How is a week's pay worked out for redundancy if I don't have fixed hours or pay?

Full answer

Where an employee has fixed hours and fixed pay, calculating a "week's pay" for statutory redundancy purposes is straightforward, but many workers -- including those on variable shifts, zero-hours contracts, or with regular overtime -- need a different method to fairly reflect their typical earnings. **Why an averaging method is needed** For employees whose pay varies from week to week (for example, because hours vary, commission forms a significant part of pay, or overtime is worked irregularly), simply using a single week's pay figure could produce an unfairly high or low result depending on which week happened to be used -- an averaging method smooths this out to better reflect genuinely typical earnings. **The 12-week averaging method** The standard approach looks at the 12 complete weeks immediately before the calculation date (broadly, the date notice of redundancy is given, or in some cases the date employment actually ends), calculates total pay across those 12 weeks, and divides by 12 to arrive at an average week's pay -- weeks in which the employee did no work at all (for example, weeks entirely on unpaid leave) are normally excluded and replaced with earlier weeks that were actually worked, so the average genuinely reflects working weeks rather than being diluted by weeks with no pay at all. **Worked example** A zero-hours worker's hours vary considerably week to week. Over the 12 complete weeks before the redundancy calculation date, they earned a total of £4,800 (having worked all 12 weeks, with no weeks excluded). Average week's pay is therefore £4,800 / 12 = £400. This £400 figure is then used (subject to the separate statutory weekly pay cap) as the "week's pay" figure in the standard redundancy pay formula based on age and years of service, rather than simply using whatever they happened to earn in the single most recent week, which might have been unusually high or low. **The cap still applies on top of averaging** Even after averaging pay over 12 weeks, the resulting average week's pay figure is still subject to the same statutory weekly pay cap that applies to employees with fixed pay -- if the calculated 12-week average exceeds the cap for that year, the capped figure is used in the redundancy formula instead of the higher averaged amount. **What counts as pay for the averaging calculation** Generally, the calculation includes normal contractual pay and, in many cases, regularly worked and reasonably predictable overtime or commission, but the exact treatment of variable elements such as overtime, bonuses, and commission can depend on the specific facts and relevant case law about what forms part of "normal" pay for a particular worker -- this is an area where the detail can genuinely matter and specific advice may be needed for complex pay structures. **Interaction with other statutory calculations** The same broad averaging principle (typically over 12 weeks, sometimes adjusted for specific purposes) is also used for calculating a week's pay in other statutory contexts beyond redundancy, such as some notice pay and certain other statutory payment calculations for workers without fixed hours or pay, so understanding this method is useful more broadly, not just for redundancy specifically. **Practical tip** If you have variable hours or pay and are facing redundancy, gather your actual payslips for the 12 complete weeks before your calculation date, exclude any weeks where you did no work at all (replacing them with earlier worked weeks), and calculate the average yourself to check it against any figure your employer provides, since averaging errors are a common source of underpaid redundancy calculations.

Try the calculator

More answers

• Why is my statutory redundancy pay lower than my actual weekly wage?