Choosing the Right Pay Cycle for Your Business
Employees are the backbone of an organisation. Being an employer, it is your duty to ensure that all payments go off without a hitch, on-time and every time. This is a core commitment on your part with your employees in return for all the hard work they put in your business.
Being a business owner you have full control of the payroll process. You can make it as easy and effective as you can. Your payroll process should be such that you don’t get a headache every time you have to do a pay run and it shouldn’t take up all of your time when you should be working on your business.
Every business has the freedom to choose it’s own payroll schedule by figuring out which is the best for their outfit and employees.
The most common payroll schedules in Australia are weekly, fortnightly and monthly. Before selecting a pay schedule, you should consider the following questions:
- How many employees do you have?
- Does your award specify a pay period?
- Do you pay your employees hourly or salary?
- Do you pay your employees for overtime?
- How much does it cost you to process the payroll?
Each pay schedule has its own advantages and disadvantages. Below we take a closer look at each of these payroll schedules.
Employees who are paid weekly receive approximately 52 paychecks a year. Most companies choose Wednesday to pay for the previous week.
Pros: Being paid every week makes it easier for employees to budget their own personal expenses.Employees do not have to wait for a long time to be compensated for their overtime.
Cons: Weekly payments do not always coincide with calendar months, which can make budgeting a little more complicated. Such frequent payments can be time consuming and take people away from their regular work.
Having a monthly pay schedule can be convenient because it’s easier to budget and staff get paid on (nearly) the same date every month.
Pros: Running monthly reports and making monthly budgets make things easier. By sticking to one payroll per calendar month you employees will know when to expect their payment.
Cons: Getting paid once month can put a financial strain on some of your employees, especially the low-income tier. More frequent payments will help them manage their finances more easily and will better align with things like rent. Finally your selected monthly payment date may fall on weekends so then you have to work around those as well.
Fortnightly payments are a great compromise between weekly and monthly payments and is the most popular payment cycle in Australia.
Pros: Employees will get two (sometimes three) pays a month making it easier for them to budget. It’s also very common for big expenses like rent and car repayments to be fortnightly as well. This is good for businesses because you’ll be making smaller payments on a regular basis without it completely consuming your week.
Cons: You’ll find that in two months of the year there will actually be three pays instead of two. The two months affected change nearly every year so be mindful of that when preparing your budgets.
If you need help with your payroll or budgeting contact us today so one of our experienced staff can set you on the right path.