Many of the employment rights that are given to workers by legislation are linked in some way to their 'week's pay'. The Employment Rights Act 1996 lays down detailed rules on how to calculate a week's pay. The rules refer to a calculation date, which differs according to the purpose for which the calculation is being made. The main calculation dates are provided in a table within this appendix (the calculation date).
When calculating a basic or additional award of compensation for unfair dismissal or a redundancy payment, the amount of a week's pay is capped. The limit is reviewed annually in the light of movements in the retail prices index. For the year from 1 February 2009 it stands at £350.
The rules for calculating a week's pay differ according to whether or not the employee has normal working hours. Whether or not an employee has normal working hours will depend on all the circumstances, but the terms of his or her contract are likely to be the most important indicator. For example, an employee's contract may specify that his or her normal working hours are 37 hours a week. Employees are also viewed as having normal working hours if they are entitled to overtime pay if they work more than a fixed number of hours in any period. The normal working hours are those specified fixed hours. If an employee is both contractually entitled to be offered and contractually obliged to work a fixed amount of overtime in any period, then his or her normal hours include those overtime hours.
12-week average
In some cases, as mentioned below, a week's pay is calculated by averaging the pay the employee has received over a 12-week period. If this entails taking into account payments that are attributable to a longer period, such as annual bonuses, those payments must be fairly apportioned. If in any of the 12 weeks over which an average is calculated the employee was not paid, earlier weeks are taken into account instead. In particular, any weeks when an employee was on maternity, paternity, parental or adoption leave and receiving no pay or less than his or her usual pay, are disregarded and earlier weeks are used.