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Prorate semi-monthly salary

edited September 2008 in General Payroll Topics
I have an employee that started on 8/20/08. His semi-monthly rate is 5K for this example. What is the correct method to use to calculate his prorated pay for the 8/16-8/31/08 pay period?


  • Sometimes I see people calculate the prorated amount by multiplying the worked hours in the pay period (80 hrs.) by the hourly rate 57.69 which equals 4,615.38. Why wouldn't this be correct?
  • Well, this is what I get:
    You pay the employee how many days he/she actually worked/came into work.
    (Standard 2080 work hours in a year or 260 work days in a year)

    $5,000.00 x 24 = $120,000.00
    $120,00.00 / 260 = $461.54 per/day
    (assuming weekends off) he/she physically came in for 8 days.
    $461.54 x 8 days = $3,692.32

    Or if you wanted to do it per hour:
    $120,000.00 / 2080 = $57.69 per/hr
    8 days worked x 8 regular hours = 64.00 hours worked
    64.00 hours x $57.69 = $3,692.16

    ********** ********** ********** ********** **********

    I do not understand the percentage method as Warren calculated, as it is not consistent and here is why:
    Let's follow your semi-monthly pay-period (1-15 & 16-end).
    Employee A and B will get the same annual salary of $360,000.00 or semi-monthly salary of $15,000.00

    Employee A = started 08/15/08
    Employee B = started 08/16/08
    Both quit only after one day :lol:

    Employee A will get 1/11 of salary = $1,363.64
    Employee B will get 1/12 of salary = $1,250.00

    So, some time in September, they compare pay checks :twisted: :shock:
    They come back and claim we should have the exact same salary, as both did the same work (8 hours or 1 day), they should be equal salary, how do you explain?...?Employee A gets more because the moon is fuller mid-month :P
  • David's method is consistent with the law and it's easier. It is true that, depending upon the number of work days in the pay period related to the number of days worked in that pay period may result in a different calculation than other methods (such as converting the salary to equivalent hourly rate and paying hours at that rate or by deducting from the pay period salary for days NOT worked), but it's legal. Depending upon the situation, each of the three calculations can result in a different amount.

    Let them compare all they want. :lol:
  • I do it differently -

    I multiply their salary and get an annual amount divide that by 2080 to get an hourly rate and then multiply that by the missed days in the period (assuming 8 hours per day) and subtract that from their salary for the missing days.

    If they have only worked a few days in the period I get the hourly wage and multiply it by the days worked (8 hrs/day).
  • Is there a payroll book I could refer to that will give guidance for this kind of scenario?
  • After further review, I think David's method is correct. However, I used a slightly different way to get to his number. In my method, the hours/day changed not the hourly rate.

    $120,000 annual salary
    $5,000 semi-monthly salary
    120,000/2080 (hrs/yr.) ~ 57.69 hourly rate
    2080/24 pay periods ~ 86.67 hrs./pay period

    An employee started 8/20/08
    8/16-8/31/08 = 10 working days
    (86.67/10)*8 days worked*57.69 hrly. rate = 4,000

    This way, the hourly rate stays consistent which makes more sense to me.

    To cross check, this is what I would do:
    Let's say there is 8 pay periods left for the year.

    semi-monthly salary * remaining pay periods
    5,000*8 = 40,000
    86.67*8 = 693.36 hrs.
    40,000 + 4,000 earned on the 8/31/08 pay period = 44,000
    (86.67/10)*8 = 69.34 hrs. worked per this pay period
    44,000/(693.36+69.34) ~ 57.69 hrly. rate

    The rate above matches the hourly rate that is determined based on the annual salary.
  • Where would I find regulation 29 CFR 541.602 rules?
  • 8) lots of learning here 8)
  • I have an employee that started on 8/20/08. His semi-monthly rate is 5K for this example. What is the correct method to use to calculate his prorated pay for the 8/16-8/31/08 pay period?

    I did not see anything in the initial post that indicates this employee is exempt - If we are discussing this under different assumptionss , it may be difficult to reach a conclusion. The method David cites is for Exmept employees - the hourly method works for non-exempt employees.
  • I have a question along these lines. What if when you do the calculation to prorate, the proration ends up being more than the semi-monthly salary? How would you handle?

  • If you are pro rating correctly(fluctuating daily rate) it shouldn't be more than the salary.

    example -
    you have an employee getting 3000.00 per SM pay period.
    for the pay period of 1/1/19-1/15/19 there are 11 working days.
    you would take the total salary(not the hours) of 3000/11days to get the daily rate of 272.73
    you would multiply this daily rate by the number of days that the employee actually worked.
    If there were 9 days in the pay period the daily rate would be 333.33

    Since the number of working days in a pay period can be anywhere from 9 - 12 days this is why you can not prorate based on hours alone.

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