HELP - The Book-keepers Forum (UK)

Nikole · Senior Member

HELP

Leger · Master Book-keeper

Hi Nikole

If they are on 40 hours a week at £7.20 an hour, and the pay is increased, presumably you will have been told the new hourly rate. Alternatively if you are told they are on £15,000 a year, pro rata over 39 weeks, then the solution is as follows: £15000 / 52 x 39 gives you an annual salary of £11250 and an hourly rate of £7.21 an hour, based on a 40 hour week. So, after two months the salary increases to £15500. Divide that by 52 and again by 40 to give a new hourly rate of £7.45 and a pro rata rate of £11625 a year.

Now lets say minimum wage kicks in which is £7.50 an hour (over 25s) is a quick calculation of 7.50 x 40 x 39 to give a pro rata annual salary of £11700. If the hours increase then the hourly rate doesn't change, you just increase the amount of hours paid.

If there's a drop in hours (I assume that causes a drop in pay rather than their hourly rate is reduced) to (say) 30 hours then again its £7.50 x 30. If later on their pay increases work out the new hourly rate and multiply by new hours contracted for.

Nikole · Senior Member

Hi John

Thanks for your response. I am quite happy and confident in calculating pro rata rates whether it be at the start of the Annual year or part way through. The reason all of this came about is an employees hourly rate changed a few weeks ago. Now because of the bulk of the school holidays from the change in pay until end of the annual year it the new pro rata rate was actually less that what she was earning before the pay increase and she didn't want to take home less.

There's just no consistency at all.

Leger · Master Book-keeper

Hi Nikole

If you are recalculating pro rata pay on the remaining weeks in the year then that's wrong, as that 6 week summer holiday is going to have a negative effect, as you've found out.

You should work out the pro rata pay first on an annual basis, then divide by the number of weeks worked per year , then by 40 to get the hourly rate.

Nikole · Senior Member

When I receive the payroll at the start of the new holiday year it is literally a case of Mr x is term time/pro rata on 7.20 and works 40 hours per week. So I then calculate the year on that basis. But then 2 months later they are might be on 7.50 and still do 40 hours then 2 months later they have a change of heart and go back down to 7.20 and reduce their hours to 35. Then when NMW comes into effect they then receive an increase and are now back to 40 hours per week.

Leger · Master Book-keeper

I'm sorry, I thought you meant that when you worked it out pro-rata, the hourly rate dropped because of the amount of holidays left in the year.

If the employer is telling you what the hourly rate is that's even easier. If the employee has an issue with the hourly rate (£7.50 down to £7.20 because of a reduction in hours) then they need to take it up with the employer, and ideally raise a grievance. You can only go on what the employer instructs, providing it's legal.

What software are you using? I use Moneysoft and all I need to do is a click on hourly pay to change the rate, and click on hours worked to change the hours worked. It takes less than 30 seconds.

Nikole · Senior Member

Hi John

I am using Sage for Payroll but I cannot work it out as you mentioned in your last post. The pro rata employees wages are pre-calculated at the start of the year and every week they are meant to be paid that wage until the end of the holiday year. So the formula for calculating term time pro-rata would be £7.20 x 40 hours x 43 / 52 = £238.15.

Then on 1st April that wages goes up to £7.50 x 40 hours x 14 weeks & 2 days /22 weeks = £196.36

So although they have received a payrise on 1st April there new pro-rata rate is £41.79 less per week because the is 9 weeks of holidays where they don't actually work.

The only other solution that I can think of is when staff receive a payrise we will then to to have a separate calculation for the rise which run along side the original that was calculated at the beginning of the year. However what then happens when someone's pay is reduced id they have relinquished there position for a lesser one.

pictures · Senior Member

I "think" I know where you are coming from although I think you are making it more complicated for yourself.

Is it one of those situations (unique to those working in education) where although you only get 5.6 weeks paid holiday per year the annual salary is divided by 12 so that the employee continues to receive pay all through the school holidays rather than have to go several weeks in the summer without pay (my husband is a teacher).

Or do they simply not receive any pay during the holiday times when they don't work (term time only contracts)

pictures · Senior Member

Nikole wrote:
Hi John

I am using Sage for Payroll but I cannot work it out as you mentioned in your last post. The pro rata employees wages are pre-calculated at the start of the year and every week they are meant to be paid that wage until the end of the holiday year. So the formula for calculating term time pro-rata would be £7.20 x 40 hours x 43 / 52 = £238.15.

Then on 1st April that wages goes up to £7.50 x 40 hours x 14 weeks & 2 days /22 weeks = £196.36

So although they have received a payrise on 1st April there new pro-rata rate is £41.79 less per week because the is 9 weeks of holidays where they don't actually work.

The only other solution that I can think of is when staff receive a payrise we will then to to have a separate calculation for the rise which run along side the original that was calculated at the beginning of the year. However what then happens when someone's pay is reduced id they have relinquished there position for a lesser one.

Why are you including the figures I have put in bold in your calculation?

If Mr X works 40 hours per week at £7.20 per hour his weekly rate of pay is £288
If he only works for 43 weeks of the year (bear in mind that he is entitled to 5.6 weeks of paid holiday) but wishes to have his salary averaged over the whole year then you multiply by 43 and divide by 52 as you have done getting a weekly pay rate of £238.15

When his rate of pay goes up to £7.50 you do the following £7.50 x 40 hours x 43 weeks divided by 52 to make his new weekly rate of pay £248.07. It doesn't matter how many weeks there are left in the year to work and how many weeks holiday because you are using an averaged out figure and he will get his new rate of pay from that point onwards. (assuming his contract is written correctly)

-- Edited by pictures on Friday 5th of May 2017 10:31:38 AM

Leger · Master Book-keeper

Thanks Julie.

I had assumed they were only paid term times, with holidays paid outside term time. If they are paid over 52 weeks then your calculation is correct.

Nikole, can you clarify which of these it is please.

Nikole · Senior Member

Hi John

The 14 weeks in bold represents 12 weeks of actual work plus 2 weeks holiday pay. So the 14 weeks plus 2 days is added together to to give a gross figure which is then spread out over the 22 weeks from 3rd April to end of August. The 21 days holiday has been apportioned over previous periods to represent pay rises.

Julie is correct. They are term time workers who are contracted to work 39 weeks of the year so therefore entitled to 21 days holiday entitlement. They are entitled to received 43 weeks and 1 day of pay over 52 weeks.

I think I need to take a look though the contract and have a good chat with the client.

pictures · Senior Member

Nikole wrote:
Hi John
The 14 weeks in bold represents 12 weeks of actual work plus 2 weeks holiday pay. So the 14 weeks plus 2 days is added together to to give a gross figure which is then spread out over the 22 weeks from 3rd April to end of August. The 21 days holiday has been apportioned over previous periods to represent pay rises.
Julie is correct. They are term time workers who are contracted to work 39 weeks of the year so therefore entitled to 21 days holiday entitlement. They are entitled to received 43 weeks and 1 day of pay over 52 weeks.
I think I need to take a look though the contract and have a good chat with the client.

In which case (bearing in mind I'm not an employment law or contracts specialist), assuming their contract is worked out the same way as every other teacher/TA/LSA etc contract works that I've ever known, you work it the way I detailed above. My husband has worked full time, part time, and at varying changing rates of pay over the course of his career (music teacher/instrumental teacher) and that's how its always been done, the new rate applies straight away regardless of how many weeks are left or how much time off has been taken so far. Its one of the reasons that teachers on maternity leave are advised to have their return to work date as the first day of the school holidays for example.

-- Edited by pictures on Friday 5th of May 2017 03:01:08 PM

Leger · Master Book-keeper

In which case, my apologies Nikole. Ignore everything I've written previously.

As Julie says £7.20 x 40 hours x 43.2 / 52 = weekly pay £239.26

If the hourly rate changes adjust that and if the contracted hours change adjust that. That's all you need to do, irrespective of the time of year you're doing the calculation.

You'll notice that the 43 should be 43.2 as that is the decimal percentage for the 43 weeks and 1 day they are entitled to.

-- Edited by Leger on Friday 5th of May 2017 03:22:35 PM

Nikole · Senior Member

Hi John

I have just redone the whole year based on your advice and the overall figure at the end is slightly higher than how I had calculated by calculating from payrise to payrise (as per clients request)

Cannot see that my client will go with your method. I may just ask her to give me the figures to input each month then the onus isn't on me.

Thank you for your advice - really appreciated! And Julies too. Is it wine time yet

Cheshire · Master Book-keeper

Hasnt this one sort of been covered before?! What a nightmare!!!!!!

Contract is a must in such circumstances. I wouldnt give the woman the figures before youve seen the contract if I were you Nikole, so then she cant make a choice based on her view, but it will be a case of she has no option (assuming the contracts are clear).

As John says - the software itself should do most of the work for you, if its set up from the start to do so. What software do you currently use?

Just as an afterthough - what kind of teachers earn minimum wage?!!!

Nikole · Senior Member

Hi Joanne,

I am just going to go with their figures. It has taken me all of my time to get them to understand that they have to pay 21 days holiday and not 20 days. Although the 20 days is still mentioned quite a lot now.

Employees are nursery workers (Term time)

I am using Sage software. Would Sage accommodate the calculations.

Leger · Master Book-keeper

If the client is to give you the figures, please ensure they aren't below the minimum wage. I strongly suspect they will be. If they are then refuse to accept them. There are severe penalties for paying below the minimum wage, and it is possible the client will look for some one to blame, ie you.

If you are working out the figures, use the formula and stick to your guns.

Sage Payroll won't work out the calculation, but the formula is a simple one and Julie and I have shown you the correct way above. I'm assuming sage will let you adjust the weekly wage when it changes?

Nikole · Senior Member

Hi John

Client just provides hours. I am going to stick with your formula as long as it is agreed. Currently if the employee does less hours or additional then the pay is either reduced by rate x hours or increased by hours x rate. Dare I broach that method with the client?!.

Leger · Master Book-keeper

Hi Nikole

Reduce or increase by hours, not rate. Only change rate if the hourly rate increases or reduces (subject to a reduced rate being allowed in the contract and not falling foul of nmw/nlw)

What does the client do at the moment, tell you the hours and rate, or give you an overall weekly or annual figure?

Nikole · Senior Member

Hi John

Apologies I don't think I had explained myself correctly. If an employee is contracted to work 40 hours and they only work 30. Their method is to deduct 10 hours x hourly rate from the pro-rata rate calculated at 40 hours.

I receive the timesheet that shows only 30 hours worked and have to deduct 10 hours x rate

-- Edited by Nikole on Saturday 6th of May 2017 01:37:01 PM

Leger · Master Book-keeper

OK, lets assume they normally work 40 hours a week at £7.50 an hour and the contract allows the employer to reduce their hours.

£7.50 x 40 hours x 43.2 / 52 weeks. Total is £249.23 and that would be their weekly pay over 52 weeks before tax and NI.

The employer then instructs you to pay 30 hours. The calculation is now

£7.50 x 30 hours x 43.2 / 52 Total is now £186.92 over 52 weeks. You change it in Sage from £249.23 to £186.92 from that week onward.

If you were to take a straight 10 hours off at £7.50 you would be paying £174.23 which is approx £7 an hour.

Nikole · Senior Member

That is exactly my point John. By deducting the 10 hours x £7.50 is wrong. I'm just the Bookkeeper though :/

Feeling like I need to change my profession as no motivation whatsoever.

Cheshire · Master Book-keeper

Can hear your frustration Nikole, but this is in part why I said you have to get the contracts. But you are also a bit between a rock and a hard place. If a payroll person, ie you does the calculations then the staff are less likely to be paid below the minimum wage rate, will get what is rightfully theirs, will not be conned out of money by an unscrupulous boss (assuming they do as they are bidden and actually pay what is on the payslips!). But if you do it incorrectly then there is the potential for a claim. But allowing them to work out the figures and for you to process means you still MAY have a claim against you for not refusing to do the incorrect pile of pants they send you!!!!! Ive had a few arguments with such bosses before and its hard work every bloody payday.

There is absolutely no shame in refusing to do their payroll and if its more hassle than its worth, which it sounds from the few posts you made above (and on other days) then why not just dump them from a great height. Say you are restricting your offering to the bookkeeping only. Suggest the Accountant does the payroll, or someone else. Give them a month or two's notice rather than leave them in the lurch, but there is more to life than stressing over such rubbish!

DUMP, dump, dump!!!!!!!

Nikole · Senior Member

It is most definitely a very difficult situation, as like you say I want to pay employees what they are entitled to. Its like clients who don't think that they have to pay holiday pay for irregular workers. The times that I have stressed that they should be accruing holiday pay but falls it on deaf ears. I know I go above and beyond for this client with their bookkeeping and payroll and I do believe they know that and do appreciate it, but I want to do what is right.

They wont go back to their previous accountant or accountant before that as they made such a mess of the payroll and the bookkeeping wasn't done accurately either. Saying that its no surprise there were lots of mistakes with the payroll.

Maybe I should increase my prices as I know I undersold myself with this client. They were my very first client and I went in too low.

Leger · Master Book-keeper

Hi Nikole, as Joanne says you are very much between a rock and a hard place. Her advice above is sound

pictures · Senior Member

Nikole wrote:
Hi John
Apologies I don't think I had explained myself correctly. If an employee is contracted to work 40 hours and they only work 30. Their method is to deduct 10 hours x hourly rate from the pro-rata rate calculated at 40 hours.
I receive the timesheet that shows only 30 hours worked and have to deduct 10 hours x rate

-- Edited by Nikole on Saturday 6th of May 2017 01:37:01 PM

They really don't get it do they.

They are telling you to deduct 10 hours x hourly rate from the 40 hours pro rata rate whereas it has to be one or the other. If you are deducting from a pro rata rate then your deduction also has to be pro rata. They are setting themselves up for an employment tribunal here.

I pretty much agree with everyone else, you need to see the contracts and if they are not going to do things in the proper way then I'm sure you can find other clients who will.

Joanne asked which teachers earn minimum wage anyway? I'm guessing this is some kind of non school setting such as a pre school or after school club or an organisation that provides PPA cover or workshops in schools where there are teaching assistant type staff only qualified to Level 3 or less.

Cheshire · Master Book-keeper

I got teachers into my head as soon as I read term time Julie. biggrin

-- Edited by Cheshire on Monday 8th of May 2017 06:55:22 PM