How You Prorate Earnings and Deductions for the US

There are multiple proration conversion rules you can use to help you calculate standard or supplemental earnings.

You select a proration conversion rule when you define an earnings or deduction element using the Elements task. They calculate prorated earnings based on calendar days or work schedules.

This topic covers:

How you prorate deductions
How prorated earnings are calculated
Examples of earnings calculation based on calendar days
Example of earnings calculation based on work schedule

How You Prorate Deductions

Typically, you don't prorate deductions, such as deductions based on a percentage of earnings. However, you might consider prorating fixed-rate deductions, such as a voluntary deduction for a fitness center membership.

In most cases, you use the predefined global proration formula for deductions (GLB_DEDN_PRORATION).

This formula calculates the proration value by:

Multiplying the periodic value by the number of calendar days in the proration period.
Divides this figure by the number of calendar days in the payroll period.

How You Prorate Earnings

When you create a recurring earnings element, and you identify it as subject to proration, the element template automatically associates it with a predefined proration formula (US_EARN_PRORATION). This formula uses the proration calculation method you selected to prorate the earnings.

This formula doesn't prorate:

Nonrecurring elements
Earnings elements with a calculation rule of unit multiplied by rate, if rate and hours are entered in the element entry

These examples show how proration calculations are performed on earnings calculations based on:

Calendar days
Work schedules

Example of Prorating Earnings Based on Calendar Days

In this example, the formula calculates proration results based on various conversion rules and daily proration units.

With these settings	The formula calculates this	For example
Standard Rate Annualized rule Daily proration units	Calendar days in proration period multiplied by annual pay and divided by annual calendar days	You assign a person to a monthly payroll for a salary basis of $25,000. You update the salary on 10 December to $30,000. You calculate the December monthly payroll. The proration formula calculates two proration periods with 9 calendar days in the first proration period, and 22 in the second period. (9 * 25000) / 365 + (22 / * 30000) / 365 = 616.44 + 1808.22 = $2424.66
Standard Rate Daily rule Daily proration units	Total pay divided by calendar days in the payroll period and multiplied by calendar days in the proration period	You hire a person to a weekly payroll in the middle of the payroll period. The employee works 3 calendar days and receives a location allowance of $500. The proration formula calculates the employee's location allowance for the 3 days. (500 / 7) * 3 = $214.29

With these settings

The formula calculates this

For example

Standard Rate Annualized rule

Daily proration units

Calendar days in proration period multiplied by annual pay and divided by annual calendar days

You assign a person to a monthly payroll for a salary basis of $25,000.
You update the salary on 10 December to $30,000.
You calculate the December monthly payroll.
The proration formula calculates two proration periods with 9 calendar days in the first proration period, and 22 in the second period.

(9 * 25000) / 365 + (22 / * 30000) / 365 = 616.44 + 1808.22 = $2424.66

Standard Rate Daily rule

Daily proration units

Total pay divided by calendar days in the payroll period and multiplied by calendar days in the proration period

You hire a person to a weekly payroll in the middle of the payroll period.
The employee works 3 calendar days and receives a location allowance of $500.
The proration formula calculates the employee's location allowance for the 3 days.

(500 / 7) * 3 = $214.29

Example of Prorating Earnings Based on a Work Schedule

In this example, the formula calculates proration results based on various conversion rules and workday-related proration units. If you don't define any working hours, the proration formula checks the assignment definition for the number of working hours and frequency. If it doesn't find any, it uses 40 as the number of working hours and 5 as the number of days for the work week.

With these settings	The formula calculates this	For example
Periodic Work Schedule Rate Annualized rule Workday proration units	Work schedule days in proration period multiplied by annual pay and divided by 260 days, the default number of annual working days A day in a work schedule is a 24-hour period.	You hire a person to a monthly payroll for an annual salary basis of $25,000. The employee works 5 days a week Monday through Friday. You increase the monthly salary to $30,000 effective 10 December. You calculate the December monthly payroll. The proration formula calculates 6 working days from 1st December to 9th December, and 16 working days from 10th December to 31st December. (6 * 25000) / 260 + (16 * 30000) / 260 = 576.92 + 1846.15 = $2423.07
Periodic Work Schedule Rate Annualized rule Hourly proration units	Work schedule hours in proration period multiplied by the annual pay and divided by 2080, the default number of annual working hours.	An employee assigned to a weekly payroll receives an annual salary basis of $25,000. You increase the salary to $30,000 effective 10 December. The employee works 10 hours a day from 9 December to 12 December. You calculate the weekly payroll for the week 8 December to 14 December. The proration formula calculates 2 proration periods, with 10 working hours for the first period, and 30 for the second period. (10 * 25000) / 2080 + (30 * 30000) / 2080 = 120.19 + 432.69 = $552.88

With these settings

The formula calculates this

For example

Periodic Work Schedule Rate Annualized rule

Workday proration units

Work schedule days in proration period multiplied by annual pay and divided by 260 days, the default number of annual working days

A day in a work schedule is a 24-hour period.

You hire a person to a monthly payroll for an annual salary basis of $25,000.
The employee works 5 days a week Monday through Friday.
You increase the monthly salary to $30,000 effective 10 December.
You calculate the December monthly payroll.
The proration formula calculates 6 working days from 1st December to 9th December, and 16 working days from 10th December to 31st December.

(6 * 25000) / 260 + (16 * 30000) / 260 = 576.92 + 1846.15 = $2423.07

Periodic Work Schedule Rate Annualized rule

Hourly proration units

Work schedule hours in proration period multiplied by the annual pay and divided by 2080, the default number of annual working hours.

An employee assigned to a weekly payroll receives an annual salary basis of $25,000.
You increase the salary to $30,000 effective 10 December.
The employee works 10 hours a day from 9 December to 12 December.
You calculate the weekly payroll for the week 8 December to 14 December.
The proration formula calculates 2 proration periods, with 10 working hours for the first period, and 30 for the second period.

(10 * 25000) / 2080 + (30 * 30000) / 2080 = 120.19 + 432.69 = $552.88