Example based on 12-month average salary? What should I pay attention to when calculating?

According to the “Employment Ordinance”, regardless of whether the remuneration system stipulated in the employment contract is: fixed monthly salary system, pure commission system, or basic salary commission system, basically when calculating employees’ wages, paid holidays, and related statutory rights and interests , all need to be calculated based on their average salary in the past 12 months. Still not sure how to calculate the 12-month average salary? You can refer to the content and examples in this article, so that you can better understand employment rights!

Why use the 12-month average salary calculation?

On July 13, 2007, the “Employment (Amendment) Ordinance 2007” was officially implemented to ensure that all components of “wages” (including commissions and allowances, etc.) are included in the calculation of employees’ relevant statutory entitlements. In other words, no matter what system the employee’s salary belongs to, including monthly salary, daily salary or even piece-based salary, it is necessary to calculate the relevant legal rights based on the average salary of 12 months. It should be noted that when calculating the average wage, the period and wages that are “not included” should be excluded.

Which employee benefits are calculated based on 12-month average wages?

Example: How to exclude “not counted” wages?

Statutory entitlements to be calculated using 12-month average wages include the following eight:

9. Holiday pay;

10. Annual leave pay;

11. Sickness benefits and related provisions;

12. Maternity leave pay and related provisions;

13. Paternity leave pay;

14. Year-end payment;

15. Payment in lieu of notice;

16. Additional Payments for Failure to Comply with Unreasonable and Unlawful Dismissal Reinstatement or Rehire Orders.

If the employee has been employed for less than 12 months, the shorter period before the employee’s separation is used for calculation.

What are the “not counted” periods and wages?

When calculating the 12-month average salary, in order to avoid reducing the statutory entitlement by dragging down the average salary, the salary earned by the employee during the following periods will be excluded:

1) Specific holidays taken by employees:

The Employment Ordinance stipulates that certain holidays such as rest days, statutory holidays, annual leave, maternity leave, paternity leave or sick leave should be deducted when calculating the 12-month average wages;

2) Sick leave for work-related injuries listed in the “Employees’ Compensation Regulations”:

If an employee takes leave due to a work-related injury or sick leave listed in the Employees’ Compensation Regulations, or if the leave is taken with the consent of the employer, it should be deducted when calculating the 12-month average salary;

3) The employee is not offered work by his employer during the normal working day.

If a monthly-salary employee has taken a 14-week maternity leave starting from 9 August 2021, that period of salary will only be calculated at 4/5 of the salary.

When calculating your 12-month average daily wages, you should exclude :

• 14 weeks maternity leave period (98 days)

• and 14 weeks maternity leave pay

Average daily wages = total wages for 12 months – 14 weeks maternity leave pay (yuan) / 365 – 98 (days)

The above information is for reference only. If you have any questions about tax declaration and accounting, we welcome your inquiries.

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