Time-based pay

What it means

Time-based pay is a form of remuneration in which wages depend on time worked rather than output. It is agreed either as an hourly rate or as a monthly salary for full working hours.

It is the most common form of pay, especially in administrative, professional and managerial roles where output is hard to count in units. It usually forms the basic pay, to which bonuses, supplements and personal performance pay are added.

The amount may not fall below the minimum wage entitlement for the job's level of difficulty. The opposite is piece-rate pay based on the amount of work done.

How it works in practice

With a monthly salary the employee receives the same amount regardless of the number of working days in the month. With an hourly rate, pay varies with the hours worked, which is typical for casual and part-time work.

Accurate working time records are essential with time-based pay. They are the basis for overtime, night and weekend work, which carry wage premiums and supplements.

If the employee does not work part of the month, for example on unpaid leave or sick leave, the monthly salary is reduced pro rata. The method should be set out clearly in the internal pay policy.

What to watch out for

When the minimum wage changes, check that time-based wages still meet the minimum wage entitlements. Any shortfall must be paid, and labour inspectors spot it easily.

A monthly salary sometimes leads to the belief that overtime is „included“. That is possible only for managers and certain roles if expressly agreed; otherwise overtime must be paid or compensated with time off.