Payday

What it means

The payday is the day on which an employer pays wages for the previous period. The Labour Code provides that wages are paid in arrears for a monthly period, no later than the end of the following calendar month, unless employer and employee agree otherwise.

The specific day is agreed in the employment contract or a collective agreement, or set in an internal policy. If it falls on a Saturday, Sunday or public holiday, wages are usually paid on the preceding working day so that the employee receives them on time.

Other employer obligations are tied to the payday. The due date of contributions and of the monthly statements for the insurers, and the payment of tax withheld, all depend on it. The payday therefore shapes the whole monthly payroll calendar.

How it works in practice

With clients we set a realistic payday: after timesheets are closed, payroll is calculated and checked, we need a few working days. Too early a date leads to errors; too late a date disadvantages employees and may breach the law.

Before each payday we prepare a payment summary: net wages, deductions, contributions and tax withheld, so that the client has enough money in the account. In cash flow planning, payday is the largest regular outflow for many companies.

Together with their pay, employees receive their payslips. When employment ends, wages and compensation are paid on the next payday unless employer and employee agree on earlier payment.

What to watch out for

Paying wages late breaches the Labour Code. The employee is entitled to late-payment interest and, if the delay is longer, may terminate employment immediately with a right to pay in lieu of notice. The labour inspectorate fines employers for late payment.

Changing the payday, for example moving it later, requires an agreement or an amendment to the internal policy in line with the law. Moving it unilaterally because of cash problems is not allowed, and employees can object.