england-and-wales employment
What is the legal definition of a day of pay for someone on an annual salary?
<p><strong>Background:</strong></p>
<p>A friend of mine was recently let go from a job. They negotiated for their notice period plus 8 day's pay (the 8 day's pay was called a 'termination award' in the payslip). The job was 5 days a week (Monday to Friday), with an annual salary.</p>
<p>In the final payslip, the accrued holiday pay was calculated as each owed day being 1/260th of the annual salary (as is standard), and as it was part way through a month the final month's pay was calculated in the same way (working days in month * 1/260th of annual salary).</p>
<p>However, the 8 days 'termination award' was calculated as only 1/365th of annual salary * 8.</p>
<p><strong>Question:</strong></p>
<p>What is the legal definition of 8 day's worth of annual salary for someone who works 5 days a week in the UK?</p>
<p>Does it make a difference if the term is &quot;8 working days&quot; as opposed to &quot;8 days&quot;?</p>
<p>Does it make a difference if it can be shown that the normal way for that company of working out a daily amount of salary uses the 1/260th method?</p>

<p><strong>The legal approach</strong></p>
<p>Unless there is something unusual about the situation, the courts tend to analyse &quot;salaries&quot; as the quid pro quo for &quot;time work&quot;, and when a salary expressed as an annual amount falls to be pro-rated, it is divided by the number of <em>working</em> days in that annual period, not the number of calendar days.</p>
<p>&quot;8 days' worth of pay&quot; would typically be interpreted as meaning the salary attributable to performing 8 full days' worth of time work, not the salary attributable to whatever time work would be done over 8 calendar days (where some of those days would be non-working days).</p>
<p>If the agreement had been expressed as &quot;working days&quot; rather than just &quot;days&quot;, that certainly would have been less ambiguous on this question.</p>
<p>But in the presence of ambiguity, the courts are likely to default to analysing it as meaning &quot;the pay attributable to a day's work&quot;, not &quot;the pay attributable to the continuation of the employment contract for an additional calendar day&quot;.</p>
<p>The courts are also unlikely to believe that an employer would be confused about such ordinary payroll concepts for salaried workers.</p>
<p><strong>Different interpretations of &quot;salary&quot;</strong></p>
<p>Although employers are unlikely to be confused about the law, a philosophical confusion arises in this area because there is a competing conception of a &quot;salary&quot; which is not as &quot;fixed time for fixed pay&quot;, but as a regular maintenance payment to the worker which is independent of time worked or any work assessed to have been done.</p>
<p>Whilst there may be normal hours of attendance under this conception, there may also be a latent expectation to attend outside these hours (without expecting additional pay), and also a latent expectation that brief absences or sickness absence will not be reckoned against the salary (as it would be for an hourly-paid worker).</p>
<p>There may also be an acknowledgement that the salaried worker is not always working in any practical sense during their hours of attendance (such as if their role involves overseeing or reacting to unpredictable events), or that at other times they may be working when not in attendance at work (such as study or preparation in free time, or thinking over the weekend).</p>
<p>In other words, the salaried worker's duty might be to keep &quot;office hours&quot;, but that is not the measure of their work output or even a measure of the times when they are actually engaged in work. This is not unusual with professional or managerial workers.</p>
<p>However, even where both employer and employee might acknowledge this as the reality in a particular case, the courts tend to reject this analysis as too complicated and uncertain to adjudicate upon.</p>
<p>Instead, the courts impose law upon the parties, holding that the primary obligation for which a salaried worker is remunerated are the hours of attendance, and a &quot;day's pay&quot; is reckoned accordingly.</p>
<p>Employers are free to use salaries as an alternative to hourly pay or per-diems, but when pro-rating disputes come to be adjudicated by the law, the employers have a clear understanding for how the calculation will be performed.</p>
