Understanding Proration Factor Calculations
This section discusses:
General proration factor calculation.
Daily, weekly, or monthly frequency calculation method.
Workday schedule calculation method.
Proration percentage calculation method.
Proration calculation method for plan members who fall off a tree.
The proration factor is a number that expresses the portion of the payout period for which an individual was an eligible plan member. The highest proration factor is 1, which means that the individual was eligible for the entire payout period.
The Determine Eligibility proration process calculates eligibility and the proration factor. The Calculate Awards process uses the proration factor in awards calculation. Before you calculate awards, ensure that you have calculated proration for the entire plan payout period.
Terms and Elements
These terms are important for understanding proration calculation.
Field or Control |
Definition |
---|---|
Payout Period |
The time period of a payout. It is defined for the plan by begin and end dates on the Plan Payout Periods page. |
Prorate Period |
A subset of the plan payout period that is used for proration. The Eligibility/Proration process tests a worker's eligibility as of each proration period end date. |
Eligibility Evaluation Period |
The time period of the eligibility/proration calculation. Define begin and end dates on the run control page. |
Basic Proration Factor Calculation Process
To calculate the proration factor:
Select Calculate Proration on the Plan Business Rules page.
Set up proration-related control tables.
Set up workday rules on the Workday Schedule page (for the workday schedule calculation method).
Set up proration percentage rules on the Percentage Proration Rules page (for the proration percentage calculation method).
Set up proration periods on the Prorate Periods page (for all prorated plans).
Define the begin and end dates of the eligibility evaluation period on the Determine Eligibility run control page.
Run the process to calculate eligibility based on whether the worker is eligible as of the end date of each of the proration periods evaluated.
Each time you run the process, it calculates the cumulative eligibility proration factor for each member from the begin date of the plan payout period through the eligibility evaluation end date.
The system displays the proration factor on the Eligible Employees by Plan or Eligible Employees by Group pages and on the Award Details section of the Allocate Awards page.
The system calculates the proration factor for each evaluation period and accumulates the factor for the entire payout period.
Setting Up Prorate Periods
You set up the prorate periods on the Prorate Periods page. Select Calendar Days, Weekly, or Monthly as the proration frequency (length of the proration period).
Note: If you select Calendar Days, do not select a prorate % ID when the field appears. If you select Weekly, or Monthly, define which day of the week or month is the as of date for eligibility calculation.
The system defines the end dates of proration periods for the payout period based on the daily, weekly, or monthly frequency parameters.
Setting Up Prorate Periods
You set up the prorate periods on the Prorate Periods page.
Select Calendar Days, Weekly, or Monthly as the proration frequency (length of the proration period).
Note: If you select Calendar Days, do not select a prorate % ID when the field appears. If you select Weekly, or Monthly, define which day of the week or month is the as of date for eligibility calculation.
The system defines the end dates of proration periods for the payout period based on the daily, weekly, or monthly frequency parameters.
Example of Monthly Calculation
This table describes the three proration periods in the example of monthly frequency with the end of the month as the period end date:
Description |
Date |
---|---|
Evaluation period begin date |
04/01/2000 |
Evaluation period end date |
06/30/2000 |
Proration period end dates |
April 30, May 31, June 30 |
The process evaluates eligibility for each of the three proration periods of the evaluation period. Workers who are eligible on the proration period end dates are eligible for the month.
The process credits qualifying members with a proration factor of 1/3 for each proration period for which they were eligible.
A member who was eligible in all three proration periods would receive a proration factor of one (3/3).
The system calculates a proration factor for each day in the period and accumulates the worker's proration factors for eligible days. The calculation is:
Goal Weight × Performance Level of the Attainment Value
Setting Up Workday Schedule Calculation
To set up workday schedule calculation:
Set up workday rules on the Workday Schedule page.
Create schedules assigning a factor to each day of the week (Sunday through Saturday).
Each day in the period has a proration factor equal to that day's factor over the total of the factors for the period.
Set up the prorate periods on the Prorate Periods page.
Select By Workday as the proration frequency. This is a daily frequency, so the system creates a prorate period end date for each day in the payout period.
Select a Workday Rule to assign factors to each day in the payout period. This Workday Rule is assigned to all members of the plan for the duration of the payout period.
Goal Weight × Performance Level of the Attainment Value
Example
Workday Schedule Definition:
Day |
Factor |
---|---|
Sunday |
0 |
Monday |
1 |
Tuesday |
1 |
Wednesday |
1 |
Thursday |
1 |
Friday |
1 |
Saturday |
.5 |
Based on this schedule, the total factor was 23.5 in January 2000.
The proration factor attributed to a member for any eligible day in January 2000 is that day's factor on the workday schedule over 23.5. In this example, the proration factor for a Saturday is 0.5/23.5; the proration factor for a Tuesday is 1/23.5.
The worker's proration factor for the entire payout period is the accumulated sum of the daily proration factors for eligible days in the period. The maximum, for a worker who is eligible on every day in the period, is 23.5/23.5, or 1.
The proration factor is determined by looking up the percentage associated with the number of days that the worker is eligible in the period.
The calculation formula is the percentage assigned to the range into which the worker's number of eligible days falls for the period.
Setting Up Proration Percentage Calculation
To set up proration percentage calculation:
Set up proration percentage rules on the Percentage Proration Rules page.
For each prorate % ID, create separate proration rate schedules for workers who are active and those terminated at the end of the payout period.
For each proration rate schedule, define ranges of eligible days and associate a percentage with each range.
Set up prorate periods on the Prorate Periods page.
Select Calendar Days as the proration frequency. This is a daily frequency, so the system creates a prorate period end date for each day in the payout period.
Select a prorate % ID to associate proration rates schedules with the plan for the payout period.
Example
Proration Rates schedule:
Eligible Days |
Proration Percentage |
---|---|
10 |
35.00 |
21 |
65.00 |
31 |
100 |
Sample of proration factors:
Employee's Eligible Days |
Proration Factor |
---|---|
5 |
35 percent |
17 |
65 percent |
22 |
100 percent |