How do I change an employee's pay frequency?
Each payroll system in the market operates slightly differently, but it's possible to change an employee from weekly pay to monthly pay cycle. Not only are there technical considerations, but there are also HR implications that must be considered.
In this article, we’ll delve into things that an employer must consider and action for a smooth transition from changing from weekly to monthly pay.
First and foremost, the employer must consider the financial implications on what changing from weekly pay to monthly pay will have on the employee. A weekly paid employee has regular income and is likely to budget accordingly, without the longer gaps between pay cycles. Moving to monthly pay is very likely to be stressful for the employee, particularly the first pay cycle after changing over to monthly paid.
Communication is key
Notifying the employee well in advance of the intended change is crucial for a successful transition to monthly pay cycles. This will give the employee time to plan for the change, adjust their budget and make any necessary arrangements. They may also be able to build some savings to offset the longer pay interval, particularly the first one. Employers will need to send a change in pay frequency letter and may need to make changes to employees contracts, which may require a consultation period. It's important to engage with the HR department or an external HR expert to make sure the change to pay frequency is managed correctly and within HR and payroll legislation.
It’s also important for the employee to understand why the change is happening. Successful transitions from weekly to monthly pay benefit from transparency between the employer and employee. The employer should engage with the employee and be transparent with them about the reasons for the change and the impact it will have on them.
Choose a switching date
This is the date on which the employee will switch from weekly to monthly pay. It’s important to choose a switching point that’s aligned with the employee's pay cycle. If the employee is currently paid on Fridays, for example, the switching point should be the Friday that’s closest to the monthly pay cycle date.
Update the payroll system
Most payroll systems allow employers to change an employee's pay frequency. To do this, employers will need to update the employee's record in the payroll system and any corresponding or integrated systems. Working with their in-house payroll processor or outsourced payroll provider, this change should be made and verified before the payrun is due.
Process the first monthly payroll
Depending on whether the employee is paid monthly in arrears or for the full month before the end of the month, their payroll will need processing accordingly.
When changing an employee's pay frequency, it’s important to consider the following from a wellbeing perspective:
- The employee's financial situation. Most employees are likely to be completely reliant on their weekly payroll to cover their expenses. Switching to monthly pay may make it more difficult for these employees to budget and make ends meet. Employers could consider slowing the transition from weekly to monthly-paid by staging the transition and paying Fortnightly for a time, allowing the employee to adjust to the longer pay interval more gradually.
If the employee is concerned about the payroll schedule change, a responsible employer will be willing to work with them to find a solution that works for both parties.
- The employee's overall wellbeing. Changing an employee's pay frequency can be a stressful experience. Employers should be supportive of their employees during the transition and provide them with any employee support and assistance they need. Employers can make sure the employee has the resources they need to make the transition to monthly pay successful. This may include providing them with financial counselling or budgeting assistance.
What are the HR Implications of changing employee pay frequency?
All employees, other than casual workers, are legally required to be given a document by their employer on the day, or before, they start work. This is the written statement of employment particulars (also known as the ‘principal statement’) and states their main conditions of employment. It’s in this document that the employer sets out how much and how often the employee will be paid, amongst other specifics relating to the employment. Whilst this is not a contract of employment, it’s legally binding.
The employer is also legally required to provide a wider written statement to the employee within two months of the commencement of their employment.
When an employer decides to change an employee from weekly pay to monthly pay, it’s a variation of the employment contract and the employer can’t impose this change unilaterally. It must be done with buy-in and the consent of the employee. It’s highly recommended for employers to consult with an HR professional to ensure this variation of contract is implemented correctly.
Points to consider for employers considering changing pay intervals:
Wellbeing:
Employee financial wellbeing should be a primary consideration for employers considering switching to monthly pay intervals. The transition from a weekly to a monthly pay cycle can have profound impacts on the financial and emotional wellbeing of employees. Financially, this change can bring about significant challenges.
Employees who are accustomed to receiving weekly payroll may struggle with the adjustment to a longer gap between payments. Monthly pay cycles can make it more difficult to manage day-to-day expenses, leading to potential cash flow problems and an increased reliance on credit. This change might also affect their ability to budget effectively, as monthly payruns may require more intricate financial planning.
On an emotional level, the shift can induce financial stress and anxiety, especially for those who rely on their weekly pay runs to cover immediate needs. Changing to being monthly-paid can lead to feelings of uncertainty and insecurity, as employees may find it harder to cope with unexpected expenses or emergencies.
The change can also lead to potential impact on morale and job satisfaction, as employees may perceive a reduction in their overall financial stability, affecting their overall sense of wellbeing. To navigate such transitions, employers should consider providing financial education and support to help employees adapt to the new pay cycle and mitigate these potential effects on their lives.
Staged-transition to monthly payroll:
Employers can help mitigate some of the impact of changing from weekly to monthly-paid by implementing a gradual shift, initially moving to a fortnightly pay cycle before making the full transition to monthly payroll.
This can help with a smoother transition, reducing the financial challenges employees might otherwise face. It ensures that employees receive some income at more regular intervals, aiding in the management of immediate expenses and reducing the likelihood of financial strain. It also demonstrates employers' consideration for their employees' financial wellbeing and helps maintain a positive work environment during times of change.
Flexible payments and salary advances:
Flexible payments where employees can have expenses or bonuses paid at any time during the month or access to salary advances or on-demand pay, are options that employees could consider to ease the transition from weekly to monthly pay. It's payroll functionality that gives employees the flexibility to access their earned wages when they need them.
With salary advances and on-demand pay, employees can typically request a portion of their accrued wages at any point in their pay period. This can be paid into their bank account each Monday morning to help cover weekly expenses, such as fuel, travel or lunches. Theey can also access emergency payments, usually within a very short timeframe, often within a few hours or even minutes. The idea behind flexible payments is to offer workers more financial control over their income and emergency payments help them cover unexpacted bills or household emergencies when they haven't got any savings set aside to cover them.
Salary advances can be particularly helpful for employees who face unexpected expenses, emergencies or cashflow challenges between pay runs. Salary advances can be especially helpful to mitigate financial stress when an employee is transitioning from being weekly-paid to either fortnightly or monthly-paid. So that employers can keep aware of the situation, payroll reports can be run for the frequency of an employee accessing emergency payments and employers can offer them additional assistance where needed.
As with any payment or deduction from payroll, salary advances or flexible payments are clearly detailed on employee's online payslips or visible on PayCaptain's interactive payslips or Plain Numbers payslips that can be viewed through the mobile payroll app.
Payment splitting:
Functionality like payment splitting can also be helpful for employees switching from weekly pay to monthly pay. Payment splitting makes payments direct from net pay so important bills are never missed. Payments to landlords, credit cards, loans or friends and family can all be set up in PayCaptains HMRC-recognised payroll app.
If you’re thinking about moving your employees over from weekly to monthly pay frequency, talk to PayCaptain to see how we can help.
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