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Weekly pays

Rob_9593369

I only have one employee on an hourly rate that I currently pay weekly.

He often works different hours each week.

I've discussed it with him and he's happy to be paid monthly.

Will the tax be right if I just enter his total hours once a month on the last day of the month? Or do I still need to enter his hours every week and pay him after 4 weeks?

What about the super - is it ok to only pay that once a month too?

Thanks, Rob.

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Acctd4

Hi @Rob_9593369 Paying monthly is absolutely fine 😁

Super is payable in line with pay day so paying that monthly also, would be correct.

The tax will re-calculate accordingly BUT only if you make sure the pay period itself is correct!

eg paying $ 1000 gross for a weekly pay will calculate more tax than $ 1000 for a monthly pay!

Ensure you change the employee’s pay frequency to Monthly in their record & when you process the first monthly one, check the dates are still consecutive (eg if the last weekly pay was to 31/07 paid on 04/08, the next monthly pay period should be from 01/08 - 31/08 & paid after that 31/08 end date!)

Rob_9593369

Thanks Shaz - I'm overthinking this.

He's currently paid to, and including, Sunday 2nd August.

1st question - should "pay period ends" for that pay run be Sun 2nd, or Mon 3rd Aug?

2nd question - If I go monthly, I'll enter his hours from, and including, Monday 3rd August, to, and including Monday 31st August, and enter the "pay period ends" as Monday 31st August yeah?

That's a total of 29 days (4 weeks and one day).

The following month will be from Tues 1st Sep to Wed 30th Sep, a total of 30 days (4 weeks and two days).

Feb 2027 will only be 28 days (4 weeks neat).

Will Reckon still calculate the tax correctly, remembering he may work 100 hours one week and zero the next?

Aren't the tax tables based on Weekly income? Does Reckon calculate the partial weeks somehow?

It must average his monthly income? Lets say he gross's $3,200 the first week, and does nothing for the next 3 weeks. If I'm paying weekly I have to deduct & remit $885. If I'm paying monthly it works it out as 4 weeks grossing $800/week, resulting in a deduction of only $332!

Told ya I was overthinking it - please explain as Pauline would say 😅

Kris_Williams

Tax tables are based on whatever you choose, monthly or weekly. They are correct either way, as long as you select it correctly

Kris_Williams

Tax tables are based on whatever you choose, monthly or weekly. They are correct either way, as long as you select it

Rob_9593369

Ah righto Kris - I didn't know they did a monthly table too.

Just downloaded one, and it shows my point exactly.

Again, say my man gross's $3200 for the month, but it's all in one week.

If I pay weekly, I deduct $885.

If I pay monthly, I only deduct $312.

What thu? They can't both be correct!

Acctd4

@Rob_9593369

This is because the tax table calcs are pro rata'd.

At the end of the year, tax liability is based on total assessable income over the entire FY, regardless of whether someone earns it in all in 1 month or over 12.

Although, you would be deducting more tax on a weekly basis, his final, annual tax liability result will be the same. He'll just get any excess back as a refund. It's the same as those who work/earn more in some weeks than others - so sometimes get taxed, sometimes not - & are under the current TFT of $ 18,200 in total, for the whole FY. This amount equates to approx $ 350 p/wk ($ 18,200 / 52 wks) before tax is payable. HOWEVER, this is based on it remaining consistently at that amount each week. If that same employee works 38 hours & earns $ 1,500 for that WEEKLY pay, the system annualises it, then divides by the applicable pay frequency - eg weekly in this case, so 52 - to calculate the tax. If that employee is paid MONTHLY & only works that 1 week, $ 1,500 p/mth x 12 mths = $ 18,000 … so no tax would be calculated 😁

This is why those who have worked for only part of a FY get more tax back 😊

Rob_9593369

Hi Shaz,

That all makes sense.

So it would also make sense for an employee that works varying hours per week to be paid fortnightly, or even better monthly, because it smooths his income out, and he gets to hold the extra tax during the year, rather than the ATO holding it and refunding him at the EOFY?

I'm sure the ATO don't pay him interest on HIS money that they've held all year when they refund him!

So where does this end? Could I pay him quarterly perhaps? I guess I would owe him interest on his money that I've held then. But better me than the ATO I reckon!

Do major employers add an interest factor to their hourly rate if they choose to pay fortnightly or monthly, as opposed to weekly I wonder?

Just some academic musing.

Cheers, Rob

Acctd4

You've certainly have been giving this some thought, haven't you @Rob_9593369 ?! 😂

" … So it would also make sense for an employee that works varying hours per week to be paid fortnightly, or even better monthly, because it smooths his income out, and he gets to hold the extra tax during the year, rather than the ATO holding it and refunding him at the EOFY ..?"

Not necessarily 😬 … If an employee's hours vary or they have any other income sources, they could end-up with a tax shortfall as annual tax liability isn't calculated separately, but on all assessable income added together 😬

" … I'm sure the ATO don't pay him interest on HIS money that they've held all year when they refund him ..!"

Actually in some circumstances, they do ! Although not generally the case in a standard tax-return-refund situation, the ATO will pay interest if it's delayed over 30 days or on refunds from amendments, as well as on voluntary or early payments 😁

" … So where does this end? Could I pay him quarterly perhaps ..?"

Unfortunately not 😬 Modern Awards & the Fair Work Act mandate how often employees must be paid (usually weekly, fortnightly or monthly) & Australian law states an employee must be paid at least monthly.

" … Do major employers add an interest factor to their hourly rate if they choose to pay fortnightly or monthly, as opposed to weekly I wonder ..?"

Definitely not 😂 As long as wages are paid within the timeframes stipulated by the relevant Modern Award, no interest is legally owed to employees.

On that logic, employees could expect to be paid each time they work eg daily ! (Imagine what a nightmare that would be to accomodate the correct amount of tax & entitlements !!! )

Robyn Kelly (Partner)

Hi @Rob_9593369

Just piping up in this conversation. Another point to note is to check the award you pay your employee under to make sure monthly pays are an allowable option. The section in the award to look at is the "Payment of Wages" usually around clause 16.

Good luck

Robyn Kelly