When changing an employee's pay from hourly to salaried or vice versa, there are a few steps that you should take to ensure a smooth transition. You need to know the pay rates you will be setting and when the changes should occur, depending on when you run payroll. You also need to ensure that the employee doesn't get double paid.
💡 If you are unsure of the correct Award coverage for your company or your employees, we encourage you to visit the Fair Work Commission Awards finder page or contact the Fair Work Ombudsman to discuss this further. Getting this right is crucial and sets the foundation for paying your employees correctly. You should also seek any independent legal advice as appropriate for your business.
Switching from hourly to a fixed salary amount
The first action is to add a Fixed salary amount for the employee.
Go to People > Employees > Select the required employee, press Edit > switch to the Employment tab > scroll down to the Fixed Salary section, and press Edit salary.
Set a fixed Salary amount.
Set a Salary period to indicate how the fixed salary is distributed. Payment of salary will still follow the Pay period. So you can have employees with a monthly salary period yet be paid weekly, biweekly, or four-weekly, depending on when you do your payroll.
Set a Valid from date to indicate when this change should come into effect.
Set the Expected working hours based on the selected Salary period.
Set Standard settings for payroll report (optional) if you work with payroll integration and manually sync data, you can specify salary codes here.
💡 See this guide for salary cost allocation if you want to compare different cost allocation methods for fixed-salaried employees.
Next, from the Employment tab > scroll to the Employee groups section > press edit on one of the groups.
c. . Repeat this step for all Employee groups that this employee is part of.
Switching from a fixed salary amount to hourly pay
The first action is to add a wage to each Employee group.
Go to People > Employees > Select the required employee and press Edit > Go to the Employment tab > scroll down to the Employee groups > Add or click edit on one of the groups.
Set a Default wage type as hourly or wage per shift and set a wage. Set a date when this change should come into effect in the "Valid from" field. This step will need to be repeated for all Employee groups that this employee belongs to.
Next, from the Employment tab, scroll down to the Salary section and press Edit salary. Set the fixed Salary amount to zero 0, select a Salary period and put a date when this change should occur in the Valid from field. Set the cost allocation to No allocation.
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