What is pro rata salary?
The definition of pro rata is to distribute something in proportion to the amount or size of something. The adverb is a Latin term which translates to “in proportion” or “proportional rate”.
When pay is prorated it is distributed to part-time employees based on the number of hours they work. It is proportional to the amount they would have earned if they worked full-time.
Before we can dive into pro-rata pay calculation, we need to understand who qualifies for it.
There are generally two types of salaried employees in a company:
Full-time employees
Part-time employees
Full-time employees are salaried employees who are paid a certain amount per annum (i.e. a full-time salary) instead of on an hourly basis.
Part-time employees are also salaried employees, but the amount they receive is proportional to the hours they work.
In other words, they receive a pro rata salary.
Pro-rata salaries are paid to part-time employees who work less hours than a full-time employee.
Other hiring options include independent contractors, such as freelancers, and temporary employees hired for a specific period of time. These other types of workers do not qualify for pro-rata pay and therefore don’t need to be considered while reading this article. However, these types of workers do still need to understand the rules and regulations of the tax that applies to them.
Top Tip: You can learn more in our simple guide to IR35 📄
How to calculate pro rata salary
Before you begin to calculate a pro-rata salary, you need to know the exact amount a part-time employee’s salary would be if they worked full-time.
You also need to know the total amount of hours the part-time employee will be working. This ultimately depends on your budget and the type of work the employee will be doing.
For example, the full-time pay of a manager would likely be higher than the full-time pay of an assistant manager. In this case, you’d ideally want to hire a part-time manager for fewer hours than a part-time executive, to save money in the long run.
Once you have this information, follow the steps below to calculate pro rata salary:
Divide the full-time annual salary by 52 (number of weeks)
Divide the result by 40 (standard full-time weekly hours) to get the hourly rate
Multiply the hourly rate by the number of actual work hours per week
Multiply this by 52 to get the annual pro rata salary
Pro rata salary example
Let’s say a full-time employee has an annual salary of £30,000 for a 40-hour week.
We need to calculate the pro rata salary of a part-time employee who works 25 hours a week.
Pro rata calculation
First, divide £30,000 / 52 to get the weekly salary, which is £576.9.Next, divide £576.9 / 40 to get the hourly rate, which is £14.4.To find out the weekly pro rata salary, multiply the hourly rate by the actual work hours: £14.4 x 25 = £360.5.To calculate the annual pro rata salary, multiply the weekly pro rata salary by the total number of weeks: £360.5 x 52 = £18,750.
Other methods to calculate pro rata salary
You can also use this simple formula to calculate an annual pro rata salary:
Annual salary / full-time hours x actual work hours
If you would rather skip the math, this salary calculator can help you work out exactly what you need to pay your employees.
How to calculate pro rata holiday
According to the UK Government, part-time workers should get the same treatment for not only pay rates, but also pensions, holidays, promotions, transfers, and more. Violating these regulations can get you into legal trouble.
In this section, we’ll show you how to calculate pro rata holidays for part-time employees.
Before we begin, it’s important to note that almost all workers in the UK are legally entitled to 5.6 weeks or 28 days of paid holidays a year. This is commonly known as annual leave or statutory leave entitlement.
To work out pro rata holidays, we’ll use a 5.6 multiplier—simply multiply the number of days an employee works per week with 5.6.
Consider this example.
A full-time worker who works 5 days a week will be entitled to 28 days of paid leave (5 x 5.6).To calculate the holiday entitlement of a part-time employee who works 3 days a week, simply multiply the number of days they work each week by 5.6.The result is 16.8 days (3 x 5.6).
For ease of timekeeping purposes, you can round off to the nearest whole number. In this case, the employee will be given 17 paid holidays.
You can also use this holiday entitlement calculator for your employees
Top Tip: The minimum holiday entitlement for full-time workers may or may not include bank holidays. This depends entirely on company policy. For employers and employees alike, you can learn more about the rules and regulations regarding time off in the UK in our guide to annual leave: how to calculate it and how to create an annual leave policy 📅