Introduction to Income Tax and NICs Earnings
2.4
Determining basic pay
2.4.1 How weekly pay figures are determined
There are several possible ways to determine weekly pay figures, including the following. These details are normally included in an employee’s contract of employment, although reference may be made to collective agreements, national pay scales.
Payment for work produced
The amount of pay is calculated according to the quantity of items produced and the rate of pay for each. This is often called ‘piece rate’.
For example, an electronics company pays 60p for each item soldered on the basis that the average worker can solder 20 items in an hour. If a worker completes 275 items in a week, then the weekly pay for that work would be £165 (275 x £0.60). A company might pay different piece rates for different types of work so that an employee ’ s weekly pay depends on how many of each of the different items the employee produces.
Hourly rate
The amount of pay is calculated according to the number of hours worked and the employee’s hourly rate of pay.
For example, if an employee worked a standard 40-hour week at an hourly rate of £10.50, then the weekly pay would be £420.00.
A company might pay for additional hours worked, such as overtime, at the employee’s usual hourl y rate or at some other rate prescribed in the contract of employment.
Payment per shift
The amount of pay is calculated according to the number and types of shifts the employee works (such as night shifts, day shifts). For each shift worked, a standard payment prescribed in the contract of employment is made. For example, a company might pay £80 for an eight-hour day shift and £100 for an eight-hour night shift. If an employee worked two-day shifts and three-night shifts in a particular week, then the weekly pay would be £460 ((2 x £80) + (3 x £100)).
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