When is 52 weeks NOT a year? A Subtle Payroll Risk for NMW Employers

Are Your Hourly Pay Calculations NMW Compliant? Why 52 Weeks Isn’t Enough

When converting hourly pay into annual or monthly salaries, many employers — and most payroll systems — default to using 52 weeks per year. This has long been a standard industry assumption.

However, where pay is calculated from weekly contracted hours and sits at or close to the National Minimum Wage (NMW), that assumption can matter. Using 52 weeks can slightly understate pay and create a genuine but often overlooked NMW compliance risk.

With increased enforcement expected from April 2026 under the new Fair Work Agency, now is a sensible time to review whether long-standing payroll calculations still meet NMW requirements.

TL; DR – The Essentials

• Hourly pay should be annualised using 52.143 weeks, not 52

• Using 52 weeks can slightly understate pay and risk NMW non-compliance

• Enforcement of NMW rules will increase from April 2026 under the Fair Work Agency

• Small differences matter - especially for employees paid close to NMW

• If you pay £12.75 per hour or more (from April 2026), this issue is unlikely to affect you

Why is this being flagged now?

As payroll reviews become more detailed, assumptions that were previously accepted in practice are receiving closer attention — particularly where pay is close to NMW.

Why 52 Weeks Is Not Correct

The UK tax year does not neatly align to 52 weeks. In reality:

• A standard tax year averages 52 weeks and 1 day

• That equates to 52.143 weeks per year

• In leap years, this can increase further to 52.286 weeks

When employers use 52 weeks to convert an hourly rate into an annual salary, the result is a slightly lower annual equivalent pay figure than HMRC or enforcement bodies would calculate.

This discrepancy becomes critical when an employee’s pay is close to the National Minimum Wage.

Why This Matters More from April 2026

From April 2026, NMW enforcement will fall under the new Fair Work Agency, alongside a broader government focus on worker protections and compliance.

This means:

• Increased scrutiny of payroll calculations

• Less tolerance for “small” discrepancies

• Greater risk of penalties where pay is found to fall even marginally below NMW

Importantly, enforcement bodies will use their own calculation methodology — and that methodology is likely to be based on 52.143 weeks, not 52.

The Correct Way to Calculate Annual and Monthly Pay

For hourly-paid employees, the correct formula is:

Hourly rate × contracted weekly hours × 52.143 = annual salary
Annual salary ÷ 12 = monthly pay

Worked Example

If an employee earns £12.71 per hour and works 37.5 hours per week:

• £12.71 × 37.5 × 52.143 = £24,852.66 per year

• £24,852.66 ÷ 12 = £2,071.06 per month

If you instead used 52 weeks:

• Annual salary = £24,784.50

• Monthly salary = £2,065.38

That small difference means that, on review, the employee’s effective hourly rate could appear to be £12.67 per hour, not £12.71 — potentially below NMW.

Who Needs to Take Action?

You should review your payroll calculations if:

• You employ hourly-paid staff

• You convert hourly pay into annual and/or monthly salaries

• You pay at or close to National Minimum Wage

If you pay comfortably above NMW — as a general guide, £12.75 per hour or more from April 2026 — this issue is unlikely to affect your compliance position provided you pay for all working time.

How We Can Help

Where we process your payroll:

• If we hold hourly rates and contracted weekly hours, we can adjust annual salaries accordingly (with your approval)

• If we hold annual salaries and weekly hours, we can reverse-calculate the hourly rate and flag any NMW risks

• If we do not have full pay and hours data, we may be unable to confirm compliance

If you would like us to review your current figures or carry out a more detailed payroll compliance check, please get in touch and we can discuss the scope and costs involved.

Final Thought

NMW compliance is not just a rate — it’s a calculation, and the accuracy of that calculation matters. While this may sound technical, for most employers it is a relatively small adjustment rather than a fundamental problem. As enforcement tightens, ensuring your payroll calculations use the correct methodology now can help avoid issues later.

This is not a cause for alarm, but it is a sensible area to review. If you’re unsure whether your current approach is compliant, checking now allows any adjustments to be made calmly and proactively — before questions are asked elsewhere.