Employee absences- what is your policy?

I own a small company of just 6 employees. I give generous benefits (in my opinion). One employee has 128 hours of paid time off. That equates to 3 weeks paid off, 6 paid holidays off and 8 additional hours off. The employee works at a high wage for our area and also can earn bonus (some have gotten $1k but not consistantly). This particular employee misses a lot of work- this year already 114 hours. This misssed time was supposed to go against her paid time off but did not, as someone else was allowing it to be unpaid off. I just found out about this... anyway, I don't want to fire the employee because they have a lot of experience, etc. So, how do I penalize this person or what should I do? It's an age old problem. It feels like I am in a rock and hard place...