February 22, 2024

Your Guide to Prorated Salary Calculation

Prorating salary is something every HR practitioner will encounter. Employees joining (or leaving) in the middle of pay cycles is very common, or if an employee takes unpaid leave.

Hence, knowing how to prorate salary correctly will save you time and money. Salary proration only applies to salaried employees that are paid every month. Employees paid hourly don’t need their pay to be prorated – instead, only the hours worked are counted.

There are three options for calculating salary proration. Employers are free to choose which formula to use, as there is no single formula specified by law.

Proration by Calendar Days

Salary is prorated by the number of days in the month, e.g. 30 or 31 days. Weekends and public holidays are included.

\[Monthly\;days * ( Days\;of\;the\;Month - Days\;before\;employment ) \over\;Total\;days\;of\;the\;month.\]

Proration by Working Days

Salary is prorated according to the number of working days in the month. Weekends are excluded (but not public holidays).

\[Monthly\;salary * Days\;worked \over\; (Total\;days\;of\;the\;month - weekends)\]

Example Calculations Harry joined Acme LLC on 8 February 2023. His monthly salary is $5,000. He works normal hours, five days a week.

Calculation by calendar days:

\[5000 * ( 28 - 7 ) \over\ 28 \] \[=3750\]

Calculation by working days:

\[ 5000 * 14 \over (28 - 8) \] \[ = 3500\]

Prorate Salary Easily with Leave Balance

It’s easy to prorate salary for one employee, but what if you have two, three, or more employees coming in (or leaving) at once? And at different pay grades?

Leave Balance’s payroll module makes salary calculation easy. Leave Balance automates payroll setup for new employees, as well as automatically calculate all salary-related data. All you have to do is check and approve.

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