I thought it was illegal to require an hourly paid employee to work off the clock. I would think the proper way of handling these situations would be to have quarterly performance reviews. The employees hourly pay rate could be adjusted higher or lower based on these reviews. If you have a employee that continues to be a poor performer than I would think this would be grounds for termination. If the employees want a raise then they need to complete the job properly including all paper work. Reward your best workers with higher pay punish the poor performers with hourly pay rate decreases or termination. I think positive incentives get better results than negative incentives. Start docking their pay and making them work off the clock and they just might not show up one day. Word may spread and others will not want to work for you. Your employees are the ones that your customers see. Do you want unhappy employees greeting your customers?
