As a business owner, one of your most fundamental duties is ensuring you pay employee wages. Failure to pay wages on time and correctly will likely result in losing trust with your employees. Further, if you fail to meet your legal and contractual obligations around payment and record-keeping, you risk employment claims and harsh penalties against your business.
This article will outline your obligations regarding payment of wages under Australian employment law and set out some helpful tips to minimise risk to your business.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Frequency and Method of Payment
Australian employment laws, such as the Fair Work Act, clearly outline how and when employers should pay wages. Similarly, employees covered by an industrial instrument, like a modern award or enterprise agreement, may have further or more unique legal entitlements. Whilst this legal framework imposes strict obligations on your business, it significantly reduces the complexity and room for error in managing your workforce.
At a minimum, you must pay your employees monthly for their work performance. However, you must remain up to date with your employee’s unique coverage at law, as some modern awards and enterprise agreements require employers to pay more frequently. For example, this might be weekly or fortnightly.
Additionally, you must pay employee wages in full, including all amounts payable for the relevant period, such as:
- incentives;
- bonuses;
- penalty rates;
- overtime; and
- leave payments.
Many businesses pay wages via electronic funds transfer. However, some other acceptable methods include:
- cash;
- cheque;
- money order; and
- postal order.
Furthermore, it is best practice to notify your employees of the method and frequency of payment at the commencement of their employment.
Additionally, you must communicate any changes to payment structures. Some may even require a variation of the contract. An employment lawyer can assist you in drafting and amending your employment documents and can provide advice on how to minimise risk to your business best.
Keeping Records of Pay
Depending on the size and nature of your business, you may have to manage several employees with different:
- work schedules;
- hours; and
- rates of pay.
Considering this and your general obligations under employment law, it is necessary and beneficial to maintain accurate and clear payment records.
Furthermore, the Fair Work Act and the Fair Work Regulations require employers to maintain pay records for each employee that is eligible. These records must be in English and made easily accessible to an inspector. Some examples of these types of records include:
- the employee’s rate of pay;
- the gross and net amounts paid to the employee;
- any deductions made from the employee’s gross pay;
- details of any monetary allowances paid to the employee (including incentives, bonuses, loading, or penalty rate); and
- hours of work if the employee is a casual or irregular part-time employee.
How Can I Minimise Risk when Paying my Employees’ Wages?
The Fair Work Ombudsman (FWO) closely monitors and enforces compliance through Fair Work Inspectors. To avoid a contravention of the law, you should:
- stay up-to-date with relevant law and industrial instruments that apply to your employees;
- carefully draft and issue employment contracts that set out the method and frequency of pay;
- implement and maintain a payment and employee record-filing system, utilising technology as necessary;
- develop a template pay record and payslip to be used across your business; and
- seek legal advice to ensure compliance.
Key Takeaways
Paying your employees is not always a simple exercise. You must understand and meet your obligations to avoid:
- prosecution;
- high employee turnover; or
- reputational damage to your business.
If you need assistance understanding when and how to pay your employees, our experienced employment lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
At a minimum, you must pay your staff monthly. However, some modern awards or industrial agreements may require payment weekly or fortnightly. If you fail to pay your staff regularly, you may be breaching the law and at risk of an employment claim or financial penalties.
Yes. The misconception is that paying your staff in cash is illegal, but this is not the case. The Fair Work Act states that cash is an acceptable payment method. However, to best ensure compliance with record-keeping obligations and avoid the risk of underpayment, we recommend implementing an electronic system or utilising cheques.
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