How to Calculate Notice Pay

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You can offer employees pay in lieu of notice.
You can offer employees pay in lieu of notice. (Image: Jupiterimages/Comstock/Getty Images)

Notice pay, also known as pay in lieu of notice, is money you pay an employee who is being let go. Rather than giving him two weeks' notice of dismissal or layoff, you simply pay him for two weeks and let him leave. Of course, if you are required to give employees more than two weeks' notice, the amount of notice pay will be more than two weeks' compensation. Calculating notice pay is a matter of simple arithmetic.

Divide the annual salary by 52.

Multiply the resulting figure by the requisite number of weeks. For example an employee who earns $52,000 per year and is entitled to two weeks' notice pay should receive $2,000. Consider $52,000 / 52 = $1,000. $1,000 X 2 = $2,000.

Divide monthly salary figure by 30, and multiply the result by the requisite number of days. If your employee is paid by the month, rather than by the year, the calculation comes down to days rather than weeks. For example, you have an employee who earns $3,000 per month and is entitled to two weeks' notice. Divide $3,000 by 30 to get $100 per day. Then, expressing the number of weeks in terms of days, multiply $100/day by 14 days. The employee should receive $1,400 in notice pay.

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