do you care about employees, or just want work from them?
employee satisfaction is what every firm must take care of.
i think you should arrange a meeting with them and ask what they expect from you? what kind of work environment they want? give them all and see the result.
some time it happens that we give deadline which are hard to meet,,,,take care of that thing also.
you are saying they never meet deadline, so there might be problem with deadline also.
another thing is that give them work according to there capability. analyze who are good in what and then assign work accordingly.

tell them that if they miss a deadline their pay will be docked each day

You can possibly replace them by freelance programmers .

Only one answer to that..

Employee Care

I think ithelp gave some good advice. Have you considered hiring software freelancers. Typically you can establish a contract which stipulates that the work must be completed (to your satisfaction) by a certain due date in order for the developer to get paid. This is a great way to motivate developers to reach your goals.

If you decide that freelancing might be right for you, you should check out websites that help you find freelancers (>snipped< is an example of such a site). All you do is post a description of your project and wait for developers to advertise and place cost estimations for you.

Hope this helped,

James

I think DangerDev gave the best advice on this issue. Remember that unhappy employees are unproductive employees.

use Scrum Project Management maybe it can deliver with your customer