Notice and final pay
A week’s pay: the measure behind notice, redundancy and holiday
Most statutory payments on leaving are counted in weeks of pay, but the law measures that week differently depending on the right.
Checked by Radif Partners · Editorial policy · Method and sources
“A week’s pay” is the unit that statutory redundancy pay, pay during notice and holiday pay are counted in, and the Employment Rights Act 1996 defines it in sections 221 to 224. With normal working hours and pay that does not vary, it is simply what the contract pays for a normal week. When pay varies with the work done, or hours fall on different days and times, it is the normal weekly hours at the average hourly rate of the last 12 complete weeks before the calculation date. With no normal hours at all, it is the average weekly pay of those 12 weeks, skipping any week with no pay. For holiday pay in Great Britain, regulation 16 of the Working Time Regulations stretches the period to 52 paid weeks and adds commission and regular overtime. Only some uses are capped: for redundancy pay a week’s pay cannot exceed £751 in Great Britain or £783 in Northern Ireland, while notice pay and holiday pay have no ceiling.
Same pay slips, two different weeks’ pay
Gap between the two averages
£75.00
| 12-week average (notice, redundancy) | £715.00 |
| 52-week average (holiday pay, GB) | £640.00 |
| Used for redundancy pay after the cap | £715.00 |
Four cases in the statute
The Act starts from one question: does the employee have normal working hours under the contract in force on the calculation date? The answer sends the calculation down one of four routes.
| Situation | Section | A week’s pay is |
|---|---|---|
| Normal hours, pay fixed for those hours | 221(2) | The contractual pay for working the normal hours in a week |
| Normal hours, pay varies with work done (piece rates, commission) | 221(3) | Normal weekly hours × average hourly rate over 12 weeks |
| Normal hours worked on days or times that change (shifts, rotas) | 222 | Average weekly hours × average hourly rate, both over 12 weeks |
| No normal working hours (zero hours, casual) | 224 | Average weekly pay over the last 12 paid weeks |
Section 223 adds three refinements for the averaging routes. Only hours actually worked and the pay for them are counted. A week with no pay is replaced by an earlier one, so the average always runs over 12 paid weeks. And where overtime is part of normal hours but was paid at a premium, the premium is stripped out and those hours are valued at the ordinary rate.
The calculation date
The 12 weeks end with the last complete week before a calculation date that depends on the right (section 226):
- Pay during notice (sections 88 and 89): the day before the statutory notice period begins.
- Redundancy pay: the day on which statutory minimum notice would have been given if it had expired on the relevant date. For someone with ten years of service, that is ten weeks before the last day, so a pay rise in the final weeks may not be counted. When pay in lieu of notice pushes the relevant date later under section 145(5), section 226(5)(b) takes the real, unextended relevant date instead.
- Holiday pay: the first day of the leave in question (regulation 16(3)(c)).
Holiday pay: 52 weeks and a wider net
Regulation 16 of the Working Time Regulations borrows sections 221 to 224 but changes three things for Great Britain. The reference period becomes 52 weeks, or the number of complete weeks worked if the worker has been there for less than a year, and unpaid weeks are skipped back to a limit of 104 weeks. The cap in section 227 does not apply. And for the first 4 weeks of leave, and all leave of irregular-hours and part-year workers, the week’s pay must include commission tied to the job, payments for seniority or professional qualifications, and overtime regularly paid in the previous 52 weeks (regulation 16(3ZA)); the rule that strips overtime premiums does not apply. The guide to overtime and commission in holiday pay goes through the details.
The same pay history can therefore give two different weeks’ pay. Take a care assistant on a 37.5-hour contract at £13.20 an hour, so £495.00 basic, who earned £1,460 of variable extras in a busy last 12 weeks and £3,900 across the last 52:
| Average | Used for | A week’s pay |
|---|---|---|
| 12 weeks | Notice pay guarantee, redundancy pay (if the extras count) | £616.67 |
| 52 weeks | Statutory holiday pay in Great Britain | £570.00 |
| Difference | £46.67 |
A seasonal peak just before notice lifts the 12-week figure; the 52-week figure smooths it out. The opposite happens after a quiet spell.
The cap and where it applies
Section 227 caps a week’s pay at £751 for a redundancy payment and for the basic and additional awards in unfair dismissal claims; article 23 of the Northern Ireland Order sets £783. Notice pay is not on that list, and regulation 16 switches the cap off for holiday pay. Someone earning £1,150 a week has redundancy pay priced at £751 a week, but notice and holiday priced at the full £1,150. The redundancy pay cap page lists the caps by year.
Not to be confused with average weekly earnings
Statutory Maternity Pay, Paternity Pay and Sick Pay use a different measure, “average weekly earnings”, taken from pay received in a relevant period of about 8 weeks under social security rules. It answers a different question (do you qualify, and what is 90 % or 80 % of your pay) and can give a different figure from a week’s pay under the 1996 Act. See average weekly earnings for SMP. For variable pay in a redundancy, redundancy pay with variable pay applies the 12-week rule step by step.