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Know when you can dock exempt employees’ pay

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in Office Management,Payroll Management

Under the Fair Labor Standards Act, exempt employees must be paid the same salary regardless of the quality or quantity of their work.

In other words, employers can’t make deductions from exempts’ pay for poor work.

The Department of Labor’s FLSA regulations do allow some salary deductions for exempt employees, but only in specific circumstances:

  • To penalize employee infractions of disciplinary rules
  • For absenteeism, if the employee is off for a full day to tend to personal business (but not for sickness or disability)
  • For absences of one or more full days due to sickness or disability, as long as the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness (in other words, sick pay)
  • For unpaid leave taken under the FMLA (full- or partial-day deductions)
  • To offset military or jury duty pay.

There is no need to pay a full salary in the initial or final week of work if the employee only works a partial week.

Let exempt employees know that they should notify a supervisor or HR if they believe an improper deduction has been made. Sample language:

It is our policy to comply with the salary basis requirements of the FLSA. Therefore, we prohibit managers from making any improper deductions from the salaries of exempt employees. We want employees to be aware of this policy and that the company does not allow deductions that violate the FLSA.

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