We have an employee who has been on unpaid sick leave for a long time. The employee is paid 2 weeks in advance and 2 weeks in arrears. The employee has a contract that just says that they will be paid their wages on the 15th of each month. In light of the fact that the employee may not work for the periods that we pay him in advance, can we change the way that he is paid so that he is wholly paid in arrears?
This is a complex query and definitive advice cannot be provided here. However, some relevant considerations are set out below.
The first consideration is whether an employer is bound contractually to pay wages in a certain way. An employer is able to bind themselves through contract in a number of ways, including through written or verbal terms or through conduct and practice.
The employment contract does not specifically state that the employee will be paid their wages in a specific manner.
However, we may have bound ourselves through custom and practise to pay the employee 2 weeks in advance and 2 weeks in arrears if we have done so for a significant period of time. The formation of implied terms can be a complex matter and further advice would depend on the precise circumstances in which the employee has been paid to date.
Moreover, other industrial instruments such as awards and enterprise agreements may also have provisions for the payment of wages. An employer would need to confirm which industrial instruments applied to an employee to determine whether they would also regulate the payment of wages outside of the employment contract.
Employers who have been struggling with overpayments in the circumstances described may conduct a risk assessment of the situation at hand. In doing so, they may balance the risks of a breach of an employment contract or an industrial instrument by electing to pay the employee’s wages differently.
For example, an employer may prefer to only pay an employee in advance in the circumstances described if the employee had communicated to the employer that they were going to return during the relevant period.
Such a failure to pay in advance may be a breach of the employer’s obligations.
However, negative consequences of such a breach may be reduced in some respects. This may include, for example, if the employer was prepared to complete an out-of-cycle pay run to promptly pay the employee in arrears for time worked during the period when they would normally have been paid in advance.
Given the involved nature of this topic, further information should be sought from our Workplace Advice Line on 1300 55 66 77.
