Can change pay frequency if properly managed

Can an employer change an employee's pay period without the employee's consent? In a recent case, the Employment Tribunal held that an employer could.

The Radio Network employed some eight hundred employees throughout the country. Some staff were paid monthly, but the majority were paid fortnightly. The company operated four different payroll structures.

The company was in financial difficulty and saw an opportunity to reduce its costs by moving all staff to a monthly pay period. It estimated that it would save around $75,000 a year by doing this.

To ensure that staff were not financially disadvantaged, the company proposed that salaries be paid two weeks in arrears and two weeks in advance. It also offered to meet out of pocket expenses incurred by staff, such as bank fees for changing automatic payments and the like. The company was also open to discuss with individual staff any other hardship they might suffer.

All but six of the company's staff accepted the change. The six who did not ("the applicants"), applied to the Employment Tribunal for a compliance order ordering the company to reinstate their fortnightly pay periods. They argued that it was a term of their respective employment contracts that they would be paid fortnightly, and that this term could not be changed without their consent.

The Employment Tribunal disagreed. It held that the company was entitled to proceed with the change as part of its right to manage its business, provided that it consulted appropriately with its employees. In reaching its decision, the Tribunal noted that:

  • The pay period was not mentioned in any of the applicants' employment contracts.
  • The applicants' salaries were expressed in terms of an annual income, and not an hourly, weekly, fortnightly, or monthly rate.
  • Unlike the United Kingdom, there was no statute in New Zealand governing the frequency of pay periods or requiring employment contracts to specify their frequency.
  • Although the applicants had been paid fortnightly in the past, the law allowed for such practices to be changed on reasonable notice.
  • The company's proposal was reasonable in the circumstances.
  • Because the company paid its employees two weeks in arrears and two weeks in advance and offered to reimburse them for out of pocket expenses, the applicants had suffered no prejudiced as a result of the change.

The Tribunal refused to recognise fortnightly pay periods as an implied term of the employee's contracts because it did not meet the criteria for implied terms. In particular,

"there was no evidence to suggest that the contracts of employment of any of the applicants would be ineffective unless fortnightly pay periods were implied" the Tribunal said.

While this case indicates that an employer may change an employee's pay period without his or her consent, any change needs to be managed carefully. Employees must be given reasonable notice of the change, and must suffer no prejudice as a result of the change. In this case any prejudice to the employees was avoided by the company paying them two weeks in arrears and two weeks in advance, and offering to reimburse them for any out of pocket expenses such as bank charges.

Employers should note that they cannot change an employee's pay period if the frequency of the pay period is specified in the employee's employment contract.

See also Changing all employee frequencies in Ace Payroll.

More employment law

Employment Law
Ace Payroll does not give legal advice but these employment law articles may assist more..
Minimum Wage
To check the current minimum wage, visit the New Zealand government website more..
90 Day Trial Periods
New employees can be on a trial period of up to 90 days more..
Daylight Saving
Daylight saving dates and handling related employment issues more..
Redundancy must be genuine
An employee can only be made redundant if their position no longer exists more..
Dismissal procedural fairness
An explanation of the meaning and importance of procedural fairness when terminating employees more..
Employee or contractor
Use this checklist to clarify the difference between an employee and a contractor more..
Contractors minimum wage
Contractors are not entitled to the minimum wage more..
Employee interview honesty
An employee must be honest at a job interview or risk subsequent dismissal more..
Employee deductions
Cannot make deductions without employee consent more..
Retreiving overpaid wages
An employer can retrieve overpaid wages if done correctly more..
Employment relationships
Make it clear when and how an offer of employment will be made more..
Terminated before started
Resigned from old job, then told new job no longer available more..
Video surveillance
The use of video surveillance by employers is common and legal more..
Host responsibility
Think about the safety of employees affected by alcohol at work functions more..
Failure to meet targets
An employee can be justifiably dismissed for failing to meet targets more..
Change pay frequency
Pay frequency can be changed if properly managed more..
Abandonment of employment
Must inquire into circumstances of worker's absence more..
Changed working hours
Redundancy possible if employee does not agree more..
Drivers license
Truck driver loses license. Dismissal fair and reasonable more..
Internet usage
You would be wise to have a policy for personal internet usage more..
Absent employees
Some tips on dealing with absent employees more..
Payment for Jury Service
There is no obligation on an employer to pay for jury service more..
Recruitment health questions
Health questions employers are entitled to ask prospective employees more..
Holiday And Leave Contents
Holiday pay, public holidays, sick and bereavement leave information more..
Alphabetical Index
The Ace Payroll alphabetical index provides links to all documentation more..
Ace Payroll FAQ Contents
All the most common Ace Payroll questions grouped by categories in a short table of key words more..