You've undoubtedly heard the term ‘pro rata'. But do you know exactly what it means and how to work out pro-rata pay and holiday entitlement for your employees?
Remember, too, that you can use our pay and benefits services at any time for assistance on this matter.
What is pro rata salary?
Let's start with a definition.
In its most basic form, a pro rata salary is an amount of pay you quote an employee based on what they would earn if they worked full-time.
For example, if an employee's salary would be £20,000 pro rata in a 40-hour week, but they only work 30 hours a week, their annual salary would be £15,000.
So, someone who works ‘pro rata' is getting a proportion of a full-time salary.
Who does pro rata annual salary apply to?
It’s a common question. What criteria would my employee have to satisfy in order to receive a pro-rated salary? Well, the pro rata salary applies to any employee who satisfies one or more of the following:
Working part-time in a business
Part-time employees receive a proportionate amount compared to a full-time employee. The person will have the same skillset as the full-time employee and will perform the same role – for a smaller amount of time. Part-time employees work less than 35 hours per week and receive the same salary as a full-time employee on a pro-rata basis.
Joining a company in the middle of a pay period
If you take on an employee after your payroll cut-off then that employee still needs to be paid. Because they have joined your business in the middle of the month the salary they receive on their first payslip will be on a pro rata basis for the days they have worked.
Resignation or dismissal in the middle of a pay period
Exactly the same as a new starter joining your organisation in the middle of a pay period, you may also get leavers. For employees who either resign or are dismissed, their final pay slip will be their normal remuneration but calculated on a pro-rata basis for the days worked.
Being promoted in the middle of a pay period
Let’s say you have an outstanding employee who you want to promote. If that promotion is granted in the middle of a pay period and it comes with a salary increase then the new salary may need to be paid on a pro-rata basis. So, the employee would get their previous rate for the days worked and the new rate for the remaining days worked in that pay period.
Working for a specific time period
An employee may only work for your business for a short duration. This might happen if another team completes a set of tasks, for example. In that instance, your company would pay the employee on a pro-rata basis.
Your contracts and documentation will outline your sick pay policy, annual leave policy and any other leave (such as maternity, paternity or bereavement). Every company has their own set of paid leave terms. If an employee has too many days off, their salary might then be paid on a pro-rata basis to reflect this.
No business wants to end up facing an employment tribunal, so let’s discuss how to get pro-rata right.
How to work out pro rata salary
The basic calculation uses simple equations, and you can use them to work out pro-rata is as follows:
- Annual salary / full-time hours x actual work hours.
The output value isn't always 100 percent accurate. The better way to calculate pro rata pay entitlement is to work it out by hours rather than days.
In other words, it's more helpful to think about it as a wage, rather than a salary.
How to work out pro rata wages
If an employee would receive £25,000 for a 40-hour week, then you can easily work out the hourly rate, which is £25,000 / 40 = £625.
Once you've figured out the hourly rate, you should be able to reach the pro rata wage just by multiplying the hourly rate by the number of hours the employee will work. For example:
- 15 hours x £625 = £9,375.
If you're still struggling with how to work out pro-rata pay, remember the basic equation: Annual salary / full-time hours x actual work hours.
Does pro rata salary impact annual holiday entitlement?
One of the trickiest things to factor in with an employee receiving a pro rata salary is their holiday entitlement and holiday pay. Pro rata holiday entitlement is the amount of holiday that an employee will get in proportion to the holiday entitlement of a full-time employee.
All employees are entitled to statutory minimum paid holiday, but with pro rata salaried staff it impacts everything from bank holiday entitlement to how much annual leave allowance is granted.
How much holiday part-time workers receive will depend on the number of hours and days a week your employee works. A full-time employee receiving full entitlement for annual leave may receive the statutory minimum holiday entitlement of 5.6 weeks. If your part-time employee works exactly half as much, they are entitled to half as much holiday on a pro-rata basis.
There are a few different scenarios to consider when you calculate pro-rata holiday entitlement. Calculating holiday pay is fairly straightforward one you know how. So let's have a look at how to work out pro rata holiday entitlement.
How to work out pro rata holiday
A part-time employee still has holiday entitlement (referred to as statutory entitlement) so let's work that out too.
There's a quick and simple trick for working out an employee's pro rata holiday. Multiply the number of days they work each week by 5.6.
If a pro rata employee works 3 days a week, then their holiday entitlement is 3 x 5.6, or 16.8 days.
Obviously, giving staff 0.8 of a holiday is awkward, for timekeeping purposes and the employee. It's usually worth rounding this up to the nearest whole number, 17 in this case.
Why the 5.6 multiplier?
Well, the basic statutory holiday entitlement of a full-time employee is 28 days (5.6 weeks). This means they work five days a week. Five, multiplied by 5.6, gives us the full 28 days' entitlement without the need for a decimal point.
Working on a pro rata basis
Another important element to consider when employing someone on a pro-rata basis is benefits.
The Part-Time Workers Regulations state that those on a part-time income should receive the same benefits as those working full-time.
What this means is that if you offer a pension to full-time employees, then you must also offer this to those working pro rata.
The list doesn't stop at pay-related benefits either. If full-time employees get a gym membership or their birthday off as annual leave, those on part-time should too.
Calculate pro rata salary
Hopefully, we've answered all of your questions and you now know how to work out pro rata salary for UK-based employees. Just a reminder if not…
An annual salary of full-time employee/total hours in a working week = hourly rate or hourly wage
Hourly rate x hours of pro rata worker = pro-rata salary
If you'd like to skip the hassle of working that out yourself, however, there are options available to you.
You can find a pro rata calculator online. There's a particularly good one at the salary calculator
If you're looking for a pro rata holiday calculator online, you can calculate holiday entitlement here, or you can leave the working out to a Croner expert.
Need help calculating pro-rata pay or holidays?
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