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How Many Working Days for Calculating Allowances?

By: Emma Jones - Updated: 18 Jan 2017 | comments*Discuss
 
How Many Working Days For Calculating Allowances?

Q.

Why are some allowances based on a calculation of 260 working days and some based on 365 calendar working days?

What should we take into account when deciding on the above?

(L.E, 18 February 2009)

A.

Calculating and administering employee benefits can be a confusing subject and it is important that you understand what you are calculating and why. There are many different numbers and rules to deal with but the 260 versus 365 working days is one that needs to be established by the company as a whole.

You will find that some allowances are based on 365 working days while others are based on 260 working days. This may seem like a strange difference but actually there are some basic numbers and logic behind it. There are 365 days in a year so this is why some allowance are based on this figure.

The 260 days figure may seem a bit random but actually relates to the number of working days in a year. So, if you take the 365 days and minus weekends, which is two a week for 52 weeks then you come to 261 which is rounded down to 260. This number actually makes more sense, as no employee is contracted to work 365 days a year.

Different employers have often adopted their own decision on which calculation they should adopt. Choosing one over the other can either benefit the employer or the employee, depending on what the situation is and what benefit or deduction you are calculating.

In terms of employee benefits, it is better for the employee to have them calculated using each day as 1/260 as they will then get more money per working day. However, if they then lose a day’s pay, for example the result of strike, then it is more beneficial for it to be calculated as 1/365 because they will then lose less. The same rules will obviously apply in reverse to the employer.

In employment tribunals there have been some precedents set about which calculations should be used in which situations but there is no set law. This means that it's down to each individual company to decide on their own policy. Whatever policy is set should be consistent throughout the company and also be laid out on paper for employees to access if they wish.

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[Add a Comment]
Are "working days" and "paid days" being confounded here? In the UK, many employers pay their employees, technically, for 5 days / week x 52 weeks = 260 days. However the number of working days is often deemed to be 260 minus 8 bank holidays = 252 (or, if they so insist, 261 minus 8 = 253).
Andy - 18-Jan-17 @ 9:07 PM
Pedant - Your Question:
"Different employers have often adopted there own decision on which calculation they should adopt." Surely you mean "their".

Our Response:
Thank you for drawing our attention to this. It's been changed.
AboutEmployeeBenefits - 27-Oct-16 @ 10:45 AM
"Different employers have often adopted there own decision on which calculation they should adopt." Surely you mean "their".
Pedant - 26-Oct-16 @ 11:03 AM
How on earth is it beneficial to the employee to have 261 days rounded down to 260 days. Straight away every employee is working a day at work for nothing
Hoddjah - 6-Apr-16 @ 6:05 PM
If you divide 165 days by 260 you come up with.63.Is this 63 days or 63 % of a year. How many days would it be ?
Rock - 23-Sep-15 @ 7:15 PM
A worker is contracted to work 35 hours per week over 5 days and paid annually.The employer uses the formula:annual salary/365 days to work out weekly wage. Then divides weekly wage by 7 days to work out daily rate.The confusion here is that the employee is contracted to work 5 days per week whereas employer calculation of weekly and daily rate means this is contradicting.Can you please shed some light on this. Thanks
Su - 3-Aug-15 @ 1:11 PM
Thanks for pointing this out. We will add a section to clarify this.
AboutEmployeeBenefits - 14-Mar-11 @ 1:54 PM
Whilst this is very helpful to knowledgeable payroll specialists, it has caused confusion among people who do not have indepth knowledge of payroll, as they seem to think that employers have the right to choose how they calculate employees' contractual annual SALARIES for a proportion of a month (e.g. if an employee leaves 5th January) using the different methods here for ALLOWANCES. They are confusing SALARIES with ALLOWANCES. It may be helpful if you add a sentence clarifying that this does not apply to contractual annual salaries which must always be calculated on the basis of 365 days a year.
Phil - 13-Mar-11 @ 6:08 PM
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