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  • The majority of Cylchoedd / Nurseries pay their staff pro rata, i.e. the pay for the hours that they work during the working weeks, is equally divided over the whole year so they are paid the same amount each month. This makes it easier for both the staff and the Cylch / Nursery to keep track of their finances, as the income / outgoings are pretty consistent on a monthly basis.
  • To calculate wages in this way, there are three things that you’ll need to know which are their rate of pay per hour, their contracted weekly hours, and how many weeks per year they’re contracted for. After you know these three pieces of information, their annual salary will be calculated as below:

Annual Salary = Rate of Pay  x  Weekly hours  x  Working Weeks

  • The above will then be divided over the number of months the contract is for, e.g. over 12 months if contracted for the whole year.
  • The majority of Cylchoedd / Nurseries will employ their staff either on 52 week contracts, or on term-time only contracts, which are 39 working weeks a year, and then a minimum of 5.6 weeks of holiday entitlement on top.
  • This is the most straightforward of both the pro rata variants to calculate, and it’s a contract that means the member of staff gets paid throughout the year, i.e. for 52 weeks. So simply, an individual on a 52 week contract working 30 hours per week at £12.50 per hour:

Annual Salary = £12.50 per hour  x  30 hours per week  x  52 weeks  = £19,500

Monthly Wage = £19,500 / 12 months = £1,625.00

Any additional hours worked on top of these core 30 weekly hours, or any of these core 30 hours missed by the individual for any reason, will need to be added to, or taken away from their total gross pay for the month at their hourly rate. If the above employee works an additional 10 hours on top of their usual 30 hour per week in a particular month, then their monthly wage for that month will be:

£1,625  +  (£12.50 per hour  x  10 additional hours) = £1,750.00

  • The same applies for the hours missed, but these will of course be deducted from the monthly wage instead of added on.
  • With regards to the holiday entitlement for individuals on these contracts, the statutory minimum that they have the right to is 5.6 weeks per year. As they’re paid for the whole 52 weeks in the year, there’s no need to add any additional pay for the holiday entitlement, but they’ll have the right to take 5.6 weeks off work with pay. Note that this is the statutory minimum, and that you can offer more than this as an additional benefit to the staff.
  • For a member of staff that works 5 days a week, 5.6 weeks a year corresponds to 28 days of holiday a year. Note that this statutory minimum can include the 8 bank holidays that are in the year, so in reality, the minimum that can be offered is the 8 bank holidays, plus an additional 20 days off per year. Every business is different, so some will offer the statutory minimum, others will offer 28 days + the 8 bank holidays on top of this, others will increase an individual’s holiday entitlement with their length of service etc. so it is important to choose to offer something that will be affordable for the Cylch / nursery in the long run.
  • Adjustments will need to be made to staff’s first payment based on their start date. If they were to start on the first working day of the month, then the calculation will be simple, with no adjustment to be made:

Monthly Wage = (Rate of Pay x Weekly Hours x 52 Weeks) / 12 Months

  • If a new member of staff starts in their role during the month at any point, and not on the first working day of the month, their first payment will need to be adjusted to account for the number of working days they will have worked in that month to avoid over-payment.

Example: A member of staff starts in a nursery on the 18/11/2023, working 30 hours per week, i.e., 6 hours per day, Monday to Friday, on a rate of £12.50 per hour.

Now here, assuming the nursery pays for the whole month in each period, we need to calculate the payment due for the period 18/11/2023 – 30/11/2023.

Note that we’re considering 52-week contracts, which works out to be 260 working days per year for this individual (52 weeks x 5 days per week)

So, we first need to calculate the amount due to this individual for 1 working day:

£12.50 per hour x 6 hours per working day = £75.00

Between 18/11/2023 – 30/11/2023 there are 9 working days

November wage will be: £75 per day  x  9 working days = £675.00

  • You could also calculate the above individual’s ‘day rate’ by dividing their annual salary by 260 working days, e.g. Their annual salary would be £12.50 per hour x 30 hours per week x 52 = £19,500, and if you divide that by 260 working days, you’ll come to the same answer as above, i.e. £75 per day.
  • Similar to working out a new starter’s first monthly payment, unless a member of staff finishes their employment on the final working day of a particular month, their final pay will need to be adjusted corresponding to how many working days they will have work in that pay period
  • This time, we’ll look at an example where we use the individual’s annual salary to work out the final pay:

Calculate the final pay for an individual leaving their role on the 20/11/2023, that’s contracted to working 5 days per week, Monday-Friday, and earns an annual salary of £19,500.

From this, we know they work 5 days per week, for 52 weeks a year, so 260 working days in a year.

Assuming 1 pay period is one full month, we need to calculate the wage for the period 01/11/2023 – 20/11/2023, i.e. 15 working days

Daily Wage = Annual Salary / 260

= £19,500 / 260 = £75.00 per day

Therefore, final wage due for the 15 working days worked in November:

£75.00 x 15 = £1,125.00

  • If an individual that’s leaving their employment with the Cylch / Nursery has any holiday entitlement left that they haven’t been able to use for any particular reason, these days will also be due to be paid to them with their final pay on the same daily rate, e.g. £75.00 per day in the above example
  • There will often be cases during the year where changes will be made to an individual’s contractual terms. This would likely be things such as changes in someone’s rate of pay per hour, or an increase / decrease in an individual’s weekly working hours
  • When this occurs, there will obviously be implications to the individual’s monthly wage, and so you’ll need to calculate the difference moving forward. If the change occurs from the first working day of any particular month, then you’ll simply need to change the appropriate figure in the calculation, i.e. input the new rate of pay or weekly working hours in the below calculation:

Monthly Wage = (£ per hour x Weekly Hours x 52 Weeks) / 12 Months

  • If the contractual change takes effect on any other working day other than the first working day of the month, you’ll need to combine two separate calculations to work out the wage for that particular month, and then use the new figures only for the following month onwards.
  • In this example, we’ll look at calculating the January 2024 wage for an individual who works 35 hours a week, i.e. 7 hours per day, Monday to Friday, if they were to receive an increase in their hourly rate from £12.50 to £13.00, and that being effective from 11/01/2024.

Working days between 01/01/2024 – 10/01/2024 = 6 days

Day rate at £12.50 per hour: £12.50 x 7 hours per day = £87.50 per day

Working days between 11/01/2024 – 31/01/2024 = 15 days

Day rate at £13.00 per hour: £13.00 x 7 hours = £91.00 per day

From the above information, we can work out that the January wage for this individual will be:

(£87.50 x 6 working days) + (£91.00 x 15 working days) = £1,890.00

Calculate the February 2024 wage for an individual that has a decrease in their weekly working hours from 35 hours per week, 7 hours per day, Monday to Friday, to working 30 hours per week, 6 hours per day, Monday to Friday, effective from 15/02/2024 on an hourly rate of £12.50.

Working days between 01/02/2024 – 14/02/2024 = 10 days

Day rate between 01/02 – 14/02: £12.50 x 7 hours = £87.50 per day

Working days between 15/02/2024 – 29/02/2024 = 11 days

Day rate between 15/02 – 29/02: £12.50 x 6 hours = £75.00 per day

From the above information, we can work out that the February wage for this individual would be:

(£87.50 x 10 working days) + (£75.00 x 11 Working days) = £1,700.00

  • These types of contracts mean that the staff are paid for 39 working weeks per year, i.e. the number of weeks in a school year, and they’re then paid an additional allowance for their annual holiday entitlement on top of this. The statutory minimum holiday entitlement that they’ll be able to receive is 5.6 weeks a year.
  • So as an example, to calculate the monthly wage for an individual that earns £12.50 per hour, working 30 hours a week on a term time only contract with a holiday entitlement of 5.6 week per year:

Wage: (£12.50 per hour x 30 hours per week x 39 weeks) / 12 months = £1,218.75

Holiday Pay: (£12.50 p/h x 30 hours per week x 5.6 weeks) / 12 months = £175.00

Total Monthly Wage = £1,393.75

 

  • The same applies with regards to any additional hours worked on top of these core 30 hours per week, or any of the core hours missed on term time only contracts, as with the 52 week contracts, i.e. these hours will need to be added to or taken away from the ‘usual’ monthly wage at the individual’s hourly rate
  • Note that 5.6 weeks is the statutory minimum that can be offered to an individual working 39 weeks a year, but you are allowed to offer a more generous holiday entitlement if you wish. Anything higher will obviously cost more to the Cylch / Nursery, so it is important to look and make sure that what you do decide on is affordable and sustainable in the long run.
  • When processing term-time only contracts, it makes sense for them to be running alongside the school year, i.e. that the contract run from 01 September and run till 31 August the following year. This is not a necessity, you can run your contracts alongside the financial year, the calendar year (January – December), or on an individual basis based on every member of staff’s personal start date. For the examples the contracts run alongside the school year.
  • With new starters on these types of contracts, if they start in September alongside the school year, divide the wage for the 39 working weeks and 5.6 weeks holiday entitlement equally over 12 months.
  • If a member of staff starts during the school year, you’ll need to count the remaining working weeks in the school year from that date, till the end of the summer term, and divide that equally over the remaining months between that date and August. This is the process for contracts running alongside the school year, if you choose to run them in another method, then you’ll need to count the remaining weeks and months corresponding to that.
  • In this example, we will look at the wage of an individual that starts their employment on 05 January 2024, working 30 hours per week over 5 days per week (Monday – Friday), so 6 hours per day at a rate of £12.50 per hour, with an annual holiday entitlement of 5.6 week a year.
  • The first thing to do is to count how many working weeks there are left of the current school year, i.e. how many weeks this individual will be working between 05/01/2024 and 31/08/2024 (this may vary slightly by the county depending on the academic calendar). As they work 5 days a week, we count each day as 0.2 weeks, so there’s 23.4 working weeks between the above dates.
  • After this, you need to calculate the corresponding holiday pay based on 23.4 working weeks, based on 5.6 weeks of holiday entitlement for an individual working 39 weeks a year. To do this, you’ll need to use the calculation: ( 5.6 weeks / 39 weeks) x 23.4 weeks, which gives you the answer that the holiday entitlement due for the new member of staff is 3.36 weeks for their work between 05/01/24 – 31/08/24.
  • You need to know how many months the wage will be divided over, and as we’re working with contracts running alongside the school year, the answer in this case is 8 months (January – August).
  • From all the information gathered above, we can work out that the monthly wage and holiday pay for the new member of staff for the next 8 months will be:

Wage = (£12.50 p/h  x  30 hrs per week  x  23.4 weeks) / 8 months = £1098.46

Holiday Pay = (£12.50 p/h  x  30 hrs per week  x  3.36 weeks) / 8 months = £157.50

  • If the staff’s contracts run alongside the school year, and the individual finishes their employment at the end of the summer term, then there’s no adjustment to make to their final month’s pay, so it will be the same as every other month.
  • Note that as the summer term usually finishes at the end of July, so if their last day of employment is 31 August, their last actual day physically in work would likely be at the end of July. They will still be due their August monthly wage in full, as the wage for the 39 working weeks that has already been during the school year had been divided equally over 12 month, and these working weeks have already been completed, so the August wage will be due.
  • Similarly to new staff that start during the school year, if an individual leaves their employment during the school year, their final wage will need to be adjusted to reflect this. You’ll need to work out how many weeks the individual will have worked between the start of the school year and their leaving dates, and them compare this with what they’ve already been paid, to work out what’s due to them.
  • In this example, we’ll look at working out an individual that’s employed on a term-time only contract working 30 hours per week, i.e. 6 hours per day, Monday to Friday, on an hourly rate of £12.50 per hour, receiving an annual holiday entitlement of 5.6 week per year. We’ll look at working out their final pay based on a leaving date of 12 February 2024.
  • In the same way as working out an individual’s first month pay, the first thing to do is to count how many working weeks this individual will have worked during their employment, i.e. how many working weeks there are between 01/09/2023 – 12/02/24. In this case, there is 20.4 working weeks between both dates.
  • After working out how many working weeks there are in this period, you’ll need to work out the corresponding holiday entitlement due, and to do this, you’ll need to use the calculation: (5.6 weeks / 39 weeks) x 20.4 weeks, which gives us the answer that this employee is entitled to receive 2.93 weeks of holiday pay for the period 01/09/2023 – 12/02/2024.
  • So, from the information gathered / calculated, we can work out the total payment due to the individual for the whole period:

Wage = £12.50 p/h x 30 hours per week x 20.4 weeks = £7,650.00

Holiday Pay = £12.50 p/h x 30 hours per week x 2.93 weeks = £1,098.46

Total Pay Entitlement = Wage + Holiday Pay = £7,650.00 + £1,098.46 = £8,748.46

So, here we have the totals for the full employment between 01/09/2023 – 12/02/2024. After getting this figure, we’ll need to deduct what the individual has already been paid between September 2023 and January 2024, and the remaining figure will be their final wage.

  • So, we know that the monthly wage and holiday pay for this individual would have been:

Wage: (£12.50 p/h x 30 hours x 39 weeks)/12 months = £1,218.75 per month

Holiday Pay: (£12.50 p/h x 30 hours x 5.6 weeks)/12 months = £175.00 per month

Total Usual Monthly Pay = Wage + Holiday = £1,218.75 + £175.00 = £1,393.75

  • These are the monthly sums, and we know that the individual has already received 5 months’ worth of wages at this rate (September – January), so what they have already received to date is:

Total Monthly Pay received x 5 months = £1,393.75 x 5 = £6,968.75

  • The last thing to do is to deduct these sums that they’ve already received between September and January from the total wage due for the full employment period, and from this, we see that the final payments due to this individual would be:

Final Wage = £8,748.46-£6,968.75 = £1,779.71

  • Note that these figures can be higher than their usual monthly wage, as their wages were paid pro-rata, and the number of weeks that they will have physically worked between 01/09/2023 – 12/02/2024 will mean that they have currently not received all the pay that they are due. This is mainly due to when the school holidays fall, and because a large proportion of the school holidays, e.g. Easter (2 weeks off) and Summer (6 weeks off) haven’t been yet, and as their pay is initially divided equally over 12 months, there’s a sum of money that needs to be back-paid to them in a way.
  • There will often be situations where staff will see changes to their hourly rate or weekly working hours during the school year. A possible example of this could be in April, where there are often increases in the minimum wage.
  • These changes in an individual’s contract will mean that their monthly wage is affected, so to calculate the new sums, you’ll need to do a similar calculation to when calculating a new starter’s wage when their employment commences during the school year, i.e. you’ll need to count how many working weeks are left in the school year, and process the change over those weeks, then divide the total over the remaining months from the change, till the end of the summer term.
  • What will someone’s new monthly wage be if they have an increase from £11.44 per hour, to £12.50 per hour from the 01/02/24 onwards, where they work a total of 20 hours per week?

Monthly Wage before the change: (£11.44 p/h x 20 hours x 39 weeks) / 12months = £743.60

Monthly Holiday Pay before the change: (£11.44 p/h x 20 hrs x 5.6 weeks) / 12 months = £106.77

Increase in hourly rate = £1.06 per hour

Working weeks between 01/02/2024 – 31/08/2024 = 19.8 weeks

Equivalent holiday weeks between 01/02/24 – 31/08/24 = 2.84 weeks

Months left in the school year = 7 months

Increase in Wage: (£1.06 x 20 hours x 19.8 weeks) / 7 months = £59.97 per month

Increase in Holiday Pay: (£1.06 x 20 hours x 2.84 weeks) / 7 months = £8.61 per month

From the above information, the new monthly wage and holiday pay for this individual for February and the rest of the school year would be:

New Monthly Wage: £743.60 + £59.97 = £803.57

New Monthly Holiday Pay: £106.77 + £8.61 = £115.38

  • Calculate the new monthly salary for an individual that sees a decrease in their weekly working hours from 30 hours per week at £12.50 per hour, to work 25 hours per week at £12.50 per hour, effective from 01/03/2024 onwards.

Monthly Wage prior to change: (£12.50 p/h x 30 hrs x 39 weeks) / 12 months = £1,218.75

Monthly Holiday pay prior to change: (£12.50 p/h x 30 hrs x 5.6 weeks) / 12 months = £175.00

Decrease in weekly hours = 5 hours per week

Working weeks between 01/03/24 – 31/08/24 = 16.8 weeks

Corresponding Holiday weeks between 01/03/24 – 31/08/24: (5.6 /39) x 16.8 = 2.41 weeks

Months remaining in the school year: 6 months

Decrease in monthly wage: (£12.50p/h x (-5 hrs) x 16.8 weeks) / 6 months =              -£175.00 per month

Decrease in monthly holiday pay: (£12.50p/h x (-5 hrs) x 2.41 weeks) / 6 months

= -£25.13 per month

So, from the above information, we can say that this individual’s new monthly wage and holiday pay for March and the remaining months of the school year would be:

New Monthly Wage: £1,218.75 – £175.00 = £1,043.75

New Monthly Holiday Pay: £175.00 – £25.13  = £149.87

  • As well as staff working in the Cylch / Nursery that have fixed weekly hours that they work, there will often be others, for example bank staff, that will work varied hours each month based on when cover is needed or for whatever other reason that arises.
  • With this type of contract, we’d recommend that you pay for the hours in the following month, e.g. pay for any hours worked in January as their February wage. If you choose not to do this, we’d recommend having some sort of cut-off point in the month, e.g. say you pay the wages on the 25th of each month, that you take the 15th as your cut off point each month as an example, and so each month you’d be paying for the hours worked from the 16th of the previous month, up to and including the 15th of the current month
  • It’s important to note that even though staff on these types of contracts do not have fixed hours that they work each week, they still have the right to receive holiday pay corresponding to the hours that the do work in the setting
  • With the holiday pay element of these contracts, it’s up to the employer to decide when the staff are paid, some will decide to pay it monthly alongside the hours worked, others will pay the holiday element during the school holidays, e.g. Christmas, Easter and August, to ensure the staff have some income throughout the year
  • To calculate how much holiday pay is due for these individuals, you’ll need to work out what 12.07% of the total hours they have worked in the period you will be paying for
  • 12.07% is the equivalent percentage to what 5.6 statutory holiday weeks is to individuals on 52 weeks per year contracts, see the calculation below:

(5.6 holiday weeks / 46.4 working weeks) x 100% = 12.07%

  • In this example, we’ll calculate the holiday pay due to be paid for an entire school year, i.e. September to July, so that they receive the payment as their August pay when the setting is closed. We’ll calculate it based on the fact that they would have worked a total of 245 hours in the year

We know from the previous slide that this will be 12.07% of the total hours worked, so simply:

Holiday hours = 245 hours x 0.1207

                              = 29.57 hours of holiday pay due in August

Note that by multiplying with 0.1207, you’ll instantly get 12.07%.

These hours will be paid at the individual’s usual hourly rate

  • On some occasions staff may have worked extra hours. These hours must be approved / authorised by the responsible manager.
  • Additional hours are when a member of staff works more hours than their contractual hours
  • Holiday pay needs to be paid when additional hours are worked. The holiday percentage of 12.07% is multiplied by the hourly rate and the additional hours worked.
  • If a member of staff has more than one job, you as employers do not need to do anything different to the usual procedure.
  • There is no difference whether the second or third job is in a Cylch Meithrin or not. Each Cylch Meithrin are separate employers.
  • HMRC share the tax code and will send the split tax code to your payroll provider for tax and NI purposes.