Pay-day is one of the most eagerly awaited days of the month, but do you know how your pay gets calculated? Does the day or date of the month you get paid make a difference? Do you get paid more in a leap year? And why do some months feel so much longer than others?
Two payroll experts pull back the curtain on the mysteries of payroll.
If your job is salaried, getting paid a predictable sum every month is great. The downside is that some months you’ll have to work more days than others for the same money.
“If you’re paid monthly, you get one-twelfth of your annual salary each month, regardless of the number of workdays in the month,” Chartered Accountants Ireland tax lead Gearóid O’Sullivan says.
Take Niamh, she’s on an average salary of €49,700 a year. Her take-home pay is about €3,300 a month. This month [February], she will work 19 days for her money. In July however, she will work almost a week more for the same pay.
The vagaries of the calendar mean July has 23 working days this year. Niamh will work four more days than in February. She will be footing the extra commuting costs, lunch expenses for these extra days too.
Do people who get paid weekly or fortnightly fare better?
“I would say, if you have the option to get paid weekly or fortnightly, go for it,” says Dearan Boyle, who is payroll manager at HR and payroll services company, the ICE Group.
“The man on the street thinks there are four weeks in the month, but that would only make 48 weeks every year. There are actually 52.14 weeks in the year. That is eventually going to result in a ‘week 53’ for payroll purposes.
“The thing about monthly pay is there are only ever 12 months in the year. But weekly-paid people are going to have a ‘week 53’, or 53 pay periods instead of 52, so you gain an extra week’s pay there.”
“Week 53″ occurs when there is an extra pay-day in the year. This happens when a pay-day falls on December 31st, or on December 30th or 31st in a leap year. Additional pay-days can apply to employees who are paid on a weekly, fortnightly or four-weekly basis. It does not affect monthly-paid employees, he says.
It’s not an exact science, he says, as it depends on when your pay-day is, but many people who are paid weekly will get an extra week’s pay while those paid monthly will not.
Leap years
Every four years, there’s an extra day in February. Will you get paid for it? If employees are paid an annual salary and receive the same basic pay every month, they will have no entitlement to an extra day’s pay, despite possibly having to work an extra day.
A salaried employee receives a set salary for the year. So long as the annual salary complies with the law on paying national minimum wage, there will be no obligation to pay the employee for hours worked on the extra day.
Some employers may pay you the additional day at their own discretion, Boyle says. “Here at ICE, we get an additional day’s pay. That said, if you are salaried and paid monthly, there is no automatic statutory entitlement to an additional day’s pay.”
If you’re paid an hourly rate based on hours worked or the amount of work you do, your employer will be obliged to pay you for all the time worked.
The date you get paid is decided by your employer. You could request to get paid at a different interval, but this would be at your employer’s discretion.
Parts of the public service, one of the biggest employers in the State, pay fortnightly. You could argue that paying monthly would save the State money, given that additional pay-days can apply to employees who are paid on a weekly or fortnightly basis.
Different employers use differing payroll systems, of course. Some calculate weekly or fortnightly pay by the exact weekly divisor of 52.14 or the fortnightly divisor of 26.07. This would mitigate the additional pay when this scenario arises.
It would be in an employer’s interest to pay staff monthly.
Long months
You know that feeling that it’s a long month when the wait for pay-day seems interminable? It’s real. Not all months are equal – and it’s not just to do with the number of working days in the month either.
What day of the week the month begins, bank holidays and the number of weekends between pay-days can all play havoc with your cash flow.
Many employers will pay early in December for example. You’re glad of the pre-Christmas cash. And payroll departments and banks can get the work out of the way. The downside is there will be a far longer wait for your next pay cheque.
“They pay you earlier in December, but they are not going to pay you early in January,” Boyle says. “You are waiting seven weeks for pay after Christmas. It’s a killer and it happens every single year, so you have to plan for it.”
Easter can skew things too. Easter Monday is a public holiday, so your pay-day can be thrown by this too. You may get paid earlier than you would like.
“You are never going to pay someone late, but you might have to pay them earlier than usual,” Boyle says.
For example, a person who usually gets paid on the 20th of the month will get paid on Thursday, April 17th, this year. Easter Sunday is on April 20th. There will be five weekends before their next pay-day in May.
It’s not just Christmas and Easter that can throw things off.
“July can be a notoriously long month if you are paid monthly, especially for those who are paid the last working day of the month,” Boyle says.
Getting paid on Monday, June 30th, means they will not get paid again until the Thursday of the fourth week of July, which is 31 days away.
“You will have 23 working days in July, and nearly five weeks before you get paid,” he says.
Their next pay-day is Friday, August 29th. With a public holiday, that month will have just 20 working days.
If your pay-day is the last day of the month, in the months that this falls on a Monday, there can be an extra weekend to get through before you get paid, he says.
“Always look at the first of the month too. If it falls on a Friday, it’s going to be a long month,” Boyle says.
Those whose pay schedule is the 28th of the month will get paid Friday, June 27th this year and again on Monday, July 28th. Their pay cheque must stretch to cover one weekend in June and then another four in July.
“It’s still a long month because there is an extra weekend in there for you,” he says.
“July is always a busy month for holidays. If you go away in the middle of the month and come back, you will still be waiting to be paid.”
Budgeting
“What date do I get paid?” is not a question many of us think to ask in a job interview, yet it can make a big difference to your cash flow and ability to budget.
“If you are taking up a new job, always ask what the pay date is,” Boyle says.
“If you get paid on the 20th of the month, or before, and you get paid every month, you may be able to budget better. But if it’s always on the last working day of the month, you could get paid on a different day every single month,” he says.
Never time your direct debits to come out the very next day. “If you get paid on the last working day, always have them come out the second of the month, or two or three days after,” he says.
Tax credits
Some people earning the same money can have very different pay cheques.
“The biggest query you will get is two people doing the same job with the same hours and pay and one wondering, ‘How come he took home more than I did?’,” Boyle says.
It can be because of differing pension contributions or because one is smarter at claiming what is owed to them.
The Revenue Commissioners estimate PAYE workers left close to €400 million in tax rebates unclaimed in 2023.
It is urging workers to claim back tax reliefs owed to them on items such as rent, mortgage interest, prescriptions and health expenses and to claim working-from-home relief.
You may be able to claim remote working relief for heating, electricity and broadband. “In some cases, an employer can contribute to these costs with a working-from-home allowance, paid tax-free up to €3.20 a day,” O’Sullivan says.
Using Revenue’s real-time tax credit service in MyAccount, PAYE workers can claim expenses in real time and get a bump in their next pay cheque. Alternatively you can claim at the end of the year, claiming for up to the previous four tax years too.
If you get married and want to be jointly assessed or if your child has been diagnosed with a disability, for example, it’s not payroll you need to tell, it’s Revenue. You can update your profile online yourself to claim the relevant tax credits.
“There is no point telling your employer, because if Revenue doesn’t know, payroll won’t know. Your employer can’t do anything for you; the direction has to come from Revenue,” Boyle says.
