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How does the pro-rata calculation work

Please note: The explanations below refer to months but the same concepts apply to employees with other pay frequencies – simply substitute “month” with “week” / “fortnight”.

Why is there a pro-rata percentage on my payslip?

A pro-rata percentage is calculated automatically for salaried employees whenever a payslip is not for a full month. This usually occurs in one of three situations:

  • The employee started employment during the month.
  • The employee’s service ended during the month.
  • The employee worked for a full calendar month but your pay frequency ends on a day other than the last day of the month.

How is the pro-rata percentage calculated?

There is no set requirement for calculating pro-rata percentages, either from Revenue or in the relevant legislation, so employers may choose the method they prefer – as long it is communicated with employees and applied consistently.

SimplePay calculates the pro-rata percentage as days worked / working days in month x 100. The following examples illustrate how this is used in each of the three situations mentioned in the previous section:

  • If your pay frequency ends on the last day of the month and an employee starts on 15 August 2016, the pro-rata percentage will be 56.52. This is calculated as 13 / 23 x 100, where 13 represents the days worked and 23 is the number of working days in August 2016.
  • If your pay frequency ends on the last day of the month and an employee’s service is ended on 20 January 2017, the pro-rata percentage will be 68.18. This is calculated as 15 / 22 x 100, where 15 represents the days worked and 22 is the number of working days in January 2017.
  • The employee worked for a full calendar month but your pay frequency ends on a day other than the last day of the month. For example, if your pay frequency ends on the 25th of the month and an employee starts on the 1st of June 2017, the pro-rata percentage will be 80.95. This is calculated as 17 / 21 x 100, where 17 represents the days worked and 21 is the number of working days from 26 May to 25 June 2017.

How do I change the pro-rata calculation used?

As mentioned in the previous section, there are no set rules for calculating pro-rata percentages, so you may override the calculated value to conform with the calculation generally used by your company.

You may wish to pay an employee their full salary even though they did not work the full period. You can do this by overriding the pro-rata percentage to 100.

To override the pro-rata percentage, click on it and enter the percentage you would like the system to use.

Which items are pro-rated?

SimplePay currently only automatically applies the pro-rata percentage to an employee’s Basic Salary.

You can enable the pro-rata calculation for custom items that are Income, Allowance or Deduction items if they have been set up to with the Input Type as “Fixed Amount” or “Enter Amount Per Employee”.

More information on custom items can be found in the following article:

Payroll Setup > Company Setup > Custom Items

If any other system or custom items need to be pro-rated, you will need to manually calculate these and enter the relevant amount.