Time Limits for Paying Employees

A frequent area of confusion for employers is the rules around the requirements for when employees have to be paid their wages or other entitlements (such as final pay/termination pay, etc.).

Payment of wages​

The starting point is section 323 of the Fair Work Act 2009 (Cth) which requires that employees must be paid “in full” in relation to the performance of work “at least monthly”.

This generally allows employers to choose whether to pay employees weekly, fortnightly or monthly. It is a good idea to state in an employee’s contract of employment that the employer has the right to change the frequency of payments, in case the employer wishes to do this in the future.

For employees covered by a modern award, the award will often have more restrictive requirements about when wages have to be paid.

For example, the Clerks – Private Sector Award 2010 provides at clause 23.1 that “Employees must be paid their wages weekly or fortnightly as determined by the employer or monthly if mutually agreed. Where payment is made monthly it must be on the basis of two weeks in advance and two weeks in arrears.”

For casual employees, the Clerks – Private Sector Award 2010 provides “casual employees must be paid at the termination of each engagement, or weekly or fortnightly in accordance with usual payment methods for full-time employees”.

How soon after a pay cycle do employees’ wages need to be processed & paid?

One question which sometimes arises is what the law says about how soon after a pay cycle employees’ wages need to be processed and paid.

There is nothing specific in legislation (or in modern awards) that deals with this question, rather, the legislation is just concerned with the frequency of the payment.

Logically this would mean that where (for example) an employee is paid weekly, there can be no longer than a week from the time they perform work until the time they receive payment. In other words, if they perform a shift from 1 pm to 5 pm on Monday, they would need to have received payment for that shift by no later than 5 pm on Monday on the following week. (An even more conservative approach would be to make sure they are paid by 1 pm on Monday the following week, otherwise technically if they are paid at 5 pm on the following week they will have had to wait longer than a week for payment for the early hours of the shift!).

Payslips

Section 536(1) of the Fair Work Act 2009 (Cth) requires employers to provide employees with a payslip “within one working day of paying an amount to the employee”.

Sometimes questions arise as to whether the time-limit runs from the time the employer sends funds to the employee’s bank, or from the time the payment actually “hits” an employee’s account.

The legislation does not deal with this issue specifically, but best practice would be that if the employer authorises a payment to an employee on a Monday, the employee should be provided with a payslip by the end of Tuesday, at the latest.

How soon after their employment ends do employees have to be paid their final pay/termination pay?

Most modern awards provide that employees have to be paid their final pay “no later than seven days after the day on which the employee’s employment terminates”. This includes wages and any other entitlements payable under the Fair Work Act 2009 (Cth) (such as redundancy pay, annual leave, etc).

For any awards that are silent on this question (or for award-free employees) the Fair Work Ombudsman’s current guidance is that “it’s best practice for an employee to be paid within 7 days of their employment ending”.

A number of court decisions have confirmed that where an employer wishes to terminate an employee’s employment immediately and pay an entitlement to notice “in lieu” of the employee working out the notice, then the termination of employment is not effective until the payment in lieu of notice has been made (see: Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20 at paragraph 214). It is therefore advisable that any payments in lieu of notice are made on the last day of an employee’s employment to avoid any arguments about when the employment actually ended.

The rules regarding payment of long service leave varies from state to state.

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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.