How does the system prorate an employees salary in the UK?

The system prorates the Basic Pay based on the proration calculation configured using the following company settings. 

      Navigate > Configuration > Payroll > Payroll Config > Calculation Settings > Proration

      

      

There are two different ways of working out apportionments for salaries (and allowances) for employees who start or leave mid-month. For each of these main methods, there is a variation on how to use it. The four methods are listed below:

1. The Calendar Day method.
2. The slight variation on the Calendar Day method.
3. The Working Day method.
4. The slight variation on the Working Day method.
   

All of the following calculations, assume a start date of 15th April 2023, and an annual salary of £60,000 (£5,000 per month x 12).  The employee works Monday to Friday.

1. Prorate using working days instead of calendar days.

Divide the annual salary by 260 (or 261 in a Leap Year) and then multiply the result by the number of working days (inclusive), between the start date and the end of the pay period.

Example:

Start date: 15 April 2023.  

Working days in April: 20

Working days to be paid: 10 (20 days – 10 days, before the employee started)

Therefore :

£60,000 / 260 x 10 = £2,307.69

The slight variation on the Working Day method:

In order to obtain the monthly value, the annual salary is divided by 12 months and then divide the monthly value by the number of working days in the month, and then multiply the answer by the number of working days (inclusive), between the start date and the end of the pay period.

Therefore:

£60,000 / 12 months = £5,000 per month

£5,000 / 20 x 10 = £2,500.00

2. The Calendar Day method.

Divide the annual salary by 365 (or 366 in a Leap Year) and then multiply the result by the number of calendar days (inclusive), between the start date and the end of the pay period.

Start date: 15 April 2023.  

Calendar days in April: 30

Calendar days to be paid: 16 (30 days – 14 days, before the employee started)

Therefore:

£60,000 / 365 x 16 = £2,630.14.

The slight variation on the Calendar Day method:

Divide the annual salary by 12 months, to obtain a monthly value and then divide the monthly value by the number of calendar days in the month, and then multiply the answer by the number of calendar days (inclusive), between the start date and the end of the pay period.

Therefore:

£60,000 / 12 months = £5,000 per month

£5,000 / 30 x 16 = £2,666.67

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