# Hourly rate cal contract paid break vs unpaid bre

How to calculate hourly rate to achive 40,000 per year for worker with paid/unpaid break 9-5 5 days

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Calculating overtime rate for the person which has 0.5 hrs break paid per day vs unpaid break per day. Working 9-5.

I think i am overthinking this, but in my mind the person with paid breaks is on more favourable contract and the hourly rate should be greater to "absorb" the break. However the client is calculating the hourly rate as follow:

For paid break 40000/52/40=£19.23

For unpaid break 40000/52/37.5=£20.51

So why the person with paid breaks which also works 37.5 in work for 40 hours would receive lower hourly rate? Surly it is on more favourable contract so it should be higher?

### Replies (12)

By FactChecker
12th Apr 2024 00:03

Although the maths is questionable and the wording of the question unclear ... the answer is simple ...
You've stated that:
* Both employees receive the same annual salary;
* One employee works 37.5 hrs/wk and the other works for 40 hrs/wk.
Therefore the one working for more hours must be receiving a lower hourly rate!

BTW I've no idea what is meant by a 'paid break' or an 'unpaid break' - but based on the figures you've shown, the person with the 'paid break' is not receiving any extra pay and so their hourly rate for when they're productive is subsidising their 'paid breaks'.

Thanks (3)
By Maybelater
12th Apr 2024 00:18

Apologise if the question is unclear.

Employee 1: works 9-5 Monday to Friday with half an hour for lunch PAID
Employee 2: works 9-5 Monday to Friday with half an hour for lunch UNPAID

What would be accurate calculation for hourly rate to make sure desired salary is achived:

Employee 2's desired annual salary: £40,000
Productive hours per week: 37.5 hours (excluding the 0.5-hour paid break)
Total productive hours per year: 37.5 hours/week * 52 weeks/year = 1,950 hours

To achieve an annual salary of £40,000:
£40,000 / 1,950 hours ≈ £20.51 per hour

So, to ensure Employee 2 achieves a salary of £40,000 per year with the paid breaks included, the hourly rate should be approximately £20.51

Thanks (0)
By FactChecker
12th Apr 2024 00:48

So, EE1 works for 37.5 hrs/wk and is paid for 40 hrs/wk ?
Whereas, EE2 works for 37.5 hrs/wk and is only paid for those hrs?

As I said before, if both are paid the same annual salary then obviously EE1 is being paid at a lower hourly rate ... that's just pure maths.
Conversely if they are both meant to be receiving the same salary for the same number of worked hours, then EE1 should be paid extra (on top of the salary) for those extra 2.5 hrs/wk - but I've never heard of such a crazy system, so is that really what you mean?

FWIW my reference to your maths being questionable is because if you're dividing salary to get to a weekly rate, then you'll find there are not 52 weeks in a year - there are 52.143 pa (non-leap years) as every Union negotiator knows!

But I still can't work out what it is that you're trying to achieve ... your initial post was all about calculating overtime rates (in some unspecified way for an unknown purpose), and your new explanation seems to have got EE1 and EE2 mixed-up halfway through.
You've now mentioned that you're trying "to ensure Employee 2 achieves a salary of £40,000 per year" ... to which the obvious answer is that if they are being paid a fixed salary for a regular contract of a fixed number of hrs/wk, then you don't need to worry about an hourly pay rate in the first place.

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By Maybelater
12th Apr 2024 01:07

I agree with you, 52 weeks was just used for example purely.
I do agree it is strange system, I have never came across this before hence the question. Although the maths is simple the results does not seem fair.

This exercise was performed to establish overtime rate and hourly pay rate to apply a 0.50 per hour raise.

I would like to establish the rule and use it going forward.

It has been very long day, apologise for misunderstanding.

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By David Ex
12th Apr 2024 00:18

Do they get paid breaks in their overtime??!

Thanks (1)
By tom123
12th Apr 2024 07:50

I'm not going to look at the maths, as it's too early in the morning - but this is basic stuff.

Take the salary and divide it by the hours worked in the year to get the overtime rate.

Hours worked per year = hours worked per week x weeks per year?

I'm not seeing the issue.

Of course some commenters may not really have worked in a setting that has breaks (paid or unpaid), in that they have a fairly comfy office job and can take drinks whenever.

Not meaning to be derogatory btw. It's just that in a lot of settings - manufacturing, retail, teaching assistants, you do need to be clear about breaks and their paid status. Get them wrong and you have a whole load of minor greivances heading your way.

EDIT: Might be worth reviewing your contracts of employment going forward. Having different parts of the workforce with different "rights" is also another way to upset people. It is much more common to define a lunch break as unpaid rather than paid. That also gives the employee confidence when saying they cannot be asked to work through it all the time.

Thanks (1)
By Maybelater
12th Apr 2024 12:33

Agree with your points, not many contracts in place, new contracts coming, need to check all the aspects, before moving forward. Thanjs for tge comment

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By paul.benny
12th Apr 2024 08:35

Bear in mind also that under the Working Time Regulations, employees working more than 6 hours must have a break during that time of at least 20 minutes. The regulations do not specify that such a break should be paid.

As regards the question - it sounds very much these are hourly-paid workers. Might be worth getting sight of employment contracts to verify. And also to check on the differential treatment of breaks.

Thanks (1)
By Duggimon
12th Apr 2024 09:46

Maybelater wrote:

So why the person with paid breaks which also works 37.5 in work for 40 hours would receive lower hourly rate? Surly it is on more favourable contract so it should be higher?

If they are both in work from 9 - 5, 5 days a week and both get paid £40,000 a year then there is no favourable contract, the two are identical.

Whether the break is paid or unpaid determines the hourly rate at which they are paid, but over the year they both get paid the same so I'm not sure why you are focusing on which is the more favourable contract, they are clearly identical.

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By Barbara G
12th Apr 2024 10:10

I think it's perhaps because the OP is trying to determine the rate for overtime.

For overtime purposes how about basing it on the hours actually worked, rather than considering paid or unpaid lunch breaks? So the hourly rate for overtime for both employees would be £20.51, as both actually work 37.5 hours per week.

That's how we do it. Even though salaried we would still base any overtime hours on the calculation:- salary/52/37.5. I know there are slightly more than 260 working days in the year (based on a 5 day working week), but the difference to the hourly rate is negligible. That's how we calculate it and we haven't had any fights yet.

That being said, all our contracts include an unpaid lunch break.

So, if it was me, I would base the overtime on the fact that they both actually work 37.5 hours per week and therefore their overtime rates will be the same.

Thanks (1)
By Maybelater
12th Apr 2024 12:36

Thanks for the comment. Yes thats what my suggestion is going to be.
Clear process, going forward.

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By lionofludesch
12th Apr 2024 14:19

The fella with the paid break gets less overtime.

By getting paid for his break, his hourly rate is lower.

Sounds paradoxical but the logic is indisputable.

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