A little advice if possible as the HMRC and IR websites are a tad confusing. The situation is as follows -
A job is soon to be started with a salary of 26K pa. The term worked will only be a period of 7 weeks. I am exempt from tax, being a student and not having earned anything this tax year or likely to exceed 4895 this tax year, and a P38(S) has been filed. The only deduction therefore will be NI. How much ? Could you please show me the calculations as I would like to understand for future reference.
It's irrelavent how many "tax weeks" there are in the year. The only relevant issue is how the employer's payroll system converts an annual salary to a weekly/monthly amount. This is unlikely to have anything to do with the number of tax weeks in the year.
It's unlikely any payroll system would always use the actual number of days in the year - as the weekly pay would then be lower in leap years. When I was on weekly pay they simply divided the annual salary by 52. Overtime was based on salary divided by 52 divided by weekly contractual hours multiplied by the premium.
They then switched to monthly pay - and we all demanded a pay rise since they were now paying us the same salary over 365/366 days as they were previously over 364! Surprisingly, they gave us one FWIWW.
Now they pay annual salary divided by 12 each month - but for (eg) pay rises in the middle of the month/joiners/leavers they use annual salary divided by 261 as a "salary per working day". But they still use the previous formula for overtime, for some reason.
So your "working week" is usually around 5.16 days? If it were usually a 5-day working week, then there'd only be around 253 "working days" per year...
Is it not the case that any job described as having a certain annual salary would tend to involve monthly rather than weekly pay?
If the employment then happens to last 7 weeks, this means there would be two or three pay periods (salary months, at most one of which would be a full month) and NI would be calculated on a monthly basis. No?
Yeh, perhaps most employments with salaries quoted "pa" would generally be paid monthly. But then the term of employment would then usually be specified in months as well, wouldn't it?
The OP specifies an annual salary, and a term in weeks. I wonder if they'd like to clarify whether the job will be paid monthly or weekly?
The total NI paid, of course, could be affected by this... [Monthly-paid effectively gets a full two months' worth of thresholds, whereas weekly-paid may only get just over 80% of that much thresholds.]
OK, it's not your maths that is faulty but your understanding of how payroll/employment contracts generally work.
Bank holidays, like annual leave, are almost invariably counted as "paid days off" for employees. Weekends (or perhaps two other days per week for those who work weekends) are counted as "unpaid days off".
Therefore when working out overtime rates, payment for part months etc, salary is divided by "working days/hours" where the days/hours *include* bank holidays and annual leave but *exclude* weekends.
Where I work, if I work a bank holiday I can't claim double time (which is the bank holiday/weekend premium), I can only claim single time, because I am already being paid for that bank holiday. I also get a day off in lieu, so it works out to much the same thing. If I were to work overtime on a weekend, I'd get paid double time.
Using this method of "paid days off" rather than dividing the salary by days actually worked, of course, reduces the hourly/daily rate quite significantly.
I don't think so. I understand hopw they work OK -- I was just trying to point-out that your use of "working days" was invalid - altho' you've now changed this to "days worked plus paid days off".
It's all just a clever way of making you *think* that you're getting paid at twice the rate for overtime, when in fact you're only getting about one-and-three-quarters of your usual rate...
If you have 8 bank holidays plus (let's say) 23 other days "annual leave" per year, then you are only working around 229.9 days (on average) each year. This means that **for the actual work that you do**, for your standard hours you're getting "annual salary divided by 229.9" per day of work.
Then your (savvy!) employer comes along & works out your overtime rate as twice "annual salary divided by 261". That's only 176% of your usual rate!!
So, the employer manages to make you *think* you're getting 200% of your usual rate for overtime, but only pays you 176% instead. He's a sly one!
[Pity the poor people thinking that they're getting paid "single-time" for 'overtime'. Really, they are working overtime for less than 90% of their usual rate of pay, per hour.]
So was yours - as you knocked off bank holidays but not annual leave. Employers are required to give 20 days annual leave.
Yup.
And of course you should include the average person's sick leave!
It works the other way as well - for instance if you take unpaid leave.
True - but that's why most companies pay a premium for overtime, even if the overtime is in "social" hours. My employer pays 1.33 time in social hours (0800-1800 weekdays), more for unsocial hours.
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