Before the “713” Ordinance had passed, there were different methods for calculating the “daily salary” of employees while calculating various employee entitlements. Some companies divide the basic monthly salary by the number of days in a month, others by the average annual working day. Today we are going to check out how to calculate ADW for daily rated employees.
Which pay items need to be calculated on the basis of the 12-month average daily wage?
The statutory entitlements defined in the Employment (Amendment) Ordinance 2007 are as follows:
- Holiday pay
- Annual leave pay
- Sickness allowance
- Maternity leave pay
- Paternity leave pay
- End of year payment
- Payment in lieu of notice
- Severance payment and Long service payment
The above items should be the average daily wage of the previous 12 months and should be treated separately when calculating salaries.
How to calculate the 12-month average daily wage (ADW)?
How to calculate ADW for daily rate employees?
12-month average daily wage (ADW) is a common pay item in salary calculation. Although many HR understand the concept of ADW, they do not know how to apply and calculate it in daily salary calculation. Now let’s take holiday pay as an example to check out how to calculate ADW for a daily rate employee.
Take the calculation of holiday pay on January 1st, 2008 as an example:
Suppose Labo is a part-time employee of a store. He gets HK$300 per day and no pay on rest days.
Wages earned in 2007: HK$92,700, including
- Wages earned for 301 days (i.e. 365 days – 52 rest days – 12 statutory holidays) : HK$90,300
- 8-day statutory holiday pay: HK$2,400
Holidays taken in 2007 that paid less than the regular daily salary:
- 52 unpaid rest days
- 4 unpaid statutory holidays (Statutory holidays within the first 3 months of employment are unpaid)
Periods and amounts not to be counted
- 52 unpaid rest days
- 4 unpaid statutory holidays
(Note: The above 56 days are unpaid leave, so the amount to be excluded is “0“)
Holiday pay based on 12-month average daily wage (ADW)
Calculate the average daily wage earned in 2007:
Holiday pay on January 1st, 2008: HK$300
A suitable human resource system can help you calculate the 12-month average daily wage from payroll records and attendance records, and automatically show it in the payroll calculation formula.
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