What happens to your salary if you work 4 days a week?

Does working 4 days a week mean losing 20% of your salary?

If you currently work five equal-length days and reduce to four while keeping the same hourly value, your working hours fall by one fifth. In a straightforward pro-rata arrangement, your gross annual salary would therefore also fall by 20%.

For example, somebody earning £50,000 across five days a week would have a pro-rata salary of £40,000 if they moved to four equal days.

That does not necessarily mean the amount reaching their bank account also falls by exactly 20%.

How to calculate your new salary

A simple way to calculate your new gross salary is to multiply your current salary by your new weekly hours and divide by your current weekly hours.

Why your take-home pay may fall by less than your salary

Income Tax and National Insurance are calculated using thresholds and bands rather than applying one flat percentage to your whole salary.

When your salary falls, some of the income you give up may previously have been subject to Income Tax and National Insurance. This means the reduction in money reaching your bank account can be smaller than the reduction in gross salary.

The exact difference depends on your income, UK tax region, pension setup and any student loan repayments.

Compare the monthly difference, not just the annual salary

An annual salary reduction can sound large, but the monthly take-home difference is often the more useful figure when deciding whether reduced hours are affordable.

Compare your new estimated monthly take-home with your regular household costs, savings goals and financial commitments. That gives you a much more practical view of what the change would mean day to day.

• Mortgage or rent
• Household bills
• Food and transport
• Debt repayments
• Savings and investments
• Childcare and other regular costs

How much are you paying for each extra hour of free time?

Another useful way to look at reduced hours is to divide the take-home pay you give up by the number of working hours you gain back.

This produces an after-tax cost for each extra hour of free time. It can make the trade-off much easier to understand than looking at salary alone.

For some people, giving up a few hundred pounds of monthly take-home pay in exchange for an extra day each week can be worthwhile. For others, the financial cost may be too high.

What happens to your pension?

Reducing your salary can also affect workplace pension contributions.

If your employee and employer pension contributions are calculated as a percentage of salary, the amount being paid into your pension may fall when your salary falls.

Before agreeing to reduced hours, check how your employer calculates pension contributions and whether any other employment benefits are linked to salary.

What happens to holiday entitlement?

Part-time workers are still entitled to paid holiday, but employers can calculate entitlement on a pro-rata basis.

If you move from five days to four days a week, your holiday entitlement may be expressed differently even though you should still receive the appropriate statutory entitlement for your working pattern.

Bank holidays can also affect how leave is handled depending on which days you normally work, so it is worth checking your employer policy before changing your contract.

Things to check before reducing your hours

• Your new gross annual salary
• Your estimated monthly take-home pay
• How your pension contributions will change
• Whether bonuses or other benefits are affected
• How annual leave and bank holidays will work
• Whether your workload will genuinely reduce with your contracted hours
• How the change affects longer-term savings and retirement plans

Is dropping to 4 days a week worth it?

There is no single financial answer because the value of an extra day away from work is personal.

A four-day working week can provide more time for family, childcare, freelance work, hobbies, rest or other priorities. The important thing is understanding the actual after-tax cost of that time before making the decision.

Instead of assuming a 20% reduction in hours automatically means losing 20% of the money you can spend, compare both your current and reduced-hours take-home pay.