This Latin term describes a proportionate allocation.
So when you hear an employee receives their salary on a pro rata basis, it’s the amount of pay you quote an employee for what they would earn if they were working full-time.
Let’s take a closer look at what that all means.
How does pro rata pay work?
It means the salary that’s quoted is what a full-time employee would normally receive while with your business.
However, they’re scaled back to reflect the amount of hours the individual is working.
An example here is if the employee’s salary would be €20,000 pro rata for a 40-hour working week. If they only work 30 hours, then the wage would come down to €15,000.
In simple terms, an employee on “pro rata” receives a proportion of what their full salary would be.
How do I work out pro rata salaries?
There’s a formula you can use to understand how to calculate pro rata:
- Annual salary / full-time hours x working hours.
So, divide the annual salary with the employee’s full-time hours. Then you multiply that by the number of working hours.
However, be aware this isn’t 100% accurate every single time. For the greatest degree of accuracy you should always aim to work out hours rather than days.
A pro rata refund of any overpaid salary may sometimes be due if you don’t get your calculations right. It’s important to keep on top of your payroll calculations to avoid confusion and pay disputes with staff.
Explaining pro rata holiday entitlement
Working out annual leave for your part-time employees can be difficult. It relates to the number of annual leave holidays with pay they receive.
In Ireland, the minimum entitlement is four weeks’ paid holidays.
To work out pro rata annual leave, you need to do another formula. The basic way to do it is as follows:
- An employee who works at least 1,365 hours in a year receives the full entitlement of 4 working weeks of annual leave.
- An employee who works at least 117 hours in a month receives one-third of a working week for each month in the leave year.
- Part-time employees have 8% of the hours worked in a full leave year (but subject to a maximum of four working weeks).
- An employee who works for 8 months or more in the annual leave year has entitlement to an unbroken period of two weeks’ annual leave.
There are many pro rata holiday calculators you can use online to do this and they’re free to use.
What is a pro rata pension?
Some employers offer their staff a matching pension contribution. This will typically be a percentage of salary which the employer matches.
Again, it’s important the pension contribution is calculated based on the prorated salary and not the figure a full-time worker would pay.