If you are a startup boss / HR freshmen / Admin and have new employees, do you have a moment that you don’t know whether to use calendar days or working days to calculate the salary? Whether to use 31 days to calculate the average daily salary? How to do the payroll so as not to pay more or less to employees?
OK, first of all, we should understand that the internal regulations of the company and the calculation method of each company is different. To use calendar days or working days depends on whether the rest days are regarded as paid.
What are Calendar days and Working days?
Calendar days: It refers to the total number of days in a year. For example, there are 366 days in 2020. If there is the rest day pay, calendar days will be used for calculation.
Working days: The calculation of working days will exclude the number of Saturdays and Sundays, so the number of working days in each month is basically in the range of 20-23 days. Therefore, working days are applicable to the situation without rest day pay.
Let’s view some examples here!
There are 31 days in March 2020, and 22 working days.
Thomas was employed on March 24, 2020, works 5 days a week with rest day pay and a monthly salary of HK$17,000. He worked six days in March. Therefore, the salary calculation method for the first month of employment is to calculate the average daily wage first, and then multiply the average daily salary by the actual working days:
Monthly salary = average daily salary of the current month x (actual working days of the month + weekends)
Average daily salary: HK$17,000 / 31 days = HK$548.39
Rest day pay: 6 (working days) + 2 (weekends) = 8 days
Net pay in March: HK$548.39 * 8 days = HK$4,387.12
Thomas was employed on March 24, 2020, works 5 days a week with a monthly salary of HK$17,000, no rest day pay. He worked 6 days in March.
Monthly salary = average daily salary of the current month x actual working days of the month
Average daily salary: HK$17,000 / 22 days = HK$772.73
Net pay in March: HK$772.73 * 6 days = HK$4,636.38
Some companies will also choose the “average annual working day”, that is, 21.75 days. However, no matter what calculation method is used, it depends on the company payroll policy, the Labour Department does not require companies to use calendar days or working days.
Compared with the calendar days calculation method used by most companies, working days will be more complicated. The working days of each month are different, it may be necessary to deduct the leave of the current month or the no pay leave taken by employees, so employers will do more on manual input, calculate and double-check.
However, the Payroll function of Workstem, an HR system, whether to use calendar days, working days or annual average working days, as long as you have done the settings on the calculation method regarding the incomplete salary calculation cycle once, the first-month salary of any new employee can be calculated automatically without any double-check.