The employment legislation in New Zealand does not set out when and how often employees are paid – that is a decision for the employer, considering their workplace and the best options.
Whatever is decided should be included in all employment agreements and agreed with employees – as part of the ‘good faith’ principles.
The normal and obvious choices are weekly, fortnightly and monthly but you could choose daily, three weekly or four weekly or any other arrangement. Common practice runs from first choice; weekly (most popular with employees) second choice; fortnightly then monthly.
It may not be a simple preference however, as the employer needs to consider how the various options with affect a business’s cash flow, its accounting processes and administration costs. ‘Good faith’ principles also mean that employee preference should be considered as well.
- The option most preferred by employees – for running a household and paying bills, weekly pay is preferable.
- Weekly pay works well with hourly wages and rostered variable hours (e.g. the hospitality industry), as the irregular working hours and/or overtime are more easily accounted for with a weekly payroll.
- It also enables the employer to account for labour costs and benefits and to address queries from staff about pay.
There are, however, some other points for an employer to consider –
- payroll runs cost time and money to administer – the more you have the more they cost
- this can be addressed by payroll software however or
- better still, by a payroll intermediary who will charge on a per employee/per month basis with no charge for each pay run
- normally four weekly pays per month can sometimes be five due to the calendar, this can add some issues to your cost estimates.
- Did you know that every year is 52 weeks and 1 day long? This mean that weekly paid employees on a salary will get an extra pay somewhere within seven years – not a huge problem but needs to be adjusted for.
- Same day, every second week means 26 pays in a year.
- Pay processing is half the work of the weekly option and overtime is simplified as the core number of hours does not change.
Other points to consider;
· fortnightly pays do not coincide with calendar months neatly and monthly budgets can be affected. Annual budgets may not be straightforward as twice a year the month will have three pays instead of two and sometimes there may be 27 pays in a year.
- Paying staff monthly is cost effective as pay runs are only 12 times a year and
- they can be set at a time of the month when revenue is available, and
- this makes for clear accounting.
- Monthly pay works best for salaried workers.
- this is not a popular option for employees.
- An employee will either have a good amount of money or be stretching their salary depending on that monthly pay date.
- Monthly pay runs can be a problem for extra hours worked because months vary in days
- keeping accurate records for anything over the contracted hours makes pay calculation month by month more complex.
NEED HELP ON PAYROLL?
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You can also go to FlexiPayroll Website for more info.