What is Pro-Rata Salary (And How to Work it Out)

If you’re wondering what pro rata salary is, you’re not alone. 

The term might already be in your vernacular, but understanding it and being able to calculate pay and pro-rata holiday entitlement accurately can be a different ball game altogether.

If there’s one thing employees are rightly entitled to, it’s correct and prompt salary payment, but to deliver that, you have to first work out what wage you need to pay them and when 

This blog explores what is pro rata salary in the UK — from the importance of pro-rata calculations to actually calculating them.

What does pro-rata salary mean?

A pro-rata salary is when you pay an employee a proportion of what would be their full salary if they worked full-time. Pro-rata salary needs to be calculated for part-time employees, anyone who job shares or receives a promotion in the middle of a pay period, if someone takes unpaid leave, or if an employee joins (or is dismissed from) your company in the middle of a pay period. 

In all these circumstances, you need to be able to pro-rata their salary accordingly and ensure they’re paid the correct amount, which can get confusing, particularly if you’re managing the process manually.

Why are pro rata calculations important?

If you don’t work out a pro-rata salary correctly, not only will employees lose trust in the organisation, but they’ll also be lining up at the door to complain. And dealing with multiple employees wondering why they haven’t been paid properly isn’t pleasant. 

And then on top of that, you’ll have to correct all the mistakes you’ve made, causing more administrative tasks for your payroll team and delaying other strategic tasks to help drive the business forward.

What are some other benefits of being accurate in pro-rata salary calculations?

Both employers and HR managers stand to gain a lot when taking the time to work out pro-rata salaries accurately:

It helps with transparent recruitment

By calculating pro-rata salaries and benefits, recruitment drives are more transparent; potential candidates are able to make informed decisions about whether or not the pro-rata salary suits their situation before applying.

It improves budget planning

Knowing exactly how much an employee costs you is essential for budget planning. You’ll know exactly how much you’re spending out, which means it’s easier to make impactful business decisions to drive growth.

It improves the employee experience

By being transparent about pay structures, you can build trust and loyalty within your workforce. Helping retention and attracting new employees.

It helps you ensure fair compensation

Just because one employee works a shorter week than another shouldn’t prevent them from accessing fair company benefits. By accurately working out benefits pro-rata, you level the playing field for all employees, and everyone gets what’s fair.

It supports flexible working

Gone are the days when every employee benefits from a 9-5 static schedule. Flexible working is a global trend that caters to the modern needs of employees, with 76% of UK businesses offering some form of flexible working. You can improve productivity, efficiency and workplace morale by offering this way of working. And being able to accurately work out pro-rata wages supports this working shift.

How to calculate pro-rata salaries accurately

If you’re scratching your head wondering how to work out a pro-rata salary, don’t worry; here’s how to calculate it:

Information you need: 

• Employee’s full-time salary 

• How many hours class as full-time in your company

• How many hours the employee worked in the given period

Your pro-rata FAQs answered

Still left with a few questions, here are some common questions about pro-rata answered below.

Does a pro-rata salary affect benefits?

Yes, pro-rata salary affects all company benefits, both monetary and non-monetary, from pension contributions and holiday entitlement to gym memberships and time off for a birthday. All benefits should be adjusted proportionately for every staff member.

Does pro-rata salary impact holiday entitlement?

It’s not just pro-rata salaries you need to work out; it’s holiday entitlement, too. Working out who is owed what leave can be a headache. They’re entitled to a proportionate amount of annual leave depending on hours worked, which, if you’re managing various leave requests, can get more than complex.

Here’s how to work out holiday entitlement for part-time workers.

What is the pro-rata rule?

The pro-rata rule is where employers proportionately split up salary, benefits, leave and more to all staff. This means that all employees, regardless of their contracted hours, are treated equally to a portion of what they’re owed. This includes bonuses, overtime pay, commissions, sick pay, pension contributions, etc., all need to be calculated on a pro-rata basis that aligns with the employee’s individual working hours.

Let PayFit manage all your pro-rata calculations

We’ve got some good news. If you don’t fancy doing manual pro-rata calculations and holiday entitlement (who does?), a payroll solution like PayFit can help by automatically calculating all kinds of important figures, including pro-data salaries, holiday entitlement, and other leave calculations (think maternity, paternity, and adoption leave).

That means you remove the guesswork and the tedium of manual calculations and can instead bank on accurate figures to report in your monthly payroll, all while keeping employees paid correctly and on time every time. 

Ready to say goodbye to manual pro-rata calculations? Let us tick it off your to-do list — book a free demo, and we’ll show you how it all works!