Payroll: How to calculate initial part month pay for monthly employee

Payroll: How to calculate initial part month...

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Payroll Question: Joiner part way through month.

My company has a new monthly paid employee who joined half way through a month. There has been a
lot of debate as to how this partial month should be calculated.

The facts are that the month in question was June which has 30 calendar days and 22 working days.
The member of staff joined on 19th June and completed 10 working days during June.

Can anyone advise what the correct formula is for calculating the partial month's pay.

Should it be based on 12/30ths or 10/22nds of a month's pay?

Your advice would be most appreciated.

Regards
Roger Sansom
Roger Sansom

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By AnonymousUser
04th Jul 2000 12:37

What does the contract say?
Mr Taylor gives a very comprehensive and accurate explanation of the 260ths method, which is generally favoured by payrollers.

However, you must look to the contract of employment (which can include a staff handbook or similar documentation) to determine the method to use. If the contract is silent on the accrual method to be used, you MUST use 12/30ths. This follows a legal precedent that "a day" means a calendar day. Custom and practice are irrelevant in this issue as it relates to amounts of pay; if the employee is shortchanged they can apply to an employment tribunal on the grounds that you had made an illegal deduction from pay.

Assuming your contract is silent on the issue (few people think in such detail when constructing their contracts of employment) you can adopt a belt and braces approach by calculating the amount due under both methods and paying whichever is greater.

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Replying to AnonymousUser:
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By jonesa223
15th Jul 2022 07:26

Please do not use this method, it would not stand up to acas scrutiny and could potentially lead to NMW issues and potential breaches in employment law. A contract, would at least, show number of working days in a month. Use this for a total annual working day number (5 days per week is 260 annually for example). You would not be able to assume 7 working days per week

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By AnonymousUser
04th Jul 2000 11:31

calculate on days worked based on an annual average
Simplest way is to look at an example of an employee who earns £30,000

Firstly find their daily rate based on 260 working days in year
Annual salary / working days in a year e.g 30,000/260 = 115.38

Then
Days worked in the month X daily rate e.g 10 X 115.38 = 1,153.80

Calculalions should always be carried out on an annual basis, not monthly as this will lead to inconsistencies between employees starting in different months but working the same number of days. For example if we have 2 employees who earn £30,000 and one starts part way through Feb (which has 21 working days) and works 10 days and the other starts part way through June (which has 22 working days) and works 10 days

The Feb starter will earn 30000/12 = £2500 X 10/21 = £1,190.48

The June starter will earn 30000/12 = £25000 X 10/22 = £1136.36

The June starter earns less than the Feb starter even though he worked the same number of days.

Hope this helps

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