1. How do I create payroll elements?
  2. Calculation of Prorated Earnings and Deductions

Calculation of Prorated Earnings and Deductions

Use the Elements task and create an earnings or deduction element, and select a proration conversion rule to calculate standard or supplemental earnings.

You can also calculate prorated earnings based on calendar days or work schedules.

Prorated Deduction Calculations

Typically, you don't prorate deductions based on a percentage of earnings. You might prorate fixed rate deductions, such as voluntary deduction for a fitness center membership. In most cases, use the predefined GLB_DEDN_PRORATION global proration formula for deductions. For this formula, the proration value is the periodic value multiplied by the number of calendar days in the proration period. This value is then divided by the number of calendar days in the payroll period.

Prorated Earnings Calculations

Creating a recurring earnings element automatically associates it with a predefined proration formula GLB_EARN_PRORATION. The proration formula determines how to prorate earnings in the proration period based on the proration calculation method you select.

As a guideline the global 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.
Note: Some predefined legislations provide a different default proration formula and rules.

The following examples show how proration calculations are performed on earnings calculations, based on calendar days or work schedules.

Earnings Calculation Based on Calendar Days

The formula calculates proration results as shown in this table.

Examples of Earnings Calculation Based on Calendar Days

Earnings Calculation Based on Calendar Days Proration Calculation

Standard Rate Annualized rule

Daily proration units

 Calendar days in proration period multiplied by annual pay and divided by annual calendar days
Example:
  1. Assign a person to a monthly payroll for a salary basis of 25,000.
  2. Update the salary on 10 December, 2013 to 30,000.
  3. Calculate the December monthly payroll.

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

The proration formula calculates 2 proration periods with 9 calendar days in the first proration period, and 22 in the second period.

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.
Example:
  1. Hire a person to a weekly payroll in the middle of the payroll period.
  2. Employee works 3 calendar days and receives a location allowance of 500.

(500 / 7) * 3 = 214.29

The proration formula calculates the employee's location allowance for the 3 days.

Earnings Calculation Based on Work Schedule

The formula calculates proration results as shown in this table. If no working hours are defined, the proration formula checks the assignment definition for the number of working hours and frequency. If no information is found, the formula uses 40 as the number of working hours and 5 as the number of days for the work week.

Examples of Earnings Calculation Based on Work Schedule

Proration Conversion Rule and Proration Units Proration Calculation

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.
Example:
  1. Hire a person to a monthly payroll for an annual salary basis of 25,000.
  2. The employee works 5 days a week, Monday through Friday.
  3. Increase the monthly salary to 30,000 effective 10 December 2013.
  4. Calculate the December monthly payroll.

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

The proration formula calculates 6 working days from 1st December to 9th December, and 16 working days from 10th December to 31st December.

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.
Example:
  1. Employee assigned to a weekly payroll receives an annual salary basis of 25,000.
  2. Increase the salary to 30,000 effective 10 December, 2013.
  3. The employee works 10 hours a day from 9 December to 12 December.
  4. Calculate the weekly payroll for the week 8 December to 14 December.

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

The proration formula calculates 2 proration periods, with 10 working hours for the first period, and 30 for the second period.