on Sunday, November 22nd, 2015 at 12:25 pm and is filed under
Attendance Management, Compensation, Labor Laws, Workplace Management.
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