What is pro rata salary?
Pro rata is a shortened term for ‘proportional rate’. Pro rata pay is offered to part-time employees and is based on the number of hours they work. This is calculated as a proportion of the amount they would have earned if they were a full-time worker.
Full-time workers are salaried employees who are usually paid a set annual amount and not on an hourly basis. Part-time workers, on the other hand, are also salaried workers, but the money they receive is at a proportional rate to the hours they work. This means they receive a ‘pro rata salary’.
Pro rata salaries are only paid to part-time employees who work less hours than a full-time employee. It should be noted that independent contractors such as freelancers and temporary employees do not qualify for pro rata pay.
How to calculate pro rata salary
Although our calculator tool makes it simple to calculate your employees pro rata salary, here is a breakdown to help you understand and do it for yourself.
- Find out the equivalent full time salary and then divide the full time equivalent salary by 52 weeks.
- Take that result and then divide it with whatever the full time hours per week at your company are e.g. 37.5 / 40. The result of this division will give you the hourly rate.
- Next multiply this number by the actual number of working hours in per week (the pro rata hours per week)
- Once you have this number, divide by 52 and you should have the annual pro rata salary.
There are a number of other factors that you will need to consider to get the true amount, such as National Insurance. Our pro rata salary calculator works this all out for you to make your life a little easier.
How to work out pro rata holiday
Alongside the pro rata salary, you may also need to work out your employees’ pro rata holiday. Like with their salary, a part-time employee will be eligible for holiday pro rata, or a proportional rate to which they work.
It is important to guarantee that your part-time employees are getting the right amount of holiday next to their proportional pay. Not doing so could land you in legal trouble.
Remember almost all employees working a standard 5 day week in the UK are legally entitled to 5.6 weeks (28 days) of paid holiday a year. This is the statutory annual leave entitlement.
If a full-time employee who works 5 days a week is entitled to 28 days of paid leave (5 x 6.6), a part-time employee who only works 4 days a week will be due 22.4 (4 x5.6)
The calculation here is simple. To work out pro rata holiday entitlement, simply multiply the amount of days they work by 5.6.
For a quick and easy way to work this out, try our holiday entitlement calculator.
Is part-time work right for your business?
Before moving employees to part-time or hiring new ones on a pro rata basis, think about whether it is the right option for your business.
Part-time work does offer a range of advantages, including reduced payroll costs, greater flexibility for workers and fewer outgoings on benefits.
However, this comes with the potential for higher turnover rates, a divide between full-time and part-time workers, and a set of employees who may not have the same commitment to the company culture as a full-time employee. That’s why it’s so important to find ways to integrate part-time workers and contractors into your workforce.
It is completely up to you on deciding what is best for your business, just make sure both their pay and holiday is accurate!
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