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?
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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