Paying hourly and shift workers in Australia
Reviewed by Mellow Editorial Team, HR & payroll content team
Paying hourly and shift workers correctly in Australia means applying the right base rate, loading any penalty rates that apply under an award or agreement, withholding PAYG income tax, and reporting every pay event through Single Touch Payroll on or before the payment date.
Work out the applicable rate of pay
Before you process a single timesheet, confirm which modern award or enterprise agreement covers each worker. Australia has more than 120 modern awards, and most hourly and shift workers fall under one of them — the General Retail Industry Award, the Hospitality Industry (General) Award, the Manufacturing and Associated Industries Award, and so on.
Each award sets a minimum base rate for the relevant classification level. On top of that base rate, penalty rates apply for:
- Overtime — hours beyond the ordinary spread of hours or daily/weekly maximums
- Weekend work — typically Saturday and Sunday rates expressed as a percentage of the ordinary rate
- Public holidays — a higher loading, often double time or double time and a half
- Shift allowances — afternoon shift, night shift, rotating shift, and broken shift loadings where applicable
These percentages vary by award. Check the relevant award on the Fair Work Ombudsman's website, or use the Pay and Conditions Tool, to confirm the exact loadings for your workforce. Applying the wrong rate — even accidentally — creates a wage underpayment liability that can attract significant back-pay obligations plus interest.
Collect and verify timesheets
Accurate time records are not optional. The Fair Work Act requires employers to keep time and wages records for seven years. For shift workers in particular, you need:
- Start and finish times for each shift
- Any unpaid meal breaks taken
- Shift type (day, afternoon, night, rotating)
- Public holiday designations
A digital time-capture system — even a basic app or cloud spreadsheet — reduces manual entry errors and gives you an audit trail if a pay dispute arises.
Calculate gross pay for each pay period
Once you have verified hours, the calculation runs like this:
1. Ordinary hours × base rate = ordinary earnings
2. Overtime hours × (base rate × overtime multiplier) = overtime earnings
3. Penalty-rate hours × (base rate × applicable loading) = penalty earnings
4. Add any applicable allowances (e.g. meal allowance, broken shift allowance, tool allowance)
5. Sum all components to get gross pay
Keep each component separate in your payroll system. Employees are entitled to see a pay slip that itemises ordinary hours, penalty hours, allowances, and any deductions — and you are required to provide it within one working day of payment.
Withhold tax, levies, and study debt repayments
From gross pay, you withhold:
PAYG income tax — calculated using the ATO's tax withheld tables or your payroll software's built-in engine. Tax is progressive: the more an employee earns, the higher the marginal rate applied. Use the employee's Tax File Number declaration to determine the correct tax scale (resident, non-resident, no TFN lodged, etc.).
Medicare levy — 2% of taxable income for most employees. Some low-income earners qualify for a reduction or exemption; higher earners may incur the Medicare Levy Surcharge separately through their tax return, but that is not a payroll obligation.
HECS/HELP repayments — if an employee has declared a study debt on their TFN declaration, you apply an additional withholding amount based on their projected annual income. The repayment scale is banded: higher projected income means a higher repayment percentage. Your payroll software should handle this automatically once the employee's details are entered correctly.
Net pay is what remains after all withholdings.
Pay superannuation on ordinary time earnings
From 1 July 2026, the Superannuation Guarantee rate is 12% of ordinary time earnings (OTE). For shift workers, OTE generally includes the base rate and most allowances, but usually excludes overtime. Check the ATO's OTE guidance if you are unsure whether a specific payment counts.
Super must be paid at least quarterly to a complying fund nominated by the employee (or your default MySuper fund if they haven't chosen one). Many payroll systems let you pay super more frequently — monthly or even fortnightly — which reduces the risk of falling behind and simplifies cash-flow management.
Report through Single Touch Payroll
Every pay event must be reported to the ATO through Single Touch Payroll on or before the date you pay your employees. STP captures year-to-date figures for gross wages, PAYG withheld, and super liability. At the end of the income year — by 14 July — you finalise each employee's record in STP, which pre-populates their myGov tax return and removes the need to issue paper payment summaries.
For businesses running multiple shift patterns or variable hours week to week, keeping payroll software updated with each employee's correct award, classification, and shift type is the single most effective control you have against underpayment errors.
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