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I am working in a 3-5 people startup & the way my employer calculates the salary is a new way which I have never seen before. He basically first removes the weekends (Sat & Sun) from the month and then divides the salary by the remaining working days.

For example in Jan 2021 there were total of 31 days. So,

Weekends in Jan 2021 = 10 (5 Saturdays & 5 Sundays)
Remaining working days = 21
Lets say the monthly salary is 10,000. So 10000 / 21 = 476 per day.

Is this a correct way of calculating salary? What are some downside of this way for the month of Feb or generally? Thanks :)

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    What is this calculation for? Are they going to take that salary per-day basis and count for the remaining year? Or the total salary is fixed? – Sourav Ghosh Feb 12 at 6:46
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    So you still get a regular monthly salary, but the daily rate varies from month to month? – Andrew Leach Feb 12 at 7:10
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    @AndrewLeach Yes thats my point. Just curious whether this method of calculation has downsides? Dont know why my question is being downvoted :/ – Faisal Ghufran Feb 12 at 7:12
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    Other than the removal of weekends, this doesn't really seem exceptional in any way. If I'm paid a monthly salary, I'm paid ~10% more per day in February than I am in January and March. – Philip Kendall Feb 12 at 8:28
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    Is this in your country (which one?) mandated by law how the payings should be? – guest Feb 12 at 9:15
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It's unusual, but ordinarily has no effect: your monthly salary is fixed at 10000, and you get that regular amount each month, and pay the same amount of deductions (tax, insurance, pension...) each month.

It may well have a bearing on overtime payments. Four hours' overtime in January would be 0.5 × 476 on your calculation in the question. In February 2021, there are 20 working days which works out at 500 per day and four hours' overtime is 0.5 × 500. In March, there are 23 working days and the daily rate is lower than January. (So, actually, February is the month which definitely doesn't have a downside here!)

It almost certainly will have an effect for unpaid leave. An unpaid day in January will cost you 476; an unpaid day in February will cost 500. A day in March is worth 434. February does have a downside here.

The employers I've worked for have set an annual salary which is simply divided by 12 for monthly payments or 13 for four-weekly payments. The annual rate is then divided by a notional number of working days in a year (365 − 104 = 261) to get a daily rate, and the hourly rate which is used for overtime is 5 × (daily-rate) ÷ (weekly hours). Because the notional number of working days is close to the actual number, the calculated daily rate is reasonable, and it doesn't vary through the year. It makes calculations easy for everyone.

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    Overtime may well have a multiplier (time and a half, double time, etc) but the amount which is multiplied will be based on the daily rate. – Andrew Leach Feb 12 at 7:38
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    The flip side of this is if you take unpaid leave for one reason or another, it's better to do it in January or March than February. – Philip Kendall Feb 12 at 8:30
  • @PhilipKendall Yes, I supppose that ought to go in explicitly. – Andrew Leach Feb 12 at 9:25
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One unintended consequence: sometimes you need to submit paycheck stubs as proof of income. Like some apartments may require you make 2-3 times the rent on an apartment. So if you get paid weekly then, using that calculation method, February would result in higher income than in January. So, if you're close in income to the 2-3x limit, already, then maybe you'd qualify for an apartment in February that you wouldn't qualify for in January.

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  • I would just submit the stub for the period where I was paid the most, or submit multiple stubs. – Barmar Feb 12 at 15:20
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    And if you're that close to the cutoff, you could just explain the situation to the landlord, saying that the weekly paychecks vary a little throughout the year. – Barmar Feb 12 at 15:21
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This is standard practice in, e.g. Russia. If you work the entire month without paid or unpaid leave, you get your monthly fixed salary. However, if you, e.g. take paid time off, you do not get the salary for the missed working days, but you get — for lack of a more accurate term — "vacation money". Since the latter is a fixed rate averaged over the entire year, taking vacation in a month with lots of public holidays will incur a net loss for the employee.

For example, in Russia this year Jan 1st thru 10th were public holidays. Extending the holiday for one more week by taking the week 11th thru 17th off would reduce your monthly salary by 33%. Sure, you would get the aforementioned vacation money, but that would amount to just under 25% of your regular monthly salary.

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