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Accounting Question

2 watchers
Oct 2017
4:56pm, 3 Oct 2017
9584 posts
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Torry Quine
I've been left holding the reins until our new accountant arrives next month. Not a problem for most things but I'm to implement a rate increase for one client according to the following formula, as taken from the contract, but I'm just not following it. Any others I've had to deal with have been a straight %. Can anyone help?

The formula to be applied to all elements of the rate shall be:

RN=RO x I NEW

I OLD

Where RN = New Element of Day Rate After Due Escalation

RO = Existing Element of Day Rate Prior to Due Escalation

I NEW = New Indices applicable April 2017 and annually thereafter as appropriate
I OLD = Old Indices applicable April 2016 and annually thereafter as appropriate

The index in calculating these revisions will be in the Monthly Digest of Statistics published by the Central Statistical Office:

EARN01 Average Weekly Earnings (Whole Economy)
um
Oct 2017
6:18pm, 3 Oct 2017
44 posts
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um
Hi Torry .. which bit are you asking about?
The EARN01 stats are available at ons.gov.uk

And I assume the formual should be RN = RO x INEW / IOLD ?
But take care - and maybe check - because my reading of the stats file is that INEW is lower than IOLD and therefore would trigger a rate reduction ....

Is there any clause in the contract to cover a reduction?
There are also multiple index rates to choose from (totaly pay, regular pay, etc) and cuts by sector (whole economy, private, public, financial services, mfg, contruction etc) - is there any better definition of the index to use?

Good luck :-)
Oct 2017
6:34pm, 3 Oct 2017
9585 posts
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Torry Quine
Yes the formula is as you say.
I'm reading AWE Regular Pay, Whole Economy from sheet 3 of that download, which shows April 16 at 464 and April 17 at 472.

Whole Economy is what's written in the contract.

The link I was given was as below but anything I search for from there comes up with page not available.
www.ons.gov.uk/ons/search/index.html?newquery=average+weekly+earnings
Oct 2017
6:51pm, 3 Oct 2017
9586 posts
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Torry Quine
So am correct that now RN=RO x 472 / 464 which equals 1.017

Therefore am I right in thinking that if our old rate is 543 our new rate would be 552.
um
Oct 2017
8:22pm, 3 Oct 2017
45 posts
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um
Given the rates, that's what I come to as well ...
Oct 2017
8:57pm, 3 Oct 2017
9590 posts
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Torry Quine
Thank you very much for your help. Here's hoping the client agrees.

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I've been left holding the reins until our new accountant arrives next month. Not a problem for...
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