Learn how to calculate a prorated salary for employees who work partial pay periods, complete with a step-by-step guide and examples.
Whenever a contracted employee, who usually enjoys a monthly or contractual rate, works for a number of days that does not complete the wage cycle stipulated in their contract, a prorated salary is typically given as compensation for the work done during those days. The salary you receive will be based on a computation of your daily rate in relation to the rate stipulated in your contract, whether it is monthly or project-based. To make this easier to understand, let's say that you are paid $2,000 for a total of 26 days of work each month. Now, for this month, you only worked 10 days instead of the total 26 days you were contracted to work. Obviously, your employer is not liable to pay the full amount of $2,000 (unless otherwise agreed upon in the contract). Since you only worked 10 days, you should only receive 10 days' worth of salary. Here is a short process you can follow to compute this, using the given example:
- Determine your daily rate. To compute your prorated salary, you will first need to determine your daily work rate. This is the rate you earn on a daily basis. Basically, all you need to do is divide the total amount for a whole month's work by the number of working days in that month, excluding your normal days off. For this example, using $2,000 for 26 days of work each month, divide $2,000 by 26. Through this calculation, you will get a result of approximately $77 per day. This is now your daily rate.
- Multiply it by the number of days you worked. Now that you have determined your daily rate is $77, take that number and multiply it by the number of days you actually worked in the given month or outside your contracted work period. In this case, using the example of 10 days, 77 multiplied by 10 equals 770. Hence, the prorated salary for 10 days of work is $770. Therefore, your employer is only required to pay you $770 for those 10 days.
- Break it down. The same process can be used to compute prorated salaries on an hourly basis. You can repeat the previous process by determining your daily rate and then dividing the result by the number of hours you work each day. Through that process, you will get your hourly rate. For example, if you use the $77 daily rate as your basis and you usually work 8 hours each day, dividing 77 by 8 comes to around 9.60. Thus, your hourly rate is $9.60. Now, to prorate your salary if you worked a total of 30 hours in a given period, you will be entitled to $288, calculated as 9.60 multiplied by 30.
Knowing how to compute prorated salaries is critical in running a business, as you never want to pay more than what your employees have worked for. At the same time, it is a crucial tool for paying an employee correctly if a compensation change takes effect mid-month or mid-year.
How to Calculate a Prorated Salary
Learn how to calculate a prorated salary for employees who work partial pay periods, complete with a step-by-step guide and examples.
Whenever a contracted employee, who usually enjoys a monthly or contractual rate, works for a number of days that does not complete the wage cycle stipulated in their contract, a prorated salary is typically given as compensation for the work done during those days. The salary you receive will be based on a computation of your daily rate in relation to the rate stipulated in your contract, whether it is monthly or project-based. To make this easier to understand, let's say that you are paid $2,000 for a total of 26 days of work each month. Now, for this month, you only worked 10 days instead of the total 26 days you were contracted to work. Obviously, your employer is not liable to pay the full amount of $2,000 (unless otherwise agreed upon in the contract). Since you only worked 10 days, you should only receive 10 days' worth of salary. Here is a short process you can follow to compute this, using the given example:
- Determine your daily rate. To compute your prorated salary, you will first need to determine your daily work rate. This is the rate you earn on a daily basis. Basically, all you need to do is divide the total amount for a whole month's work by the number of working days in that month, excluding your normal days off. For this example, using $2,000 for 26 days of work each month, divide $2,000 by 26. Through this calculation, you will get a result of approximately $77 per day. This is now your daily rate.
- Multiply it by the number of days you worked. Now that you have determined your daily rate is $77, take that number and multiply it by the number of days you actually worked in the given month or outside your contracted work period. In this case, using the example of 10 days, 77 multiplied by 10 equals 770. Hence, the prorated salary for 10 days of work is $770. Therefore, your employer is only required to pay you $770 for those 10 days.
- Break it down. The same process can be used to compute prorated salaries on an hourly basis. You can repeat the previous process by determining your daily rate and then dividing the result by the number of hours you work each day. Through that process, you will get your hourly rate. For example, if you use the $77 daily rate as your basis and you usually work 8 hours each day, dividing 77 by 8 comes to around 9.60. Thus, your hourly rate is $9.60. Now, to prorate your salary if you worked a total of 30 hours in a given period, you will be entitled to $288, calculated as 9.60 multiplied by 30.
Knowing how to compute prorated salaries is critical in running a business, as you never want to pay more than what your employees have worked for. At the same time, it is a crucial tool for paying an employee correctly if a compensation change takes effect mid-month or mid-year.
How to Calculate a Prorated Salary
By Howtodotips
Learn how to calculate a prorated salary for employees who work partial pay periods, complete with a step-by-step guide and examples.