Monthly payroll

[Newchodge]

Many years ago the vast majority of people were paid an hourly rate and received their pay in brown envelopes every week. Managers were an exceprion as management's role was not seen as time-limited, but that they would work as and when their role needed it. So they were paid a monthly salary, paid equally every calendar month, and they didn't get overtime. If those monthly paid people took holidays they just got paid as normal, if they were off sick they usually got company sick pay so they just got paid normally. Hourly paid people who didn't work because they were sick just didn't get paid for those hours.

Times have changed. For some reason, probably cost and convenience, very many people are now paid in equal monthly instalments of their annual salary. Even if their pay is expressed as an hourly rate. That is the first problem, because a calendar month is not a constant, it can be 28 to 31 calendar days. Even a year is not a conctant as 25% of the time there are 366 days in a year. There is also the false knowldge involved, that a year has 52 weeks. Neither 365 nor 366 is divisible by 7, thee are always more than 52 weeks in every year.

An example of a problem with this - I took over payroll after a TUPE transfer. The staff were contractually entitled to be paid at the real living wage (£13.15/ hour at the time). They all worked 48 hours every week but were paid the same amount every calendar month. The previous payroll provider worked this out as £13.15*48*52 = £32822.40. That/12 makes £2,735.20 per month. That was last year, which had 366 days or 52.29 (rounded) weeks. So their annual rate should have been £33,002.75 (rounded up). So they were to be underpaid by £180. However, as they only worked Monday to Friday using the averages does not necessarily produce the right answer either.

Do people on here think this may be a problem?

 

[FreddyG]

Many years ago the vast majority of people were paid an hourly rate and received their pay in brown envelopes every week.

And if you worked at the Appleby-Froddingham Steel Works in Scunthorpe, that brown envelope had the following printed on the outside

"If the contents of this envelope do not match the payslip, staff are to inform the pay office BEFORE breaking the seal and opening the envelope."

Do people on here think this may be a problem?

It will, of course, now keep me awake at night!

 

[DontAsk]

"If the contents of this envelope do not match the payslip, staff are to inform the pay office BEFORE breaking the seal and opening the envelope."

Pay envelopes usually had a window and notes were folded in such a way that you could count them without opening it.

 

[MikeJ]

I've only ever been paid an annual salary, so the /12 thing has always worked. The fact that there may be a slight fluctuation in the number of days worked was always just shrugged off

 

[Daybooks]

Arguably it is a problem if somebody complains.

Is the contract of employment explicit? Are they to be paid an annual salary (however worked out) of £x that meets minimum / living wage criterion? Or, does it stipulate the hourly rate.

Are you able to revisit what was paid in the previous leap year?

Nevertheless are you able to use this TUPE transfer to clarify the on-going arrangements. In theory, if you use the annual salary then you need to ensure that salary meets the actual work days including bank holidays in that year period multiplied by the appropriate hourly/daily rate; otherwise someone will do the calculation themselves and complain if it’s short.

If workers complained they were underpaid by the £180 would they win at any tribunal? I would suggest that answers your question.

 

[Newchodge]

Arguably it is a problem if somebody complains.

Is the contract of employment explicit? Are they to be paid an annual salary (however worked out) of £x that meets minimum / living wage criterion? Or, does it stipulate the hourly rate.

Are you able to revisit what was paid in the previous leap year?

Nevertheless are you able to use this TUPE transfer to clarify the on-going arrangements. In theory, if you use the annual salary then you need to ensure that salary meets the actual work days including bank holidays in that year period multiplied by the appropriate hourly/daily rate; otherwise someone will do the calculation themselves and complain if it’s short.

If workers complained they were underpaid by the £180 would they win at any tribunal? I would suggest that answers your question.

The contract was explicit about the hourly rate.

I cannot access what was paid in previous years, but it isn't only the leap year issue, there would have been a (smaller) underpayment in every year.

Ongoing they are being paid properly, but the employer is not sure about re-visiting earlier years.

They would, without doubt win at tribunal.

But this is a very minor issue compared with the next bit.

 

[Newchodge]

Most people are now paid an annual salary, in 12 equal monthly instalments, even if they work fixed hours and get overtime if they work extra.

Let's look at someone who is offered a job on an annual salary of £26,500. That figure, divided by 12 is £2.208.33 recurring. Most employers would pay £2,208.33. Which is £26,499.96. so they have a contractual shortfall of 4p per year. Nothing to worry about, and certainly nothing to take legal action over. But an employer with 10,000 employees is saving £400. Again not a huge amount.

Let's assume this employee works 9 to 5, Monday to Friday. 1 unpaid hour for lunch, so 35 hours in total.

The employee is entitled to be paid overtime, at standard rate, and in February 2025 they work 5 hours overtime. How much should they be paid?

 

[Daybooks]

Most people are now paid an annual salary, in 12 equal monthly instalments, even if they work fixed hours and get overtime if they work extra.

Let's look at someone who is offered a job on an annual salary of £26,500. That figure, divided by 12 is £2.208.33 recurring. Most employers would pay £2,208.33. Which is £26,499.96. so they have a contractual shortfall of 4p per year. Nothing to worry about, and certainly nothing to take legal action over. But an employer with 10,000 employees is saving £400. Again not a huge amount.

Let's assume this employee works 9 to 5, Monday to Friday. 1 unpaid hour for lunch, so 35 hours in total.

The employee is entitled to be paid overtime, at standard rate, and in February 2025 they work 5 hours overtime. How much should they be paid?

I round up the salary divided by twelve; simply because it prevents complaints, however trivial. I learned many many years ago - that what you might think is trivial is not everyone’s view.

The answer to your question is the monthly salary plus the five hours at the standard rate.

 

[Newchodge]

I round up the salary divided by twelve; simply because it prevents complaints, however trivial. I learned many many years ago - that what you might think is trivial is not everyone’s view.

The answer to your question is the monthly salary plus the five hours at the standard rate.

Obviously. What is the standard rate? And, how have you calculated it?

 

[Daybooks]

Annual salary divided by number of working hours

Where working hours equal:
[Number of days in year less number of non work days (e.g. weekends) less number of paid bank holidays less number of paid holiday days*.] times hours per day

* decide whether minimum or enhanced. If enhanced then need specific calculation per employee.

The employer must decide in keeping with legal requirements.

 

[Newchodge]

Annual salary divided by number of working hours

Where working hours equal:
[Number of days in year less number of non work days (e.g. weekends) less number of paid bank holidays less number of paid holiday days*.] times hours per day

* decide whether minimum or enhanced. If enhanced then need specific calculation per employee.

The employer must decide in keeping with legal requirements.

There are no legal requirements about how an hourly or daily rate is calculated when someone is on an annual salary. Other than it must comply with NMW regulations.

If there is a contract clause detailing the calculation, that must be used; whatever the calculation is. There is an argument that, in the absence of a contract clause the Apportionment Act of 1870 should be used. That works on calendar days So 1 day is1/365th of the annual salary. It produces the lowest possible hourly rate.

Within the profession there is guidance that whatever method is used should be used for unpaid hours and additional hours, so you should not use the calculation that gives the lowest hourly rate for overtime and also use the highest hourly rate for unpaid leave.

The CIPP taught (and possibly still teaches) that the rule of 260 should be used. This assumes that the employee works 5 days/week and that there are 104 (52*2) non working days in a year. Many professionals use that, even though the 52*2 element is clearly wrong. I have also seen queries from payroll staff when they get very strange results, often because they use this rule of 260 for staff who work more or less than 5 days/week.

It is very common to use working hours in the relevant month. So if someone works overtime in February they are paid more than if they work the same overtime hours in July.

I have never seen a method suggested that takes into account paid holidays - it is either calendar days or normal working days/week. Causing difficulties if people work different amounts each week, working every other Saturday, for example, or a 4 on 4 off shift pattern.

This is far more important now than it used to be:

Fewer and fewer people receive full pay when off sick, so normal pay must be reduced by the right amount for those days of absence.

Many people have holiday pay at a different rate from normal pay, so again the right amount must be deducted.

There are, I think, 10 different (legal) ways to calculate someone's hourly or daily rate. On a salary of 26,500 the lowest daily rate is £72.60, the highest is £116.23.

But there is another issue as well.

 

[Daybooks]

I do use the 260 standard days in calculating a daily rate. This would typically be used for unpaid holidays. For starters and leavers I use the monthly rate (annual / 12) multiplied by the number or physical worked days divided by (the number of net working days less bank holidays in that month). Fortunately the spreadsheet does the calculations to ensure consistency and does tend to favour the employee compared to a annual method.

If you want an equivalent hourly rate then my approach would be the annual salary divided by the standard number of hours to be worked. I think you should ensure that a salaried worker is identical to an hourly paid worker.

By way of example if someone has an annual salary of £37,280 and works for 233 days (allowing for all types of holidays) at 8 hours per day their actual hourly rate is £20 (37,280 / [233*8]) for 1,864 hours.

If you calculated the rate by reference to another standard number of days, for example the 260 days, then that would be a rate of £17.92 per hour. Therefore you would have to work 2,080 hours to get the same annual pay. Good luck at a tribunal?

In many respects an hourly paid employee is cut and dried – it is the quoted hourly rate. Converting an annual salary into an hourly rate can have a number of nuances and complexities.

 

[Newchodge]

I do use the 260 standard days in calculating a daily rate. This would typically be used for unpaid holidays. For starters and leavers I use the monthly rate (annual / 12) multiplied by the number or physical worked days divided by (the number of net working days less bank holidays in that month). Fortunately the spreadsheet does the calculations to ensure consistency and does tend to favour the employee compared to a annual method.

Have you tried using the reverse calculations - so 260 for starters and leavers and working days/month for unpaid leave? I think you will find there is a difference.

Do you check for NMW compliance after you have removed unpaid leave days? If someone is paid at or close to minimum wage I think you will find that the monthly payment is not NMW compliant.

However, my point is more that there ought to be an officially recgnised way of calculating the hourly rate. Personally I think all job payment rates should be quoted as the hourly rate and, preferably paid for actual hours every 4 weeks. The only exceptions should be those senior managers who genuinely do not have recognised hours of work.

There is another problem with the current system.

 

[MikeJ]

There is another problem with the current system

Oh she's such a tease!

 

[Newchodge]

The final problem. Let's use the example again of someone working Monday t Friday, 7 paid hours/day. Let's assume they start work on 1 April 2025.

Their monthly pay 26500/12 = £2,208.34 (rounded up to avoid complaints.

The following table shows how much the pay they receive every month dffers from what they would have received if they had been paid for the actual weeks (days, hours) worked:

Month	Weeks	Days	Hours	Weekly pay	Variance	Cumulative
April	4.4	22	154	2233.72	-25.38	-25.38
May	4.6	23	161	2335.25	-126.91	-152.29
June	4	20	140	2030.65	177.69	25.40
July	4.6	23	161	2335.25	-126.91	-101.51
August	4.4	22	154	2233.72	-25.38	-126.88
September	4.2	21	147	2132.18	76.16	-50.73
October	4.6	23	161	2335.25	-126.91	-177.64
November	4.2	21	147	2132.18	76.16	-101.48
December	4.4	22	154	2233.72	-25.38	-126.86
January	4.6	23	161	2335.25	-126.91	-253.76
February	4	20	140	2030.65	177.69	-76.08
March	4.2	21	147	2132.18	76.16	0.08
	52.2	507.6628		26500

I am not aware of any payroll system that takes into account the fact that someone working April to January will have been underpaid by £250.

I think this is a problem.

 

[Daybooks]

The final problem. Let's use the example again of someone working Monday t Friday, 7 paid hours/day. Let's assume they start work on 1 April 2025.

Their monthly pay 26500/12 = £2,208.34 (rounded up to avoid complaints.

The following table shows how much the pay they receive every month dffers from what they would have received if they had been paid for the actual weeks (days, hours) worked:

Month	Weeks	Days	Hours	Weekly pay	Variance	Cumulative
April	4.4	22	154	2233.72	-25.38	-25.38
May	4.6	23	161	2335.25	-126.91	-152.29
June	4	20	140	2030.65	177.69	25.40
July	4.6	23	161	2335.25	-126.91	-101.51
August	4.4	22	154	2233.72	-25.38	-126.88
September	4.2	21	147	2132.18	76.16	-50.73
October	4.6	23	161	2335.25	-126.91	-177.64
November	4.2	21	147	2132.18	76.16	-101.48
December	4.4	22	154	2233.72	-25.38	-126.86
January	4.6	23	161	2335.25	-126.91	-253.76
February	4	20	140	2030.65	177.69	-76.08
March	4.2	21	147	2132.18	76.16	0.08
	52.2	507.6628		26500

I am not aware of any payroll system that takes into account the fact that someone working April to January will have been underpaid by £250.

I think this is a problem.

You identify the differences between the two methods not a problem between one or the other.

Both give their respective correct results. The choice is made. The differences are the consequences of that choice. If you want the two methods to realise the same monthly result then as it stands it is mathematically impossible. You would have to bring one in line with the other; at which point you have to question the need of one of them. There is a similar difference between choosing the director method of national insurance or the alternate method. Neither are wrong.

You could make the monthly salary equivalent to the variable hours for the respective months rather than one twelfth. If you do please let me listen in when it’s being explained.

We have got to mid 2025 so maybe this identified ‘problem’ is just perceived?

Your point about there should be an officially recognised way of calculating the hourly rate is that there is. It is the pay divided by the hours; both are matter of fact. Let’s not get into ‘productivity’ for now.

Who would think choice is so troublesome.

 

[Newchodge]

It is the pay divided by the hours;

What pay divided by what hours?

If 2 different methods (both legal) can produce a difference in daily pay for someone on NMW of more than £30 there is a problem. Don't you think?

 

[Daybooks]

You have to put it into context - what question is trying to be answered. The actual pay received for the actual hours worked gives the actual hourly rate of pay. The standard pay for a standard number of hours gives a standard hourly rate. If actual equals standard then all is well.


You have to accept that the use of hourly rate and a monthly salary will yield different results because they are different methods. Annual salary divided by twelve is a simple solution but inherently differs from the hourly rate regime on a month by month basis. Neither are wrong they are just different. The difference is a consequence of the choice.

I don’t think the difference should be of concern because they are two separate methods. The employee on an hourly rate is contractually going to be paid that rate for actual hours worked. The employee on the monthly salary will be paid contractually the agreed amount.

Unless you can change the number of days in the year or the number of days in each month then the difference will persist.

From your table you didn’t seem to have an issue with the month of June, September, November, February and March.

If you don’t like the consequential differences as a result of the choice then change the choice. Nothing stops you from making the monthly salary based on the expected hours in the month - when the two would align. The choice is yours (the employer).

 

[Newchodge]

The employee on an hourly rate is contractually going to be paid that rate for actual hours worked.

Many employees on hourly rates are paid an annual salary in equal monthly instalments.

The choice is yours (the employer).

The employer can choose to pay the employee less than their legal entitlement? Without the employee being aware?

I don’t think the difference should be of concern because they are two separate methods.

It is of huge concern if the employee is paid at or near NMW - that would be a criminal offence.

From your table you didn’t seem to have an issue with the month of June, September, November, February and March.

There is nothing illegal, or criminal, in paying an employee more than their legal entitlement.

 

[Daybooks]

Many employees on hourly rates are paid an annual salary in equal monthly instalments.


The employer can choose to pay the employee less than their legal entitlement? Without the employee being aware?


It is of huge concern if the employee is paid at or near NMW - that would be a criminal offence.


There is nothing illegal, or criminal, in paying an employee more than their legal entitlement.

My argument is that the annual pay for the salaried employee when divided by the contractual hours to be worked gives the actual hourly rate of pay and should be on or above any legal requirements.

If it is contractually that an annual amount is to be paid in equal instalments then so be it.

Your argument seems to be (please correct me otherwise) that if given this agreed and lawful arrangement is arbitrarily compared to a strictly hourly paid worker and that hourly rate for the monthly salaried worker is less than the equivalent hourly paid worker or possibly less than any legal requirement then it is unlawful, or even illegal. It would become so for a month in question - and arguably you would have to apply a cumulative test - through the quirkiness of number of days in months not through deliberate action on the part of anyone. Notwithstanding this the contractual and lawful annual salary gets paid.

How do you hit back at the defence of “Employee A is paid contractually at a rate of £x per hour and Employee B is paid at a contractual annual rate divided by twelve and for the contracted hours is this same effective rate of £x per hour”? I believe there is an acceptance of the consequences of annual salary divided by twelve; perhaps not by you, without the need to get litigious. You are effectively outlawing annual salaried paid in twelve equal instalments. Has it received Royal Assent, I may have missed it?

 

[MikeJ]

You are effectively outlawing annual salaried paid in twelve equal instalments. Has it received Royal Assent, I may have missed it?

Is that tone really necessary? Cyndy is raising an interesting point, and some people could be breaking the law without realising it.

In my limited experience, people quoted an annual salary have been paid on a 1/12th monthly basis*. Those paid an hourly rate have been paid for each hour worked.

* I've seen this done on a 1/13th basis too. People got the missing money in June and December, theoretically to pay for their summer holiday and for Christmas. I've no idea how they handled people leaving part way through a year.

 

[Newchodge]

How do you hit back at the defence of “Employee A is paid contractually at a rate of £x per hour and Employee B is paid at a contractual annual rate divided by twelve and for the contracted hours is this same effective rate of £x per hour”

You must have missed the post about the fact there are 10 different ways to calculate the hourly rate, leading to a potential difference in pay of £30 per day when the employer chooses which one to use.

You described that you use the 260 method, which gives a high hourly rate, to deduct mney from staff on umpaid leave and a monthly average, which gives a low hourly rate, when calculating the pay for starters and leavers.

So when deducting hours' pay you use a high hourly rate and when paying an hourly rate you use a lower hourly rate. Do you think that is reasonable?

 

[Newchodge]

Is that tone really necessary? Cyndy is raising an interesting point, and some people could be breaking the law without realising it.

In my limited experience, people quoted an annual salary have been paid on a 1/12th monthly basis*. Those paid an hourly rate have been paid for each hour worked.

* I've seen this done on a 1/13th basis too. People got the missing money in June and December, theoretically to pay for their summer holiday and for Christmas. I've no idea how they handled people leaving part way through a year.

It's often done on 1/13th basis when people are paid every 4 weeks, as well.

 

[numbersrule]

Thanks Cindy for alerting me to this thread in the other thread.

I agree that a standard to address these issues would be an improvement on the current situation where it is left to the employer to make a choice without any guiding principles.

Taking your examples of potential underpayments for mid year leavers, it would be relatively simple to include a guiding principle in a standard to the effect that employees pay should be recalculated for the whole employment in their final pay month to remove any discrepancy.

 

[Newchodge]

Thanks Cindy for alerting me to this thread in the other thread.

I agree that a standard to address these issues would be an improvement on the current situation where it is left to the employer to make a choice without any guiding principles.

Taking your examples of potential underpayments for mid year leavers, it would be relatively simple to include a guiding principle in a standard to the effect that employees pay should be recalculated for the whole employment in their final pay month to remove any discrepancy.

Thanks Numbers (please excuse the informality)

The guidance on NMW for people paid annually in equal monthly instalments actually states that leavers' pay should be recalculated for the 'current' year from the anniversary of their start date, to ensure that it complies with NMW. Many payroll professionals have not read that guidance, or are even aware of its existence. I was on a thread on a payroll forum last week when several people discussed the need to calculate whether NMW had been paid every month in those circumstances, which does not need to happen. So, in theory that resolves that issue for NMW earners. The problem still being that employers may be unaware that their annial salaryis below the NMW hourly rate. But even if that were done properly, it doesn't resolve the issue for those paid more but whose employers are, I believe, in breach of contract.

My bigger worry is still caclulating from annual pay to hourly or daily pay to ensure the right level of additions or deductions.

 

[Daybooks]

You must have missed the post about the fact there are 10 different ways to calculate the hourly rate, leading to a potential difference in pay of £30 per day when the employer chooses which one to use.

You described that you use the 260 method, which gives a high hourly rate, to deduct mney from staff on umpaid leave and a monthly average, which gives a low hourly rate, when calculating the pay for starters and leavers.

So when deducting hours' pay you use a high hourly rate and when paying an hourly rate you use a lower hourly rate. Do you think that is reasonable?

Hopefully I have not missed your point. There is only one true hourly rate and that is the actual pay in the period divided by the actual hours worked in that pay period.

Your ten or so possible calculations refer to evaluating an hourly rate from an annual salary and the possible denominators that could be used. The choice will lead to the differences you state but that is the result of mathematics and I am not expressing an approval of any.

The 260 method, as I believe you say CIPP approved, has been used to calculate the daily rate for paid or unpaid leave equally. These were not hourly paid staff. Starters and leavers not by reference to the acceptable 260 method but by reference to work days and holidays in the period to those actually worked. That ensured the employees were not disadvantaged due to the month in question. It was consistently applied. Minimum wage would never have been an issue.

The issue you raise I believe is down to whether fluctuations in effective hourly rates for a salaried worker who is expecting 1/12th each month should get a higher pay figure in some months because the effective rate based on the actual hours in some months is lower and that lower rate is below the legal minimum. I don’t know. I have tried to put a case for why it shouldn’t.

I believe a later post suggests it is acceptable. If it should apply then in theory the minimum wage for salaried staff has just gone up. Hopefully those versed in employment law can advise.

 

[Newchodge]

Hopefully I have not missed your point. There is only one true hourly rate and that is the actual pay in the period divided by the actual hours worked in that pay period.

Your ten or so possible calculations refer to evaluating an hourly rate from an annual salary and the possible denominators that could be used. The choice will lead to the differences you state but that is the result of mathematics and I am not expressing an approval of any.

The 260 method, as I believe you say CIPP approved, has been used to calculate the daily rate for paid or unpaid leave equally. These were not hourly paid staff. Starters and leavers not by reference to the acceptable 260 method but by reference to work days and holidays in the period to those actually worked. That ensured the employees were not disadvantaged due to the month in question. It was consistently applied. Minimum wage would never have been an issue.

The issue you raise I believe is down to whether fluctuations in effective hourly rates for a salaried worker who is expecting 1/12th each month should get a higher pay figure in some months because the effective rate based on the actual hours in some months is lower and that lower rate is below the legal minimum. I don’t know. I have tried to put a case for why it shouldn’t.

I believe a later post suggests it is acceptable. If it should apply then in theory the minimum wage for salaried staff has just gone up. Hopefully those versed in employment law can advise.

I am an employment lawyer.

I am nor advocating any of the 10 methods of calculating an hourly or daily rate for those on an annual salary paid in 12 equal instalments. As all produce different results, they are all an issue.

What I am advocating is that, with exceptions for very senior staff, all pay rates should be expressed as an hourly rate and, if it is advisable to pay the same amount every payday (which I think it may be) then pay every 4 weeks.

 

[MikeJ]

The problem there is most bills are monthly. Rent/mortgage, utilities, credit cards. I know it works out the same in the end, but that's going to be a budgeting nightmare for most people. Getting the same money every month is probably a benefit for many people, even if it's not entirely correct.

 

[Newchodge]

The problem there is most bills are monthly. Rent/mortgage, utilities, credit cards. I know it works out the same in the end, but that's going to be a budgeting nightmare for most people. Getting the same money every month is probably a benefit for many people, even if it's not entirely correct.

I know - I was paid 4-weekly a few years ago and I struggled at first, however mortgage, council tax and, I think, utilities will all accept 4 weekly payments if you request it. Rent is very frequently quoted as a weekly rate, so should be easy to pay weekly, certainly social hosing rents would be OK. I am not sure about credit cards, but if it became the norm, it would also become the norm for all bills to be 4-weekly.

The biggest issue is Universal Credit, which IDS insisted had to be calendar monthly (like all working peple are paid). Everything else in employment and in benefits is weekly. 5.6 weeks paid holiday paid at the average of the last 52 weeks, SSP, SMP etc are weekly, all benefits, with the exception of UC is weekly calculated.

 

[Newchodge]

The problem there is most bills are monthly. Rent/mortgage, utilities, credit cards. I know it works out the same in the end, but that's going to be a budgeting nightmare for most people. Getting the same money every month is probably a benefit for many people, even if it's not entirely correct.

Actually for those on the lowest incomes getting the same amount every month can make life very difficult. Making the same amount of money in months that can have 33 days (payday on a weekend, so paid early, then 31 days the next month) as in February (28 days) can be hard. Mortgage and regular bills may be the same, but food, school meals, transport, heating (if you are on prepay) can be problematic. Too much month at the end of the salary is a common saying!

 

[Bobbo]

The final problem. Let's use the example again of someone working Monday t Friday, 7 paid hours/day. Let's assume they start work on 1 April 2025.

Their monthly pay 26500/12 = £2,208.34 (rounded up to avoid complaints.

The following table shows how much the pay they receive every month dffers from what they would have received if they had been paid for the actual weeks (days, hours) worked:

Month	Weeks	Days	Hours	Weekly pay	Variance	Cumulative
April	4.4	22	154	2233.72	-25.38	-25.38
May	4.6	23	161	2335.25	-126.91	-152.29
June	4	20	140	2030.65	177.69	25.40
July	4.6	23	161	2335.25	-126.91	-101.51
August	4.4	22	154	2233.72	-25.38	-126.88
September	4.2	21	147	2132.18	76.16	-50.73
October	4.6	23	161	2335.25	-126.91	-177.64
November	4.2	21	147	2132.18	76.16	-101.48
December	4.4	22	154	2233.72	-25.38	-126.86
January	4.6	23	161	2335.25	-126.91	-253.76
February	4	20	140	2030.65	177.69	-76.08
March	4.2	21	147	2132.18	76.16	0.08
	52.2	507.6628		26500

I am not aware of any payroll system that takes into account the fact that someone working April to January will have been underpaid by £250.

I think this is a problem.

However if you look at it from a January 2025 to December 2025 perspective as follows:

Month	Weeks	Days	Hours	Weekly pay	Actual	Variance	Cumulative
January	4.6​	23​	161​	2335.25​	2208.34​	-126.91​	-126.91​
February	4​	20​	140​	2030.65​	2208.34​	177.69​	50.78​
March	4.2​	21​	147​	2132.18​	2208.34​	76.16​	126.94​
April	4.4​	22​	154​	2233.72​	2208.34​	-25.38​	101.56​
May	4.4​	22​	154​	2233.72​	2208.34​	-25.38​	76.18​
June	4.2​	21​	147​	2132.18​	2208.34​	76.16​	152.34​
July	4.6​	23​	161​	2335.25​	2208.34​	-126.91​	25.43​
August	4.2​	21​	147​	2132.18​	2208.34​	76.16​	101.59​
September	4.4​	22​	154​	2233.72​	2208.34​	-25.38​	76.21​
October	4.6​	23​	161​	2335.25​	2208.34​	-126.91​	-50.7​
November	4​	20​	140​	2030.65​	2208.34​	177.69​	126.99​
December	4.6​	23​	161​	2335.25​	2208.34​	-126.91​	0.08​
	52.2​	507.6628​		26500​	26500​

The person is never out of pocket as much as from an April to March perspective. Indeed They are never 'out of pocket' for more than one month at a time and 'overpaid' for most of the year.

I did note that your working for some months of the year had the wrong amount of 'Monday to Friday days' by 1 (some over some under) so have corrected this in my working. Crucially, not covered in my calculation as it is January to December, you have January 2026 as having 23 M-F days when it will have 22. As such a person's underpayment from April to January would be £152 rather than £250. Their most 'underpaid' point would be October, not January and it would be fully recouped in November.

To be clear, i'm not saying you don't have a point - just that picking different starting points gets different results

 

[Newchodge]

However if you look at it from a January 2025 to December 2025 perspective as follows:

Month	Weeks	Days	Hours	Weekly pay	Actual	Variance	Cumulative
January	4.6​	23​	161​	2335.25​	2208.34​	-126.91​	-126.91​
February	4​	20​	140​	2030.65​	2208.34​	177.69​	50.78​
March	4.2​	21​	147​	2132.18​	2208.34​	76.16​	126.94​
April	4.4​	22​	154​	2233.72​	2208.34​	-25.38​	101.56​
May	4.4​	22​	154​	2233.72​	2208.34​	-25.38​	76.18​
June	4.2​	21​	147​	2132.18​	2208.34​	76.16​	152.34​
July	4.6​	23​	161​	2335.25​	2208.34​	-126.91​	25.43​
August	4.2​	21​	147​	2132.18​	2208.34​	76.16​	101.59​
September	4.4​	22​	154​	2233.72​	2208.34​	-25.38​	76.21​
October	4.6​	23​	161​	2335.25​	2208.34​	-126.91​	-50.7​
November	4​	20​	140​	2030.65​	2208.34​	177.69​	126.99​
December	4.6​	23​	161​	2335.25​	2208.34​	-126.91​	0.08​
	52.2​	507.6628​		26500​	26500​

The person is never out of pocket as much as from an April to March perspective. Indeed They are never 'out of pocket' for more than one month at a time and 'overpaid' for most of the year.

I did note that your working for some months of the year had the wrong amount of 'Monday to Friday days' by 1 (some over some under) so have corrected this in my working. Crucially, not covered in my calculation as it is January to December, you have January 2026 as having 23 M-F days when it will have 22. As such a person's underpayment from April to January would be £152 rather than £250. Their most 'underpaid' point would be October, not January and it would be fully recouped in November.

To be clear, i'm not saying you don't have a point - just that picking different starting points gets different results

The majority of people get pay increases from April. Their annual salary is, therefore constant from April. So starting the calculation from April makes sense. I accept I may have made slight errors in the figures, but the basic principle is sound. What actually happens is people are 'underpaid' during longer monthe and 'overpaid' during shorter months. There are 7 long months in a year, so the effect, generally, will be underpayment. The fundamental problem is using a constant payment for periods that are not constant.