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Average salary calculation on businessacquisition

Average salary calculation on businessacquisition

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I am dealing with a client who has acquired a business on 22nd Feb. Payroll providers of the previous owner has been calculating salary based on 5 days working week i.e. 260 days a year / 21.666 days per month which is normal. However they have allocated the salary for the month of Feb as 15 days to previous owner and balance to my client. My client's argument is 5 days should be allocated to him and balance to previous owner.

The 2 calculations will obviously result in significantly different numbers due to salary being divided by 21.666 days but multiplied by 20 days if we purely go for number of days in the month of Feb.

Who should be picking up the difference? Has anybody dealt with this kind of issue before?




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By johngroganjga
25th Mar 2019 09:56

Presumably the business purchased was an unincorporated one. What does the sale agreement say about this? Obviously the apportionment of post sale payments was something it should have dealt with.

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Replying to johngroganjga:
By kashpat
25th Mar 2019 10:16

The business is unincorporated. They have not dealt with this eventuality in the agreement. They were to exchange end of Feb so to get a clear start from March. Clearly this has not happened.

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Replying to kashpat:
By johngroganjga
25th Mar 2019 11:02

Perhaps they should run this past the solicitor who acted for them in the drafting of the agreement.

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By lionofludesch
25th Mar 2019 10:17

There's no answer to this.

Months are different lengths, the year's not 52 weeks long, it's 52 weeks and a day, maybe two, February is always going to be shorter than the other months.

You're just going to have to cobble together a compromise.

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By Duggimon
25th Mar 2019 11:58

Well unless the payroll company want to pay the 1.67 days, I would suggest splitting it between them is probably the equitable solution since they're both correct about the number of days that legitimately accrue to their time as business owners.

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