Managing people

It’s pay day – what could possibly go wrong?

When it comes to pay day, keep in mind there are rules about payment times and how wages are paid.

30 June 2021

The Fair Work Act, modern awards, enterprise agreements and contracts of employment set the pay day rules.

What does the Fair Work Act say?

Section 323 of the Fair Work Act says wages should be paid at least monthly. However, many modern awards specify weekly or fortnightly payments. Section 323 (1)(b) of the Act requires employers to pay employees in money and not ‘in kind’.

What are the issues?

Common issues your pay office may encounter include: 

1. Pay day — which day? 

2. Day off coinciding with pay day 

3. Method of payment 

4. Docking wages 

5. Junior employee 

6. Payment of overtime 

7. Payment of wages on termination 

8. Payment when taking annual leave or long service leave 

9. Waiting time 

1. Pay day — which day?

The day wages are to be paid is found in the applicable industrial instrument or, in its absence, the employee's contract of employment. Many industrial instruments are now flexible with respect to the designated pay day and the frequency of payment of wages.

If an employee is paid wages by cash or cheque, payment should be during ordinary working hours.

2. Day off coinciding with pay day

An industrial instrument usually stipulates that where someone is paid by cash or cheque, and an employee’s day off coincides with pay day, usually the employee must be paid no later than the working day immediately following pay day. 

This is normally referring to an employee's rostered day off (RDO) or a non-working day in an employee's shift roster.

3. Method of payment

Section 323(2) of the Fair Work Act provides that wages and salaries can be paid by:

  • cash
  • cheque, money order, postal order or similar order, payable to the employee
  • the use of an electronic funds transfer system to credit an account held by the employee 
  • a method authorised under a modern award or an enterprise agreement.

The Act states (sec 323(3)) that if a modern award or an enterprise agreement specifies a method of payment, then the employer must pay the money by that method.

4. Docking wages

Recovery of overpayments

Most industrial instruments have a 'payment of wages' clause which details the method of payment or the way a deduction can be made from an employee's wage.

While industrial awards may be silent on specific amounts that may be deducted – e.g. when an employee is late for work, or late returning from a break such as a meal break – many enterprise agreements are quite specific regarding the method of deducting wages when an employee is late for work. 

5. Junior employees

Many industrial instruments have junior wage rates, which are usually a percentage of adult rates. Where a junior's birthday occurs during pay week, the higher wage rate applies from the date of the employee's birthday, not from the first full pay period after the employee's birthday.

This is because a junior's weekly wage is payable 'at the rate of', which means the appropriate wage rate is applicable to when the work is performed. 

6. Payment of overtime

An industrial instrument usually states that any overtime be paid within a week from the pay day succeeding the day/s the overtime becomes due. This requirement may vary depending on the frequency of pay day, e.g. overtime to be paid within a fortnight from the pay day where the employee is paid fortnightly, etc.

7. Payment of wages on termination

Most awards say employees should be paid their final pay within seven days of the employment ending.

Similar provisions apply in the various state or territory leave legislation.

If an employee has been paid leave in advance, most modern awards allow an employer to deduct that amount from any termination payment.

8. Payment when taking annual leave or long service leave

Employees taking annual leave or long service leave should be paid before going on leave.

Where an employee is paid by EFT, the industrial instrument or leave legislation may allow the parties to agree to payment on the usual pay days during the period of leave.

If an employee receives a pay rise while on leave, the relevant industrial instrument or leave legislation will determine if an adjustment needs to be made to their leave pay.

9. Waiting time

Employees who are kept waiting for their wages (after their normal ordinary finishing time on pay day) may be entitled to overtime, according to a common provision in industrial instruments.

This might occur if an employee is paid by cash or by cheque. Where wages aren’t deposited into a bank account by pay day, or on the date of termination, industrial tribunals have determined there is no overtime payable to the employee. This is because the provision only applies to circumstances where an employee is kept physically waiting at the workplace.


My Business Workplace includes pre-approved contracts, policies, letters, checklists and so much more from award-winning law firm Australian Business Lawyers and Advisors (ABLA). From contracts of employment to letters of termination and everything in between, we've got you covered.

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