Calculating a day’s pay

According to the Supreme Court calculating a day’s pay should be at the rate of 1/365th of the annual salary, unless the employment contract says otherwise. This does not apply where the employee has a set hourly rate.

Some people calculate a days leave as 1/260th of the employee’s annual salary, ie the number of working days in a year (5 days x 52 weeks) or 1/365th of the employee’s annual salary which would include weekends (7 x 52).

The Court of Appeal previously ruled that the deduction should be 1/260th of the employee’s annual salary but this has now been overturned and says that in the absence of any express contractual wording to the contrary, the correct rate of deduction is 1/365th of the employee’s annual salary.

Do not worry if your contracts say differently, it is fine to continue to use the 1/260th rate, but where calculation is not included in a contract then the 1/365th calculation should be used.

To receive an express contractual provision please email quoting code: PRO6617

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