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Wednesday, 3 October 2023

Calculating your pay: the basics

It’s important to know how to calculate a week’s pay as it is used to work out how much you should get when claiming some employment rights, such as redundancy pay. It is not always the same as your average pay, or the pay you get in a typical week

A week’s pay

The pay you are due each week under your contract of employment can be different to your average pay over a month or your pay in a typical week. The amount you earn in a week under your contract of employment is linked to several of your individual employment rights. These are:

  • redundancy pay and pay during time off for job-hunting
  • pay during your notice period
  • holiday pay (if your working pattern changes)
  • guarantee pay for work (if your employment can’t provide you with work, but is bound under your employment contract to pay you anyway)
  • certain types of compensation awarded by Employment Tribunals

The ’12-week period’

When you calculate your week’s pay, you may have to average your pay and hours over a 12-week period. These 12 weeks must be the last full 12 weeks that lead up to the reason you need to calculate your pay, for example:

  • to calculate pay during time off for job-hunting, use the 12-week period leading up to the day you were first given your redundancy notice
  • to calculate notice pay, use the 12-week period leading up to the first day of the notice period
  • to calculate paid annual leave, use the 12 weeks leading up to your holiday
  • to calculate guarantee payments, you should normally use the 12 weeks leading up to when your payment is due; if you no longer work for that employer use the last 12 weeks of your employment

If you did not receive pay for work during the 12-week period (for instance you received holiday pay), you should use the previous week in your calculation. For example, if during the 12-week period you did not receive pay for three weeks you should look at a 15-week period and only include those weeks you were paid for work.

Calculating basic fixed wages, salary or hourly rate

If you have the same pay every week or month then your weekly pay will be your pay for your basic contract hours. Any bonuses or allowances (except an expense allowance) which do not vary with the amount of work you do can also be included in calculating your week’s pay.

If you are paid by week then the amount you are paid is your weekly pay.

You can’t include overtime hours when calculating your week’s pay unless your employer must pay it to you under your contract of employment.

Working outside your normal work hours

If you do some work outside of the hours you normally work, for example voluntary overtime, it can be included when calculating your average week’s pay. However if you are paid a higher overtime rate for work that could be done in normal hours, the higher rate of pay can’t be used when calculating your week’s pay.

No normal working hours

If you have no normal working hours your amount of week’s pay is your average pay over the 12-week period leading up to the time that you need to calculate for. For example a sales rep paid by commission.

If, for example, you are being made redundant, you should use the last 12 full weeks you worked leading up to the day you were given notice of your redundancy.

If you receive no pay one week, then you should look at the week before. For example, if you are looking at a 12-week period, but you did not receive any pay during three weeks of that time, you should look back for 15 weeks.

Work done for a previous employer

Time you have worked for a previous employer can be included when calculating your average weekly pay, if the change in your employer did not break your continuity of employment.

Where to get help

Calculating a week’s pay can be fairly complex and calculating redundancy or guarantee payments will depend on your situation If you need further help on how to calculate a week's pay contact Acas (Advisory, Conciliation and Arbitration Service) or your local Citizen’s Advice Bureau for advice.

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