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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.

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“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
Use the figure in the redundancy pay calculator →

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.

Employment Rights Act 1996, ss.221 to 224. The Northern Ireland Order 1996 has matching articles.
SituationSectionA week’s pay is
Normal hours, pay fixed for those hours221(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)222Average weekly hours × average hourly rate, both over 12 weeks
No normal working hours (zero hours, casual)224Average 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:

Computed with the redundancy and holiday engines of this site.
AverageUsed forA week’s pay
12 weeksNotice pay guarantee, redundancy pay (if the extras count)£616.67
52 weeksStatutory 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.

Questions people ask

Does voluntary overtime count in my week’s pay for redundancy?

Usually not. For redundancy and notice, sections 221 to 223 look at pay for normal working hours, and section 234 makes overtime part of those hours only when the contract fixes a minimum number of hours above the point where overtime starts. For holiday pay in Great Britain the rule is wider: overtime regularly paid in the 52 weeks before the leave counts.

Which twelve weeks are used if I am paid monthly?

The twelve complete weeks ending with the last complete week before the calculation date, or with the week that ends on it. GOV.UK’s convention is a week running Sunday to Saturday, unless your pay is worked out over another seven-day period. For holiday pay, its method for monthly pay is to take the month’s pay divided by the hours worked, then multiply by your weekly hours.

Is a week’s pay before or after tax?

Before. The Act counts the remuneration payable by the employer, so the starting point is gross pay, before income tax and National Insurance come off your payslip. The £751 cap for redundancy pay is a gross weekly figure too, which is why the calculators on this site ask for gross weekly pay.

I had no work for three of the last twelve weeks. Do those weeks pull my average down?

No. Where no pay was due in a week, sections 223(2) and 224(3) bring in earlier weeks so that twelve weeks with pay are counted. A zero-hours worker who earned £4,380 across the twelve paid weeks therefore has a week’s pay of £365.00, not a lower figure diluted by the empty weeks.

Is the week’s pay for holiday different in Northern Ireland?

Yes. The 52-week reference period was introduced in Great Britain only. nidirect says that in Northern Ireland, holiday pay for pay that varies is the average weekly wage over the previous 12 weeks, and should take account of guaranteed and non-guaranteed overtime and commission.

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