How to Calculate Weekly Pay: A Guide for UK Businesses
Flexible Working Survey 2024
As your business grows, so will your team, and with that comes the critical responsibility of managing payroll accurately. For many employers and HR managers, understanding the nuances of how to figure out weekly earnings in the UK is a foundational part of maintaining a happy workforce and ensuring legal compliance. Getting it right prevents disputes, helps with budgeting, and ensures your employees feel valued. This article breaks down the essential methods and factors for determining an employee’s weekly pay.
Different roads to the same payslip: calculation methods
How you calculate weekly pay depends on your employee’s contract. There are three main types of employment pay structures, each with its own calculation method.
For salaried staff, the process is straightforward. To determine their weekly gross pay, you should know how to calculate weekly pay from annual salary. The formula is simply the worker’s annual compensation divided by 52. For instance, an employee on a £35,000 annual salary would have a gross weekly pay of £673.08 (£35,000 / 52).
For individuals paid by the hour, the calculation is their wage rate multiplied by the number of hours they work in a given week. If an employee works 35 hours at £15 per hour, their gross weekly pay is £525 (35 x £15). It is then the employer’s responsibility to ensure the hourly wage meets at least the National Minimum Wage.
Commission-based pay is common in sales roles and is often paid in addition to a basic salary. This is a variable amount that depends on performance. The commission earned during the pay period is added to the employee’s basic weekly pay to determine their total gross earnings for that week.
Factors that influence weekly pay in the UK
Gross pay is just the starting point. Several factors can alter an employee’s final take-home pay.
Additions to pay
Overtime: When an employee works more than their contracted hours, they may be entitled to payment for these extra hours, often at a higher level (e.g., 1.5 times their normal hourly rate). This additional income must be included in their weekly pay calculation. This may be a key part of an employee’s benefits package.
Bonuses: Performance-related bonuses are also added to an employee’s pay. A yearly bonus is a common example.
Statutory payments: Payments for leave, such as Statutory Sick Pay (SSP) or Statutory Maternity Pay (SMP), will also need to be correctly calculated and included.
Deductions from pay
The two primary deductions are Income Tax and National Insurance Contributions (NICs). These are calculated based on the employee’s earnings and their specific tax code. As an employer, you are responsible for deducting these through the Pay As You Earn (PAYE) system and paying them to HM Revenue and Customs (HMRC).
Other deductions to consider include:
Pension contributions: Both employer and employee contributions must be accounted for.
Student loan repayments: If applicable, these are deducted automatically.
Other agreements and statutory deductions: This might include salary sacrifice schemes, attachments of earnings orders (AEOs) related to court orders, or deductions from earnings orders (DEOs) related to child maintenance payments.
When do you need to calculate a 'week’s pay'?
Calculating weekly pay isn’t just for employees who receive their pay every seven days. The concept of a ‘week’s pay’ is a crucial legal metric used in several situations for all employees, regardless of their pay frequency (e.g., monthly). This critical information is needed for calculating:
Statutory redundancy payments
Holiday pay entitlements
Pay during notice periods
For employees with variable hours, a ‘week’s pay’ is typically determined by taking the average of their pay over a reference period covering 52 weeks.
Calculation examples
Salaried employee:
Annual salary: £40,000
Gross weekly pay: £40,000 / 52 = £769.23
From this, you would deduct tax, National Insurance, and any other relevant deductions to find the net pay.
Hourly employee with overtime:
Hourly rate: £12
Normal working hours: 37.5
Overtime hours worked: 5 at 1.5x rate (£18/hour)
Normal pay: 37.5 x £12 = £450
Overtime pay: 5 x £18 = £90
Gross weekly pay: £450 + £90 = £540
Worth noting...
Ultimately, your approach to pay should be part of your wider compensation and benefits philosophy. For insights on creating a fair and motivating pay structure, explore our article on building a collaborative reward strategy.
Exploring further payroll calculations and strategies
Payroll extends beyond these weekly calculations. For instance, you might need to understand how to handle pay for part-time employees, which is where knowing about pro-rata salary is essential. Similarly, if you’ve recently given a pay rise, you may need to make backdated payments - something our backdated pay guide will help you with.
