Is it possible to fine employees?

Many employers have at least once faced a situation where an employee has been guilty and they want to punish them somehow. The first option that comes to mind is to fine them. But is it possible to do so? Let's find out.

Is it possible to punish employees by deducting a fine from their salary?

The Labor Code prohibits fining employees for violations of labor discipline or any other misconduct. However, the Code provides for two other options for punishment: reprimand or dismissal.

"Punishment with a hryvnia" is possible only if the employee caused damage to the company during work and fulfilled additional conditions:

• an employee violated his or her employment duties and caused damage as a result;
• caused direct actual damage;
• the damage was caused by guilty unlawful acts or omissions;
• the damage does not fall into the category of normal industrial risk;
• the employee was not in a state of emergency when the damage was caused.

If a person is subjected to a material penalty, a disciplinary sanction, i.e. a reprimand, must also be applied at the same time.

If you decide to punish an employee financially, despite the prohibition of the Labor Code, we hasten to warn you that the State Labor Service will consider such a punishment as payment of wages in part, and then you will have to pay the fine (UAH 14189), plus you will have to pay the employee.

If you can't fine, how else can you punish to be effective? Let's look at a few permissible options.

Disciplinary action

The Labor Code provides for two options for disciplinary action: reprimand or dismissal. Please note that only one of the two options can be used to punish a violation. That is, if you have reprimanded an employee, you cannot dismiss him or her for this violation.

We believe that you shouldn't fire employees left and right, but rather reprimand them first. Therefore, let's take a closer look at how a reprimand is issued:

1. We identify the fact of a disciplinary offense. It must be recorded in writing. You can draw up an act, a memo, a protocol, etc. The date of drawing up such a document will be considered the day the misconduct was discovered.
2. We demand a written explanation from the offender. If an employee refuses to write an explanation, this will not save him or her from a reprimand.
3. We decide to impose a disciplinary penalty. We have 1 month from the date of discovery of the misconduct, but no more than 6 months from the date of its commission.
4. We issue a reprimand and notify the employee. To do this, draw up an order to reprimand the employee and give it to the employee to sign within 3 days. But we do not record the reprimand in the employment record book.

Punishment in hryvnia

Although many people consider a reprimand to be a minor punishment, it has serious consequences that entail material losses for the employee. For a year after the reprimand is issued, unless it is lifted early, no incentives are applied to the employee. This means that neither bonuses nor other incentive payments are provided for such an employee while the disciplinary sanction is in effect.

What payments can be withheld from an employee while a reprimand is in effect:

• remuneration based on the results of the year's work;
• annual remuneration for long service (length of service);
• bonuses for performing important and especially important tasks;
• one-time incentives not related to specific performance results.

Please note! Bonuses for performing production tasks and functions should not be deprived of, as they are part of the additional salary.

Deprivation of bonuses

One of the most effective tools an employer can use to influence employees is to withhold bonuses. However, it is not possible to refuse to pay bonuses to everyone. All reasons must be spelled out in the Bonus Regulations.
There may be reasons why an employee may be deprived of a bonus:

• failure to fulfill the duties specified in the job description or employment contract;
• failure to comply with production and process instructions, labor protection and fire safety rules;
• violation of the deadlines for the performance of work stipulated by contractual obligations;
• violation of labor regulations or discipline;
• failure to comply with the instructions of the manager;
• failure to ensure the safety of the company's property;
• complaints from counterparties;
• other violations provided for by law.

Please note! Bonuses may be deprived only for the period in which the labor discipline violation occurred. The decision to deprive a bonus must be formalized in an Order and specify the specific reasons for deprivation.