Section Menu

Rules for calculating a week's pay

19: As explained in the introduction, the legislation sets out how a ‘a week’s pay’ should be calculated for the purposes of many individual rights. The table lists them. It also shows the date at which the week’s pay should be calculated for the purposes of each right - known as the calculation date. Please note that this calculation date is only relevant to working out a week’s pay: it may well be different from the qualification date you need to work out length of continuous service, which is given in the same table.

Limits

20: For some of the rights shown in the table, the payments and awards are subject to financial limits set by Regulations. These limits are regularly reviewed by the Secretary of State; see the document Limits on payments (PL 827) for the current limit on payments. The document on the right in question will also tell you more about this.

Employees paid a fixed wage or salary or entirely on an hourly rate

21: If an employee’s pay for work done in normal working hours does not vary, a week’s pay will be the pay due for the basic hours the employee is contracted to work. Any regular bonus or allowance (except an expense allowance) which does not vary with the amount of work done may be included. But pay for overtime hours may only be included if the contract of employment obliges the employer to provide those hours of overtime work as well as obliging the employee to work overtime if the employer provides it.

Employees paid by piece-rates, variable bonuses or commission

22: If an employee’s pay varies with the amount of work done, as, for example, under piece-work systems, or when pay is partly made up of variable bonuses or commission related to output performance, then a week’s pay for normal working hours (excluding overtime hours not binding on both sides, as above) is based on a specially calculated hourly rate. This rate is the average hourly rate over a 12-week period, ending on the calculation date if the calculation date is the last day of the pay week. If the calculation date falls during a pay week, the 12-week period ends on the last day of the previous week.

23: To get this special average hourly rate, only hours when the employee was working (including overtime hours) can be taken into account. If the employee has less than 12 weeks’ service, other factors might be relevant such as the working hours of other employees of the same employer and/or the expected pattern of working based on the terms on which the job was offered. Any pay for hours not worked, for example under a guaranteed week agreement, must be left out. If overtime hours are included, the pay must be adjusted, as explained in paragraph 25 below. Any week in which no work was done should be replaced by the last previous week when the employee did work, to bring the total number of weeks up to 12. 12/13 of any quarterly bonus, or 12/52 of any annual bonus, can be included, provided the bonuses are not paid specifically for some time outside the 12-week period. The hourly rate is calculated by dividing the pay to be taken into account over the 12-week period by the number of hours worked during the same period.

Shift or rota workers

24: If at the calculation date an employee is contracted to work normal hours, but on days of the week or at times of the day which differ from week to week or over a longer time so that the pay for any week varies (for example when the normal hours worked at night or at the weekend attract a higher rate of pay), then a week’s pay means pay for the average number of normal weekly working hours at the average hourly rate. To allow for variation of hours according to the shift worked, the average number of normal weekly working hours is calculated by dividing by 12 the total number of normal working hours during a period of 12 weeks, ending on the calculation date if the calculation date is the last day of the pay week. If the calculation date falls during a pay week, the 12-week period ends on the last day of the previous pay week. The average hourly rate is worked out in the same way as for piece-workers, explained in paragraph 23.

Adjusting pay for work done outside normal hours25: Work done outside normal working hours, for example voluntary overtime, will sometimes be included in arriving at the average hourly rate. Where pay for such work is higher than pay for the same work done in normal working hours, the pay must be adjusted, that is to say brought down to the level it would have been if the same work had been done in normal working hours. If there is more than one rate for work done in normal working hours, for example because the hourly or piece-rate goes up after a certain number of hours have been worked or units produced, the overtime pay should be brought down to the lower of the ‘normal hours’ rates.

Employees with no normal working hours

26: For an employee with no normal working hours - for example an outdoor sales representative paid wholly by commission - the amount of a week’s pay is the average weekly pay over a 12-week period, ending on the calculation date if the calculation date is the last day of the pay week. If the calculation date falls during a pay week, the 12-week period ends on the last day of the previous pay week. Any week for which no pay was due should be replaced by the last previous week for which pay was due, so as to bring the number of weeks to be averaged up to 12.

Work done for a previous employer

27: Weeks worked for a previous employer can be included in the 12-week period over which the hourly rate is calculated, if the change of employer did not break the employee’s continuity of employment (that is, if it fitted one of the descriptions in paragraph 20).

  
 Advisory, Conciliation and Arbitration Service
 Redundancy Payments Offices 
 Other employment legislation publications