4 weekly pay - how is it calculated?

jem16

ian103 wrote: »

not sure that there is a problem as you are paid in a 20 day cycle, so not convinced you have been underpaid - its just been forced on you with little or no proper explanation.

That is true. Apart from being told we were to be paid every 4 weeks and would now have 13 pays in a year that was it.

it should all be correct when you get the last payment, if not this is the time to address it.

What do you mean by last payment?

chrismac1

What no one can surely deny is that this guy has suffered a year 1 cash flow shortfall. Some of the employers I have implemented this sort of stuff with have been as hard-nosed as you get, Metalbox for example.

They all recognised - no exceptions - that messing around with payroll was a good way to upset staff if it is botched up, as this one appears to have been. Making a one off adjustment of £131 in month 1 would be small beer in relation to the cost savings, maintain staff morale and reduce management time spent huddling with the unions - and when the union is the GMB, as at Metalbox, huddling with them is the last place you want to be!

ian103

The payment when you retire, as this will have to be corrected for days worked as I assume you will retire on the last day of a month, not a pay day

I'd accept a cashflow shortfall but not underpaid as the payment cycle has been changed and yes messing with peoples pay is a sure fire way to cause upset etc.

jem16

chrismac1 wrote: »

What no one can surely deny is that this guy has suffered a year 1 cash flow shortfall.

From my figures, I am down £262.06 over 2 years from where I would have been had I continued with monthly pay. As yet no-one has explained why although I have asked the question of the Head of Finance.

ian103 wrote: »

The payment when you retire, as this will have to be corrected for days worked as I assume you will retire on the last day of a month, not a pay day

I would retire on the day before the beginning of the new term which may or may not be a pay day.

I'd accept a cashflow shortfall but not underpaid as the payment cycle has been changed and yes messing with peoples pay is a sure fire way to cause upset etc.

Very true. The changeover meant that people got less each 4 weeks than they had each month but obviously it was eventually made up with the extra 13th pay. However no-one said that 2 years later I would find myself over £260 down no matter what way you try to dress it up.

jimmo

Thanks to ian 103 I think I’ve got it.

I was thinking too much like a taxman rather than about your gross pay.

Subject to any commencing adjustments which may have been necessary when you were first switched over to 4 weekly pay, each payday your employer pays you what it owes you up to that date. So on each payday, once you have been paid, there are no arrears.

I think it really is as simple as that.

Now, going back to thinking like a taxman again, strictly speaking those on monthly pay, paid on the last day of the month, are, on the 5 April, owed 5 days pay by their employer. So, in any given tax year they are paid 5 days arrears from the previous tax year and owed 5 days pay from the current year. However they are assessed to tax on what they received, not what they earned.

Your situation is comparable but the number of days pay owed to you at the end of each tax year will vary, increasing by one day each normal year and 2 days each leap year.

Going back to your pay at the end of year 1 you will be owed 1 day’s pay and your employer will make that good on your next payday 27 days later.

At the end of year 2 you will be owed 2 days’ pay and your employer will make that good 26 days later and so on.

So In one sense you are right, the amount owed to you at the end of each tax year will increase until you reach the magic 56 week year or until you retire.

When you retire your final salary pay will balance the books.

Also, with regard to Chrismac1’s posts the only comparable situation that arose with my former employer was when the weekly paid staff were compulsorily switched to monthly salary. Whilst I was not involved I do remember that those who were received a one off, non taxable, payment. Non taxable because it was a Change Payment and way, way below the £30,000 limit.

http://www.hmrc.gov.uk/manuals/eimanual/EIM13012.htm


The union certainly wouldn’t have let HMRC, the employer, get away with not paying something for the change in pay and neither should your union allow your employer to do so.

StuC75

More like never 14*28 = 392 days, so will never fall within a standard Earth Year...

John_Pierpoint wrote: »

The calendar indexes forwards a day per year for three years and then 2 days in a leap year, so as your month lasts 28 days it could indeed be a long time before you get 14 lunar pay days within a calendar year.

chrisbur

The fourteen paydays in a year will occur when the payday falls on April 5 or in a leap year either on April 4 or April 5. By my quick estimate this will be in the year 2030. On average the 14 payday year will happen about once every 22.5 years. The fourteen paydays in a year every 22.5 years though is only to bring your pay year into line with the tax year. At the moment the figure you get at the year end on your P60 is a bit less than what you are actually being paid for the year so after about 22 years your pay year and the tax year are 4 weeks out of step so you get fourteen paydays fitted into the tax year.

I do disagree slightly with how they worked out the new pay figure, there are I feel a couple of errors in the way it was worked out. First they started with 365 when the correct figure (as near as I can find ) should be 365.2425 and second they have rounded the number of days to 261 half way through the calculation. It is very bad practise to round any calculation part way through, rounding should only be applied at the end. This would result in a very slightly higher four weekly rate.

StuC75

Technically there are 14 pay days in any 12 month period - since payday 1 on 1st January, results in the 14th Payday being the 31st December for a standard year, and 30th December if it was a leap year. However whilst that it when you are paid 14 times in that 12 months the range of dates covered would be more than a year.

even with Chrisburs statement above, such pay days would span 2 tax years. The discussion is more with the paid periods as opposed to actual pay dates..

One question for the OP, when you were paid Monthly - Did you ever dispute that you were paid too much in February? because that month had less working days so should not have been 1/12th every month? or that didnt vary for 30/31 days in the month?.

jem16

jimmo wrote: »

Thanks to ian 103 I think I’ve got it.

I was thinking too much like a taxman rather than about your gross pay.

Subject to any commencing adjustments which may have been necessary when you were first switched over to 4 weekly pay, each payday your employer pays you what it owes you up to that date. So on each payday, once you have been paid, there are no arrears.

I think it really is as simple as that.

Ok I get that.

Now, going back to thinking like a taxman again, strictly speaking those on monthly pay, paid on the last day of the month, are, on the 5 April, owed 5 days pay by their employer. So, in any given tax year they are paid 5 days arrears from the previous tax year and owed 5 days pay from the current year. However they are assessed to tax on what they received, not what they earned.

Your situation is comparable but the number of days pay owed to you at the end of each tax year will vary, increasing by one day each normal year and 2 days each leap year.

Going back to your pay at the end of year 1 you will be owed 1 day’s pay and your employer will make that good on your next payday 27 days later.

At the end of year 2 you will be owed 2 days’ pay and your employer will make that good 26 days later and so on.

So In one sense you are right, the amount owed to you at the end of each tax year will increase until you reach the magic 56 week year or until you retire.

Which for me and my tax situation gives me grief. I have 2 incomes plus savings/dividends which take me into higher rate tax. On their own neither source of income does. Each year I have to give HMRC an estimate so that they can give me a tax code which will not see me overpay or underpay too much. When my annual salary aligned with the tax year this was easy to do. With this new 4 weekly pay, it's not quite so easy.

When you retire your final salary pay will balance the books.

Hooray - only 2/3 years max to wait!

The union certainly wouldn’t have let HMRC, the employer, get away with not paying something for the change in pay and neither should your union allow your employer to do so.

As I said earlier, the council's idea of liaising with our union was to walk in, put down the fait-a-complit and walk out!

Our council offered us a £500 loan at the changeover. It was taxed, pension was taken from it and we paid it back each month! That's how much they value us.

jem16

chrisbur wrote: »

The fourteen paydays in a year will occur when the payday falls on April 5 or in a leap year either on April 4 or April 5. By my quick estimate this will be in the year 2030. On average the 14 payday year will happen about once every 22.5 years. The fourteen paydays in a year every 22.5 years though is only to bring your pay year into line with the tax year. At the moment the figure you get at the year end on your P60 is a bit less than what you are actually being paid for the year so after about 22 years your pay year and the tax year are 4 weeks out of step so you get fourteen paydays fitted into the tax year.

I shall tell my colleagues they can look forward to a windfall in 22.5 years.

I do disagree slightly with how they worked out the new pay figure, there are I feel a couple of errors in the way it was worked out. First they started with 365 when the correct figure (as near as I can find ) should be 365.2425 and second they have rounded the number of days to 261 half way through the calculation. It is very bad practise to round any calculation part way through, rounding should only be applied at the end. This would result in a very slightly higher four weekly rate.

So from your figures, you would make it 260.89? That would give a daily rate of £131.09 and a payday gross amount of £2621.79. That should make an extra £15.65.