Changing the frequency of your payroll can save time and money on payroll processing costs, however, to navigate this transition successfully, there are many aspects to consider for your business, such as payment calculations, and how to communicate this to your employees.
If you are paying to an Award, or have employees whose salaries are underpinned by an Award we suggest starting with the Payment of Wages section within the Award.ย
Some examples of these are the following:
Hospitality Industry (General) Award 2020
23.1 The employer and an individual employee may agree to a weekly or fortnightly pay period. However, the employer may determine that the pay period of an employee to whom clause 24 โ Annualised salary arrangements or clause 25 โ Salaries absorption (Managerial Staff (Hotels) applies is monthly.
23.2 Except on termination of employment, wages may be paid on any day of the week other than a Friday, Saturday, or Sunday. However, if the employer and the majority of employees at a workplace agree, wages may be paid on the Friday of a week during which there is a public holiday.
ClerksโPrivate Sector Award 2020
17.2 Pay period
(a) The employer may determine the pay period of employees as being either weekly or fortnightly.
(b) The employer and an individual employee, or the majority of employees, may agree to monthly pay periods.
(c) If an agreement is made under clause 17.2 (b), payment must be made on the basis of 2 weeks in advance and 2 weeks in arrears.
For employees that are not covered by an award, there are less rigid guidelines set out under the Fair Work Act (2009) in Section 323:
(1)ย An employer must pay an employee amounts payable to the employee in relation to the performance of work:
(a)ย in full (except as provided by section 324); and
ย (b)ย in money by one, or a combination, of the methods referred to in subsection (2); and
(c)ย at least monthly.
To help guide your business navigate the change successfully, our Payroll experts have provided a comprehensive list to consider when changing your payroll frequency.ย
Additionally, itโs important to take into consideration the Human Resources component such as consultation with your employees, and it’s useful to engage your Human Resources team or a third-party provider such as our HR Advisory service when considering this change.
DEDUCTIONS
Child Support Deductions/Garnishees
Services Australia will need to be contacted to update the pay cycle frequency, where new letters will be issued. Deduction amounts and protected earnings amounts will need to be updated to match the new pay frequency.
Salary Sacrifice to Super
Check with relevant employees to see if their ongoing deduction needs to change (for example, contributing $20 on a weekly basis may change to $40 per fortnight).
If running an interim payroll to cater to the change in pay period you may wish to discuss how salary sacrifice will be treated in that pay run.
Ongoing Tax Adjustments
If your employees have requested an additional tax adjustment when payroll is calculated, contact them to see if these should also be changed. This does not include STSL calculations or withholding variations issued by the ATO.
Deductions to third-party providers
If changing pay frequencies, you will need to contact the provider to confirm the change in pay frequency. New amounts may be issued as a result of the change in frequency, along with reporting these amounts to the providers. This can include:
- Novated Leases
- Salary Packaging arrangements
- Workplace Giving
ALLOWANCES
Ongoing Allowances
If your payroll has fixed allowances paid each pay run to your employees, you will need to review how this is set up within your payroll system such as a car allowance.
Additional Considerations
Bank Account Splits
If you have employees that elect to split their pay into more than one bank account, discuss options with these employees, as they may wish to alter the amount going into additional bank accounts once the pay frequency changes.
Overtime
If there is an interim period when changing your pay cycle, you will need to consider how to treat any applicable overtime your employees are entitled to in order to ensure they are not at a disadvantage of this change.
Salaried employees
Check the setup of how your system will treat salaried/autopay employees. For example, a full time employee changing from 38 hours per week to 76 hours per fortnight
Termination Payments
Many awards contain a section on when an employer is required to pay their employee at the termination of their employment. This clause is called Payment on termination of employment. For example, the Fast Food Industry Award requires employees to receive their termination payment within 7 days after the day on which the employeeโs employment terminates (Clause 22.a). This includes payment of wages up to the final day worked, along with any additional entitlements, such as accrued leave.
If you are changing your payroll frequency to be something less frequent, such as changing from a fortnightly payroll to a monthly payroll, this section may now require you to process out-of-cycle payments to staff when they leave your organisation.
Internal Payroll Processes
When changing your pay frequency, will affect your payroll calendar. For example, deadlines for managers that approve timesheets, or changes submitted by your Human Resources department may be altered to meet the new timelines of processing payroll.
You may also need to consider how changing your pay frequency affects superannuation calculations for the current financial year. If this is the case, you may need to plan ahead for early processing of a pay run in June so that the new pay date falls in the current financial year, rather than the start of the new one.
When deciding on the frequency of pay periods, youโre ultimately trying to find a balance between a cost-effective solution for you and a schedule that keeps your organisation happy.
Weighing the pros and cons of different frequencies helps you find that balance, and finding the right payroll systems makes it easier to process payroll no matter how often you do it.ย
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Disclaimer
The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact Employment Innovations for advice.