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Calculating backpay and salary for new employees
Calculating backpay and salary for new employees
Rebecca Russell avatar
Written by Rebecca Russell
Updated over a week ago

PayFit automatically prorates any salary payments based on your company preferences. This can be applied to employees who started in the previous month or employees who start mid-way through the current month. We'll explain here how you can automate the calculations or add the payments manually.

Paying employees who started last month

PayFit automatically calculates the backdated pay up to one month if the employee has a fixed schedule. You can also choose to add or overwrite the value with your own calculated value.

Automatically apply backpay

To automatically apply backdated pay for all new employees:

  1. From the left, choose Company settings, then Payroll set-up.

  2. Under the Employee settings section, click Edit.

  3. Under the Late starter pay section, select Pay late starters automatically.

  4. Click Save.

Overwrite the backpay

Or to add backpay manually for a new employee, choose whether you're adding this while onboarding the employee or after they've onboarded:

During onboarding

When setting up the employee, you'll first enter the personal information before entering the contract information. Within the contract information section, at Step 3: Salary, you can select the option to add backpay.

Note: This option only appears if the employee started in an earlier month.

To do this:

  1. Enter the employee's base rate frequency, and the base rate value.

  2. Under the Previous month's pay section, toggle on the option to indicate that the employee still needs to be paid for days worked in the previous month.

    PayFit automatically calculates the days worked in the previous month, and the payment due.

  3. If you'd like to overwrite the value calculated by PayFit, enter the Corrected total pay since start date.

  4. If the employee will be enrolled in a pension scheme in their first month with your company, select whether the backpay payment should also be pensionable.

  5. Click Next and continue the onboarding process.

After onboarding

If you haven't enabled the automatic backpay calculation in your company settings, or if you want to overwrite the value calculated by PayFit:

  1. From the employee's record, click the Employment tab.

  2. Under the Employment section, click Edit contract.

  3. Under the Previous month's pay section, toggle on the option to indicate that the employee still needs to be paid for days worked in the previous month.

    PayFit automatically calculates the days worked in the previous month, and the payment due.

  4. If you'd like to overwrite the value calculated by PayFit, enter the Corrected total pay since start date.

  5. If the employee will be enrolled in a pension scheme in their first month with your company, select whether the backpay payment should also be pensionable.

  6. Click Save.

Once the payment has been entered, you'll see it displayed on the payslip:

Paying employees who joined mid-month

If an employee starts part way through the month, they'll receive a pro-rated base pay as a proportion of the month that they've worked.

The pro-rated base pay is calculated based on two calculation preferences. The first is how the daily rate is calculated:

  • Business days in the month: The number of days in the month that the employee would be expected to work.

  • Inputted business days in the year: The number of days in the year that an employee would be expected to work at your company.

The second is how the number of days in the month is calculated:

  • Count days worked: Pays the number of days that the employee actually worked within the month.

  • Deduct days not worked: Deducts the number of days that the employee didn't work, from their usual monthly base pay.

Tip: Examples of each calculation can be found in the Examples section below.

Automatically apply pro-rated base pay

To set your preferences:

Note: These calculation preferences are applied to all pro-rated base payments for starters, leavers, and employees on leave. It doesn't apply to annual leave payments.

  1. From the left, choose Company settings, then Payroll set-up.

  2. Under the Calculation Preferences section, click Edit.

  3. Enter the number of business days in your company's year.

  4. Next to the How do you want daily rate to be calculated? question, select your preferred daily rate calculation.

  5. Next to the How do you want base pay to be calculated? question, select whether to count days worked in the month, or deduct days not worked.

  6. Click Save.

Overwrite the base pay

If your company calculation preferences don't match your setup in PayFit, you can overwrite the value. To do this:

  1. From the left, choose Run my payroll, then Salaries & variations.

  2. Search for the employee.

  3. Under the Base pay column, click the down-arrow next to the employee's base pay.

  4. Enter the Base pay you've manually calculated.

  5. Add a Reason for overwriting, this is useful for auditing purposes.

  6. Click Save.

You'll see the new base pay displayed on the employee's payslip.

Example calculations

In these example, the employee started on 14th February 2024 with a base pay of £48,000 per year or £4,000 per month. There are 21 working days in February 2024.

Example: Business days in the month

The employee's daily rate is the monthly salary of £4,000, divided by 21 business days in the month = £190.48

Example: Inputted business days in the year

The company uses 260 business days in the year.

The employee's daily rate is the annual salary of £48,000, divided by 260 = £200

In this example, the employee's daily rate is calculated using 260 business days in the year; therefore, the daily rate is £200.

Example: Count days worked

Based on the start date, the employee worked 12 days between 14th and 29th February.

The employee's February base pay is calculated as:

  • 12 days multiplied by the daily rate of £200 = £2,400

Example: Deduct days not worked

Based on the start date, the employee didn't work nine days between 1st and 13th February.

The employee's February base pay is calculated as:

  • 9 days multiplied by the daily rate of £200 = £1,800

  • Monthly base pay of £4,000, minus £1,800 = £2,200

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