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When pay changes, which salary counts?
Notice pay and redundancy pay are usually worked out using the employee’s normal weekly pay at the relevant date. If pay has changed recently, the key question is which rate applies under the rules for that type of payment.
For UK employment rights, the calculation often depends on whether the payment is based on a week’s pay, average pay, or contractual pay. Employers should check the exact date the notice period starts, the termination date, and any statutory formula that applies.
Notice pay and recent pay rises
If an employee has had a pay rise before their notice period begins, the new higher rate will often be used for notice pay. This is because notice pay is generally based on what the employee is earning when notice is given or when the notice period runs, depending on the circumstances.
If the employee is on gardening leave or working through notice, the normal contractual salary usually continues. If pay is reduced before dismissal, the employer should be careful, because a lower rate may not be valid if it affects contractual or statutory rights.
How redundancy pay is calculated
Statutory redundancy pay is based on the employee’s age, length of service, and weekly pay. The weekly pay figure is capped by law, and the cap can change each year. This means a recent pay increase may matter only up to the statutory maximum.
If an employee’s pay has varied, the calculation usually uses a “normal week’s pay” approach. For employees with variable hours, commission, or overtime, the employer may need to use an average over a set reference period rather than the latest payslip alone.
What happens if pay is part salary, part commission?
Where an employee earns commission, bonuses, or irregular payments, the calculation can become more complex. For notice pay, the contract may require the employer to include more than basic salary if those sums form part of normal pay.
For redundancy pay, only the statutory weekly pay is used, but the rules on what counts as a week’s pay can include regular overtime or allowances in some cases. Employers should review payslips and employment terms carefully before deciding the figure.
Why the timing matters
The date of dismissal, the start of notice, and the end of employment can all affect the amount owed. A pay rise shortly before redundancy may increase notice pay, but redundancy pay may still be limited by the statutory cap.
If an employer changes pay in the run-up to dismissal, the change must be genuine and properly documented. Employees who think their notice or redundancy payment has been undercalculated can ask for a breakdown and check the figures against their contract and statutory rights.
Frequently Asked Questions
They are the rules used to work out notice pay, redundancy pay, and related entitlements when an employee's pay has recently increased, decreased, or otherwise changed. The exact calculation usually depends on the employment contract, the reason for the change, and the laws that apply in the relevant jurisdiction.
If your salary recently increased, the calculation may use your current rate of pay or an average or reference period set by law or contract. Some systems protect employees from being disadvantaged by a late pay rise, so the timing of the increase can matter.
If your salary recently decreased, the calculation may use the lower current rate, but some rules may look back to a prior higher rate or average earnings over a set period. Whether the lower pay is used depends on the governing law, the reason for the decrease, and the wording of the contract.
The pay rate used can be the employee's current contractual pay, an average pay over a reference period, or a statutory figure depending on the benefit being calculated. Where pay has changed, the law or contract usually specifies whether the new rate, old rate, or an average applies.
Bonuses may count if they are contractual, regularly paid, or included by the relevant calculation rules. Discretionary or one-off bonuses may be excluded, but this depends on the employment terms and the legal rules that apply.
Overtime can count if it is regular, guaranteed, or required to be included by law or contract. If overtime is occasional or unpaid under the calculation rules, it may be excluded from the pay figure used.
During probation, the employee may have different notice entitlements under the contract or law, and redundancy rights may still depend on service length and statutory eligibility. If pay changes during probation, the calculation generally follows the rate and rules in force at the relevant assessment date.
After a promotion, the new higher pay may apply if the relevant calculation date falls after the promotion takes effect. In some cases, rules may instead use an average or a protected reference period so that the change is treated fairly.
A temporary pay cut may not always reduce notice or redundancy calculations if the law or contract uses an earlier higher rate or an average over a longer period. The effect depends on whether the reduction was agreed, how long it lasted, and which date is used for the calculation.
It usually uses gross pay, not net pay, unless the applicable rule specifically states otherwise. Gross pay is the amount before tax and most deductions, which is the usual basis for employment entitlement calculations.
Commissions may be included if they are a regular and measurable part of earnings under the law or contract. If commissions vary widely, the calculation may rely on an average over a set reference period.
Shift allowances may be included if they are part of normal pay and paid regularly. If they are irregular or specifically excluded, they may not be counted in the entitlement calculation.
Special rules often apply during family leave so that an employee is not disadvantaged by reduced or unpaid periods. The calculation may use normal pay, statutory pay, or a notional rate depending on the law and leave status.
Yes, many systems use average earnings over a specified reference period when pay changes or fluctuates. This helps smooth out changes from overtime, bonuses, commission, or recent pay adjustments.
A recent pay change may or may not be ignored depending on the legal rules and the purpose of the calculation. Some frameworks use the current rate, while others protect against last-minute changes by using an average or earlier reference point.
Contractual terms can set a more generous notice period, define how pay is measured, or specify which earnings count toward redundancy. If the contract gives more favorable terms than the minimum legal standard, those terms may apply.
Part-time employees are usually calculated on their actual pay rate and hours, with pro-rata treatment where applicable. If pay changes, the calculation typically uses the part-time contractual rate or the relevant average earnings basis.
Yes, employees can dispute the calculation if they believe the wrong pay rate, reference period, or earnings items were used. A dispute is often resolved by checking the contract, payslips, and the applicable statutory rules.
Useful documents include the employment contract, recent payslips, bonus and commission records, pay change letters, and any redundancy or notice notice issued by the employer. These records help determine which pay rate and reference period should be used.
You can get help from an employment lawyer, trade union representative, HR adviser, or the labor or employment authority in your jurisdiction. They can explain how the calculation works and whether a pay change should alter your notice or redundancy entitlement.
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