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Pay Deductions and Employee Conduct: Our HR Experts Answer Your Questions

HR experts discuss employee conduct

Managing workplace staff presents a perpetual stream of new challenges for employers. Small- and medium-sized business leadership are aware of the risk of liability if incorrect action is taken, and consequences can be severe.

Tina Peckman, Senior Director, Human Resource Services and Christine Parker, Senior Human Resources Manager at ExtensisHR provide guidance on handling some of the trickiest situations experienced by employers.


Employee classification is an area where employers must be careful regarding compliance violations. One of the most common questions we receive relates to circumstances under which employers have the right to deduct pay from employees who are willing and able to work.

“When can deductions be applied to exempt employees’ salaries?”

The Federal Fair Labor Standards Act (FLSA) requires exempt employees to be paid a fixed weekly salary that cannot be reduced based on the quality or quantity of the employee’s work. 

FLSA permits certain deductions (usually those benefitting employees) such as insurance premiums and contributions to pension plans. However, employers are restricted from reducing pay in most other instances. This means employers are prohibited from deducting pay from exempt employees for no-shows, poor performance, and many other reasons. State wage deduction laws may further limit pay reductions, so employers should check those for additional compliance obligations or consult with the HR experts at their PEO company.

Employers should always communicate their policy on the types of deductions allowable and establish a complaint mechanism for employees who feel the deduction was improper.

Full or partial day deductions are allowed for exempt employees in the following circumstances:

  • If the employee works less than a full week during their first or last week of employment
  • When the employee takes a full personal day
  • When a full day leave is taken under the Family and Medical Leave Act (FMLA)
  • When partial day leave is taken under FMLA (employer may pay a proportionate amount of the full salary)
  • Full-day sickness or disability leave (when the employer has a bona fide leave plan in place and the employee is not yet eligible to participate)
  • Major safety violations (full- or partial-day)

Full or partial day deductions are prohibited in the following circumstances:

  • Partial personal day leave
  • Partial day sickness or disability leave (when the employer has a bona fide leave plan in place)
  • Partial day disciplinary suspension
  • Holiday (full- or partial-day)
  • Full- or partial day business closures due to weather, emergency, lack of work, etc.
  • Poor job performance
  • Jury duty, witness duty, or temporary military duty (unless the absence is for a full workweek)

We recommend checking with the HR experts at your PEO company before taking any action regarding employee pay deduction. Incorrect action can expose your organization to risk with serious consequences.


Handling a difficult employee can cause disruptions throughout any organization. However, correct management of these circumstances is crucial to protect the business from undue exposure.  

“How should we address issues regarding employee relations, conduct, and performance?”

This answer goes deeper than: “If X happens, do Y.” Strong employee relationships are built before the hire is made. Therefore, this question has a two-part answer: what happens before the hire and what happens after the hire.

Before the Hire

Solid employee management starts well before a hire takes place. By creating conditions to set employees up for success, employers are less likely to face disciplinary events down the line.

The first step is to establish clarity around the role, responsibilities, and its place within the organization. Write a clear job description outlining the role, responsibilities, attributes, and requirements needed to perform the position. This job description lays the groundwork for your recruiting requirements and interview questions and content. 

From there, ensure your training process is clear, concise, and accounts for all learning styles. Training processes should be written, shared with the new employee, trainer(s), and manager(s), so everyone has a clear understanding of the subject matter and timeframe for the training. Utilize multiple touchpoints along the way to ensure information is being retained and applied.

Tie your job description, role, and responsibilities to performance management assessments. Rating an employee on the responsibilities and expectations outlined during hiring and training sets a clear path for success. Many organizations find performing a 60- to 90-day initial review is a good opportunity to ensure everyone is aligned and meeting expectations.

After the Hire

If performance, conduct, or engagement become an issue, this could be time to consider applying progressive discipline or corrective action. A small lag in performance should be considered carefully before applying any discipline, as it may be related to training rather than effort.

To address employee conduct or ongoing performance issues, following a progressive discipline policy makes more sense. This could take the form of a Record of Conversation, written warning, Performance Improvement Plan (PiP), final written warning, or even termination in cases of gross misconduct.

Moving to termination should be approached systematically and methodically. Employees should be made aware of any lack of performance or conduct in writing early on with an opportunity to improve during a set period.

Terminating an employee without following the appropriate steps and process can create unnecessary risk and liability.

Consult with HR Experts

Managing employees requires close consideration and thoughtful action both before hiring and during day-to-day operations. For many employers, implementing a sound employee management strategy means revising aging company policies or establishing new policies altogether.

Careful policy application and sufficient documentation are key to ensuring your organization remains protected during difficult circumstances. Working closely with the HR experts at your PEO company or legal counsel will ensure you take appropriate action, even in unfamiliar situations.

When was the last time you updated your workplace conduct policies? Our HR experts will ensure they are comprehensive and compliant.

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