What Counts Towards Your Redundancy Pay Calculation?

The weekly pay figure is the foundation

Your statutory redundancy pay is calculated using your weekly pay — but the definition of "weekly pay" is more specific than it sounds. It is not simply your annual salary divided by 52, in every case. The rules depend on how your pay is structured.

Understanding what counts can meaningfully change your entitlement figure.

Employees with fixed hours and fixed pay

If you work fixed hours and receive the same pay each week (i.e. a standard salaried position), your weekly pay is straightforward: your annual salary divided by 52.

The result is then subject to the statutory weekly pay cap, which is £751 from 6 April 2026. If your weekly pay figure exceeds £751, only £751 is used in the calculation.

Employees with variable pay

If your pay varies from week to week — because you work variable hours, receive variable overtime, or are paid piece rates — your weekly pay is calculated as the average of your gross weekly earnings over the 12 weeks immediately before your notice period began.

Weeks where you received no pay at all (for example, unpaid leave) are excluded. The average is taken only over weeks where you actually received payment.

This rule is more employee-friendly than many people assume. If you had a strong 12 weeks before redundancy — lots of overtime, high-output weeks — that higher average feeds into your statutory calculation.

What is included in weekly pay?

The following are included when calculating your weekly pay:

• Basic salary or wages — the foundation
• Contractual overtime — overtime that you are required to work under your contract (not voluntary overtime)
• Regular contractual bonuses — bonuses you are contractually entitled to receive, such as a guaranteed annual bonus or a production-linked bonus written into your contract
• Shift premiums — if you are contractually required to work shifts and paid a premium for them
• Commission — if it forms a regular and contractual part of your remuneration

The key test is whether the payment is contractual and regular. Payments that are both contractual and regularly received are included.

What is excluded from weekly pay?

• Discretionary overtime — overtime you choose to work, which is not required under your contract
• Discretionary bonuses — one-off payments at the employer's discretion, not guaranteed by contract
• Expenses and allowances — travel, meals, equipment reimbursements
• Benefits in kind — private health insurance, company car, gym membership
• Tips — unless they are routed through the payroll as guaranteed contractual payments

The dividing line between contractual and discretionary is sometimes contested, particularly for overtime and bonuses. If you regularly worked overtime and regularly received a bonus, but your employer describes both as discretionary, it may be worth examining what your contract actually says.

Maternity and paternity leave

If you were on statutory maternity, paternity, adoption, or shared parental leave during the 12-week reference period, weeks of absence do not count. The 12-week average is calculated using the most recent weeks where normal pay was received.

Crucially, a period of maternity leave does not break continuity of service for redundancy purposes. Your service continues throughout maternity leave, and the period counts towards your total qualifying service.

Sick leave

If you received full sick pay (at your normal rate) during the reference period, those weeks are included in the average. If you were on statutory sick pay only (at a lower rate than your normal pay), the position is more complex — the lower SSP rate would reduce your average. Again, weeks of no pay at all are excluded from the average.

A practical example

An employee on a contract that requires a minimum of 37.5 hours per week but regularly works 45 hours under a contractual overtime clause. Their basic pay is £28,000 a year, and they receive an additional contractual payment of £80 per week for the additional hours.

Weekly pay: (£28,000 ÷ 52) + £80 = £538.46 + £80 = £618.46

This is below the £751 cap, so the full £618.46 is used in the calculation. Had the overtime been discretionary rather than contractual, the weekly pay would have been £538.46 — a meaningful difference over a multi-year redundancy calculation.

See our pillar guide on statutory redundancy pay — the complete 2026 guide for the full calculation method including age band multipliers.