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Calculate pay for an incomplete month of work / Proration
Calculate pay for an incomplete month of work / Proration

How PayrollAny automates proration for incomplete work months?

StaffAny avatar
Written by StaffAny
Updated over a week ago

Contents of this article are applicable to the following users

Tier: NA

Product: PayrollAny

Platform: Web

When a monthly salaried staff works an incomplete month (mid-month joiner, mid-month leaver, or has compensation changes in the middle of the month), their salary needs to be prorated accordingly. This article will explain how this proration for an incomplete month of work can be automatically done in PayrollAny.

This guide will cover the following:


Proration formula & setup

We use the MoM formula for proration, defined as such:

Pay for an incomplete month of work =

(Monthly gross rate of pay) / (Total number of working days in that month) x Total number of days the employee actually worked in that month (MoM Reference)

Monthly gross rate of pay

This is the actual amount to prorate. All salaried staff by default have their basic monthly salary already setup as proratable.

Additionally, you can create a new custom pay item and select that as proratable for this calculation to apply. An example is transport allowance, fixed amount type, that is proratable. See more on how to set up pay items here.

Total number of working days in that month

This is based on the MoM table of working days (MoM Reference), and the 5 / 5.5 / 6 working day setting defined for each staff.

Total number of days the employee actually worked in that month

This only changes for months that have mid-month joiners, mid-month leavers, or mid-month compensation changes. If a staff within a particular payroll period does not fall into either of the above 3 categories, this value will just be the same as “Total number of working days in that month”, and effectively no proration will happen.

This is calculated based on the “Prorate salary based on” setting:

  • If “Fixed working days per week” is chosen, the number of days worked is counted the same way how working days is counted, but just applied to that shorter time range.

  • If “Attendance data” is chosen

    • For payruns with attendance data, number of days worked follows our current timesheet days worked definition of:
      Number of days with at least 1 shift with clock-in record + number of working day leaves taken.

    • For payruns without attendance data, number of days worked follows the “Fixed working days per week” setting

In general, the recommendation here is for office staff, choose “Fixed working days per week”. For outlet staff, choose “Attendance data”.


Examples of incomplete month proration

The following are examples of how incomplete month proration is applied in different scenarios:

Mid-month joiner

Setup

  • To identify new joiners efficiently, it is recommended to enter the join date in the My Team > staff's name > Work Information.

  • When making edits to the payroll, you could differentiate new joiners, and it will automatically prorate the calculations accordingly.

Calculation

  • From the example above:

    • Working days per week settings: 5 days (Mon-Fri)

    • Prorate salary based on: Fixed working days per week

    • Join date: 8 December 2023

    • Payroll’s Timesheet period: 01 Dec 23 - 31 Dec 23

    • Monthly wage: $5,500/month

  • Calculation:

    • Working days (1 Dec-31 Dec) = 21 days

    • Days worked (8 Dec-31 Dec) = 16 days

    • Prorated salary = wage x days worked / working days
      = $5000 x 16 / 21 = $4,190.48

Mid-month leaver

Setup

  • To identify resignee efficiently, it is recommended to enter the contract end date in the My Team > staff's name > Work Information

Calculation

  • Similar to the mid-month joiner above.

Mid-month compensation changes (promotions / transitions)

Setup

  • For the case of promotion or transition that cause compensation changes. You can update the compensation accordingly in the My Team > staff's name > Current wage setup. Then specify the effective pay period.

    • Note: After saving, if the effective date is in the future, it will only show the “current wage setup”, and it will change upon the effective date

  • When making edits to the payroll when there are any compensation changes in mid-month. The system will prorate for all of the periods.

Calculation

  • From the example above:

    • Working days per week settings: 5 days (Mon-Fri)

    • Prorate salary based on: Fixed working days per week

    • First compensation period: 1 Jan - 14 Jan 2024 @ $5500/month

    • First compensation period: 15 Jan 2024 - onwards @ $6000/month

    • Payroll’s Timesheet period: 01 Jan 24 - 31 Jan 24

  • Calculation:

    • Working days (1 Jan-31 Jan) = 23 days

    • Days worked for period 1 (1 Jan-14 Jan) = 10 days

    • Days worked for period 2 (15 Jan-31 Jan) = 13 days

    • Prorated salary period 1 = wage x days worked / working days
      = $5500 x 10 / 23 = $2,391.30

Prorated salary period 2 = wage x days worked / working days

= $6000 x 13 / 23 = $3,391.30


Monthly Total Number of Working Days in 2024

Here's a useful table based on MoM recommendation to help you calculate the number of working days in 2024 on a monthly basis, based on your company's working schedule.

Note:

  • The total number of working days per month includes public holidays that fall on a normal working day but excludes rest/off and non-working days.

  • Half-day work (5.5 days per week) is scheduled on a Saturday, while Sunday remains the default rest/off day.

  • The 6th working day falls on a Saturday, and Sunday is still considered the default rest/off day.

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