A pay period is a set length of time for which an employee is paid. Employees on salaries are paid a fixed amount for each pay period, while hourly paid employees will receive earnings based on the number of hours they worked within that pay period.
Remember that a salary must not disadvantage an employee. If a salaried employee would earn more on hourly wages than the amount paid under their salary, you are required to “top up” the salary with the difference. Keep an eye on the entitlements of any salaried employees working overtime or public holidays, to ensure your business is not risking an underpayment.
How long is a pay period?
ARA members are reminded that the General Retail Industry Award 2010 provides that the pay period for retailers is either weekly or fortnightly. The Award also requires that you notify your employees in writing of which day of the week wages will be paid. You may wish to include this in the letter of offer you provide with the employment contract to a new employee, or put a notification on your staff noticeboard or intranet.
If you wish to change the pay day, you must give four weeks written notice of the change. We recommend that you only change the day if you have valid business reasons for doing so as it may have a significant impact on your employees.
Does this mean I can’t use monthly pay periods?
If, prior to 1 January 2010, you were paying certain classifications of employees on a monthly pay cycle, then you can continue to do so. However, this only applies to employees of level 4 or higher; employees who are classified as level 1, 2 or 3 must be paid either weekly or fortnightly.
It is possible to have different pay periods within the one business, although it may increase your administrative costs. For instance, you may choose to pay your permanent salaried managers on a monthly basis, while your casual store assistants have a fortnightly pay period.
What does the “first full pay period commencing on or after” mean?
You’ve probably seen this phrase a lot lately, particularly as it accompanies the wage guides for the 2016-2017 financial year. The ‘first full pay period commencing on or after 1 July 2016’ means that you do not necessarily pay your employees the increased minimum wage from 1 July, but from the first pay period which runs uninterrupted after that date.
ARA members are encouraged to contact the ARA Employment Relations team on 1300 368 041 for any questions relating to pay periods.