What Does Prorated Salary Mean?

Salaried workers are usually contracted with a specific annual salary. This salary may not, however, be the actual amount that the employee receives. In some cases, a salary may be prorated. Employees and employers alike should understand what a prorated salary is and how it works.

To prorate something is to divide it proportionately. In the case of a salary it means to divide an annual salary proportionate to the amount of time that a person has worked. A salary can be prorated according to any period of time, be it months, weeks or even days. When salaried employees receive a paycheck it is usually prorated based on the actual number of days that she has worked.

Purpose

The purpose of a prorated salary is to compensate employees for the amount of time that they actually work. For example, if a person has a contract that says he will earn £26,000 per year, but he starts the job on July 1st, it does not make sense that he should be paid the entire annual salary. Instead, he would receive a prorated salary of £13,000 for the remainder of that year.

Calculating Prorated Salary

To calculate prorated salary, begin with the total annual salary. Divide the annual salary by the number of work days that the employee is supposed to work in a year (i.e., the total number of weekdays less any holidays). This gives you the daily pay rate for the employee in question. An employees prorated salary is, therefore, the number of days that he has actually worked multiplied by this daily wage.

Benefits

A prorated salary has benefits for employees and employers alike. From the employer's perspective, prorating a salary allows an organisation to pay for the amount of time that a salaried employee has actually worked. This makes it possible to hire employees at any point, rather than only at the beginning of the financial year. From the employee's perspective, a prorated salary offers fair compensation to temporary employees. It ensures that if an employee works for a short period of time, he will receive pay proportionate to the amount of time he has worked.