The type of scheme your employees are paid with can significantly affect their relationship with your business. A good scheme helps to keep employees happy, but a bad scheme could lead to strong de-motivation.
It is feasible to have different employees on different pay schemes, and depending on the type of people you employ, this may be the most appropriate option for many businesses.
If you move an employee from weekly to monthly pay, you need to help them cope with the 3-week gap without pay. This may involve you offering interest-free loans or similar, which are paid back over the following few months wages.
You should always thoroughly research a pay scheme before introducing it, as the costs of a bad scheme and/or changing back are often very high. Make sure that the levels you set find the right balance between keeping your employees happy, and keeping your cash-flow healthy!
Key Points
A salary scheme is simplest to administrate but should be used where hours are fixed, otherwise, employees that work extra hours may feel unappreciated.
An hourly rate scheme means you do not have to pay for hours that are not required, and ensures employees who work extra hours are rewarded. However, if hours change, employees may fear their job and financial security is at risk. A piece-rate scheme means that you pay only for work completed or sales made. This ensures your pay is very efficient, but employees may worry about losing pay in the event of lower demand or if other people slow down production. Piece rate schemes also cost more to administrate than salary or hourly rate schemes. A combined salary and piece-rate scheme solves the problem of lack of reward for extra work and minimises the worry that piece-rate workers have over lack of pay if production drops, but at the expense of extra administration costs. A combined hourly rate and piece-rate scheme ensure employees are rewarded for extra effort, both in hours and productivity. It also helps to minimise the worries of piece-rate workers that they may have very low wages in times of lower demand. It is an efficient way to pay employees but is the most costly in terms of administration costs. Weekly pay is more expensive to administrate but is popular with employees. Monthly pay is cheaper to administrate but is much less popular with employees. Always make sure that a payment scheme is relevant for your employees and business before going ahead with it.