A pay cycle is the regular, recurring period over which employee work hours are recorded and payment is processed. In Australia, common pay cycles include weekly, fortnightly, and monthly intervals. The Fair Work Act 2009 requires that employees be paid at least monthly.

What is a pay cycle?

A pay cycle, also known as a pay period, is the scheduled timeframe that determines when employees work, when their hours and entitlements are calculated, and when they receive their wages or salary. It establishes the rhythm of payroll processing within an organisation and forms an essential component of employment agreements.

What are some common pay cycle types in Australia

In the Australian workplace, several standards are used:

Weekly

• Work hours calculated over a 7-day period
• 52 pay periods per year
• Commonly used for casual staff and industries with variable hours
• Provides employees with more frequent income
• Higher administrative workload for employers

Fortnightly

• Work hours calculated over a 14-day period
• 26 pay periods per year
• The most common in Australia
• Balances administrative efficiency with reasonable payment frequency
• Aligns well with common billing cycles for utilities and other expenses

Monthly

• Work hours calculated over a calendar month
• 12 pay periods per year
• Often used for salaried employees and executive positions
• Simplifies payroll administration
• May create cash flow challenges for some employees

Four-weekly

• Work hours calculated over a 28-day period
• 13 pay periods per year
• Less common but used in some industries
• Not aligned with calendar months

What are the legal requirements for pay cycles in Australia

The Fair Work Act 2009 stipulates that:

• Employees must be paid at least monthly
• Payment must be made on a regular, predictable schedule
• Employers must specify the pay cycle in employment contracts or agreements
• Any change to an established pay cycle typically requires consultation and agreement

Modern Awards and Enterprise Agreements may contain additional requirements regarding pay cycles for specific industries or occupations.

How to implement and manage pay cycles

Setting up a pay cycle

When establishing a pay cycle, employers should consider:

• Industry standards and norms
• Cash flow management for the business
• Administrative capacity and payroll systems
• Employee preferences and needs
• Alignment with accounting and reporting periods

Pay cycle calendar

Typically includes:

• Pay period start and end dates
• Timesheet submission deadlines
• Payroll processing dates
• Pay dates
• Public holidays that might affect processing

Pay cycle calculations

Different calculations may be required depending on the pay cycle:

• For hourly employees: Total hours × hourly rate + any allowances, penalties, or overtime
• For salaried employees: Annual salary ÷ number of pay periods per year

What are the payroll process within a pay cycle

Typically involves several key stages:

1. Time recording
   Collection of attendance data, hours worked, leave taken, and other time-based information
   
2. Data verification
   Checking time records, approving overtime, validating allowances
   
3. Payroll calculation
   Computing gross pay, tax withholdings, deductions, and net pay
   
4. Approval and processing
   Final review and authorisation of payroll before processing
   
5. Payment distribution
   Transfer of funds to employee bank accounts
   
6. Record-keeping
   Maintaining payroll records and generating pay slips
   

How to change pay cycles

Employers may change pay cycles by:

• Providing reasonable notice to employees (typically at least one full cycle)
• Consulting with employees about the impact of the change
• Ensuring the transition does not disadvantage employees financially
• Managing any one-time adjustments needed during the transition period
• Obtaining written agreement if required by contracts or awards

Frequently asked questions about pay cycle