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Working Days | Return to menu |
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| Introduction | If you are
considering drawing up a business plan, it is important to realise that
there may well be 365 days in the calendar year, but there are significantly
fewer productive days you spend at work than you think. How many productive working days are there? Assuming a normal Monday to Friday working week applies, there are in fact only 252 productive working days in 2002 and 254 in 2003 - see the tables below. If you take into account the legal minimum annual holiday leave of 20 days employees are now entitled to take, the number of productive days fall to just 232 for 2002. Although it is not a statutory requirement to provide 20 days paid leave on top of the normal public and bank holidays, we are assuming that many employers will do so as part of their contracts of employment. Remember that 2002 also contains the exceptional Golden Jubliee Bank Holiday on 3 June 2002. Using the wrong number of days in your business plan may cost you more than you think! To illustrate the last point, consider Mr Jones (specialist turner and fitter) who is currently working out what hourly rate he should charge his clients. He determines that he will spend a minimum of £20,000 over the next twelve months renting his machine shop and equipment. This figure also includes electric, telephone, insurance, rates and similar fixed overhead expenses. On top of all this, Mr Jones wishes to make a profit of £40,000 to take home as his gross earnings for the year. He concludes that in order to pay his way and take home his required salary, he is going to have to invoice his customers at least £60,000 (£20,000 + £40,000) over the forthcoming year. Mr Jones charges by the hour, so he needs to work out a standard hourly rate to achieve the level of planned income. Mr Jones' first attempt to calculate a suitable hourly charge out rate Please note that for the sake of simplicity we are assuming that Mr Jones charges his clients at cost for the materials he uses on the job. On this basis they do not need to be taken in to account for this exercise. Mr Jones works a standard 7 chargeable hours a day, Monday through to Friday. He wishes to take 4 weeks' paid holiday during the year, so that leaves 48 productive weeks. Mr Jones calculates the total number of productive hours in this period to be 48 weeks x 5 days x 7 hours = 1,680 hours. The required minimum hourly charge will be £35.71/hr (£60,000 divided by 1,680 hrs). This may seem perfectly reasonable, but the basis Mr Jones has used is flawed. Let us take a look at the same problem, this time using the exact number of productive days in the year 2002. The hourly charge-out rate recalculated by the recommended exact method: If Mr Jones was to use the exact number of productive days for 2002, as determined by the table below, and he then provides for his 20 days holiday entitlement, the revised number of productive hours now falls to 232 days x 7 = 1,624 hrs. Using the new information, the required hourly rate now rises to £36.95/hr (£60,000 divided by 1,624hrs). Over the course of the working year, had Mr Jones used the original £35.71/hr instead of the more accurate £36.95/hr rate, he would have generated an overall shortfall on his target income, of £2,006 [£60,000 - (£35.71 x 1,624 hrs)]. The shortfall in 2003 would be slightly less owing to the effect of the two extra days in the calculation. Is a shortfall of 3% (£2,000) going to make a difference? Any budget plan should include a margin of at least 10% to cater for unforeseen events. In relative terms the 3% shortfall is not that material to a business plan, but £2,006 is still a tidy sum. Had Mr Jones had a workforce of 10 employees, however, the shortfall variance becomes very significant indeed - £20,060 per year! Monthly timing differences? The following table also highlights the variation in the number of working days each month. For a business operating with tight working capital funds, a short working month (e.g. December and June 2002) could have a dramatic impact 30 days later. The work billed during December will be lower than other months, and those funds will not start being received until the end of January. But January is a long month with higher costs. It is also a month in which many businesses will need to settle tax debts. Both factors contribute to even more demands on scarce cash funds. |
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| There
are just 252 working days in 2002. (254 days in 2003) Assuming a normal Mon-Fri week, and recognising all UK public and bank holidays. |
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