Calculating a week’s pay

By Tolley in association with Sarah Bradford

The following Employment Tax guidance note by Tolley in association with Sarah Bradford provides comprehensive and up to date tax information covering:

  • Calculating a week’s pay
  • The calculation date
  • What pay includes
  • Type of hours and payment structure

The terms of a contract of employment can include various ways in which the entitlement to pay is calculated. For example, the employee may be paid solely by reference to hours worked or some, or all, of his pay entitlement may be related to performance levels. Employees may also be paid at various intervals, although pay intervals of a week or a month are the most commonly used. However, a common measure of pay is needed for the purposes of the calculating the amounts that the employer must pay in relation to many of the statutory employment rights (such as holiday pay or breaches of the right to statutory notice, the right to written reasons for dismissal or the right to an appeal against dismissal). The common measure used is the employee’s weekly pay.

This guidance note focuses on the method of working out a week’s pay as set out in detail in the Employment Rights Act 1996.

ERA 1996, ss 220–229
The calculation date

The date on which you start for the purpose of calculating a week’s pay depends upon the type of claim. The statute lists all of the types of claim for which compensation is calculated on the basis of a week’s pay and gives the calculation date for each. Where the claim relates to something that happened during a person’s employment, the calculation date is the date of the event. Where the claim relates to a dismissal, the calculation date is the effective date of termination.

What pay includes

Pay can include a variety of different items, although precisely what is covered will depend on the type of hours the individual works and the pay structure that applies to them:

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