I have recently left my company’s employ and have been astounded at the method which was used to calculate my final pay.
The approach used by my former employer varies gross pay according to the month of leaving based on the number of working days in that month. The same number of days worked in May for example will equate to a different final pay than had I left in June 2008 (May having 22 weekdays and June 21) HOWEVER, hourly overtime rates used are static and not dependant upon month accrued or paid (annual salary / 52 weeks of year / 35 paid working hours of week).
Please could anyone offer any advice or guidance, as in my opinion this is creative accounting and a HR cost cutting bid. I have worked out that my former employers method works out in their favour for 7 month of the year for 2008 and prehaps more crucially, 2 of which are the months the company experiences its highest turnover of staff.
How would you calcualte gross final pay for an illustrative salry of £12K p/a and a leaving date of 12th May 2008???
My previous employer would calculate this to be £363.64 Gross although I believe the figure should be £369.23 Gross. It only a matter of a few pounds but multiplied by a number of staff is a significant cost avoidance (bearing in mind ER NI and pension liabilities etc are based on amounts paid!).
Any comments would be much appreciated. I have attached calculation details below should you be interested.
Many thanks in advance.
Terry.
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CALCULATION METHODS
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FORMER EMPLOYER
1. Annual salary / 12 (month of year)
2. Resultant / number of working days in month
3. Resultant x number of days worked in month of leaving
So, using an illustrative full time £12K p/a salary and a leaving date of 12th May 2008…
1. £12,000 / 12 = £1,000 pm
2. £1,000 / 22 working days in May ’08 = £45.45 per day
3. £45.45 x 8 days worked in month of May = £363.30 Gross Final Pay
Note this method takes no account of the amount and hours worked already paid in the year and may lead to a shortfall of the contracted £12k salary per year.
MY METHOD
My method (which does not vary accroding to month of year in which employee leaves)…
1. £12K / 52 weeks of year = £230.77
2. £230.77 / 5 paid working days of week = £46.15 per day rate
£46.12 * 8 days worked before leaving = £369.23
Terry Hillier
