Change of hourly rate in pay run

[melrWA]

Good morning,

I'm wondering if you could provide the best way to process my fortnightly payroll when I have a change in my staff's hourly rate due to our annual pay increase. The first pay will be for 1 day  being 30.11.20 and then the remainder of the 9 day fortnight will be at the new increased rate.  I understand I will need to process 2 pay runs?  Do I need to manually adjust the tax or will myob calculate?

Thanks

Mel

[Julie_A_C]

Hi @melrWA 

Usually employees are paid at the increased rate for the whole period on the next pay run. eg when pay rises usually happen 1/7 (except a covid year) the next pay run in july is done at the higher wage rate, even if some of those days fell in June.

If though you want to do it how you want then I would suggest you change the pay rate to the new rate, create a new payroll category called Hourly rate prior to 1/12/2020, enter the hours worked over the 9 days against the base hourly and enter the hours worked 30/11/2020 aganst the new payroll category.

[melrWA]

Thank you for your advice Julie, however my organisation's annual pay increase is applied from 1st Dec each year so as we are paid fortnightly this could fall anywhere during the payroll fortnight.  What they have always done in the past is create a pay run based on the old pay rate and then create a 2nd pay run for the new pay rates.

If I use your example and create a new payroll category this will take me forever as we have 45 plus employees who I would have to amend.

If I process my way how would I apply the tax withheld?  Will myob automatically adjust if I run two pays in the fortnight or will I have to manually amend the 2nd pay run?

cheers

Mel

[Steven_M]

Hi @melrWA 

@Julie_A_C  has provided you with the typical way we do recommend that users deal with the situation. Basically, leave the existing pay rate, create a new payroll category for the new rate amount, assign that new payroll category to the relevant employees* and process a pay assigning the desired amount of hours against the new payroll category. 

Your method of processing their pay for a shorter period would work, however, there is tax, leave and superannuation considerations that may need to be taken into account.  On the tax front, the calculation will use the pay frequency listed on the employee's card as the basis of which tax table to use. As such, if you are processing a pay for a different pay frequency it the dollar value of the PAYG may be incorrect thus requiring the user to update to the required amount.

*In terms of assigning a new payroll category to the relevant employees, within the payroll category there is the Employee button (top right), this would allow you to quickly indicate the employees that will receive that payroll category:

[Maria6062]

Hi, I think this would be the easy solution however, I note that the leave accrual will not take into account the one day.  We have someone who changed their hourly rate half way through the pay period i.e. old rate - 5 days and new rate - 5 days.  If I processed it as suggested their leave accrual will be as if they only worked for one week?

[Steven_M]

Hi @Maria6062 

It depends on the method you do use.

If you have used multiple pay items (an old one and a new one) you would be looking at setting the calculation basis of the entitlement to be Equals x percentage of Gross Hours. This will ensure that both the payroll categories are included in the calculation.

In theory, if you do use the one pay for one rate and another pay for another rate, it should calculate the required amount if you do use the Equals x percentage of Gross Hours. This is due to the fact that it will calculate based on the hours being processed for that pay. If the entitlement category was set to be Equals x amount per pay period, and you are processing two pays it will double the amounts as you have one for each pay.