Posted: Tue Jul 18, 2006 1:03 am Post subject: Standard method for calculating first paycheck on a salaried
I am the payroll administrator for our company. Our salaried employees are paid semi-monthly, the 15th and the 31st. I normally divide the annual salary by 24 pay periods and pay the employee that amount every pay period, regardless of the number of actual hours worked in that pay period.
What is the standard practice for calculating the gross pay on such an employee's first payroll check when the days worked were less than the full period?
Posted: Tue Jul 18, 2006 7:24 am Post subject: Calculating the first paycheck
Welcome to the PayPerShop forum and thank you for your question.
First, I have an embarrassing apology to make - I have inadvertently deleted your membership of the Forum - can you please join up again?
Your reference to "paycheck" suggests that you are based in the US?
Here in the UK, semimonthly payments are very uncommon, we have weekly, fortnightly, four-weekly and monthly. People paid weekly or multiples of a week are usually paid by the hour, so your problem does not arise.
When employees are paid a monthly salary, the three common practices, both for employees who join mid month and who leave mid month, is
(1) to use the number of working days (Monday to Friday) in the month, e.g. if there are 21 working days in the month, divide the monthly salary by 21 and multiply by the number of working days you want to pay
(2) divide the annual salary by 260, the number of working days in the year and multiply by the number of working days you want to pay
(3) divide the annual salary by 365 and multiply by the actual number of days in the period you want to pay.
These calculations all give somewhat different results for any particular period - the important thing is to be consistent, and under UK employment contract law, to specify the calculation process in the contract.
To my knowledge, there are no US federal rules that apply to your situation and you would have to check locally to see if there are any state rules. We will include your question in next week's US newsletter to see if we can get any further comments. _________________ Ian Congreave, PayPerShop owner
I always use no.2, which I think is the fairest method. Although I realise no.1 is a common method I have never understood why it is considered as being acceptable. With this method somebody who starts/leaves in February and is paid for 1 week/5 days receives a greater amount than if they were paid for the same number of days in August. Surely this is not right !
Joined: 13 Feb 2006 Posts: 206 Location: Hampshire, United Kingdom
Posted: Fri Jul 28, 2006 9:37 am Post subject: Calculating the first pay check
Hi everyone,
I was interested to read both your, Ian, and Brian's replies to this. Actually, there is a fourth method, and taking Brian's comments on board, probably the most unfair.
The public sector tends to work on a 365 day basis so working part way through February you would end up being paid x/28ths or x/29ths of one twelth of your annual salary as opposed to x/31sts for August. Yes that means it is best to start your job in February in a non-leap year and leave in January, March etc. That way you get the most for the days you work at the start and lose the least when you leave, crazy, but true.
Interestingly, back in the 80's when the Water Boards were privatised there were near riots when the method of payment was to be changed from the traditional public sector method to what was normal in the private sector and Thames Water had half of its staff on the above method and the other half on 260ths, I knew the payroll manager there at that time and I know it was a nightmare to administer.
Fundamentally though it has to be down to the contract and even though this sounds like a US matter I cannot believe that their contracts are silent on the subject of apportionment when their laws seem so prescriptive on other matters.
I can appreciate that semi monthly must give similar problems to monthly in that pay period can be different lengths so it sounds like a job for HR to produce a single, unambiguous definition for the calculation.
I always use no.2, which I think is the fairest method. Although I realise no.1 is a common method I have never understood why it is considered as being acceptable. With this method somebody who starts/leaves in February and is paid for 1 week/5 days receives a greater amount than if they were paid for the same number of days in August. Surely this is not right !
it may seem the 'fairest' but it's generally easier to automate 365ths, quite important if you have a high number of starter/leavers
in fairness, it doesn't really matter what version you use so long as you are consistent
You cannot post new topics in this forum You cannot reply to topics in this forum You cannot edit your posts in this forum You cannot delete your posts in this forum You cannot vote in polls in this forum
FAQ
Search
Memberlist
Register
Profile
Log in to check your private messages
Log in
