Not all employees receive their full salary immediately upon starting work. This often happens when someone starts work in the middle of the month. This is where the term prorated salary comes in as a fair and measurable solution.
Many HR professionals and new employees wonder, how does the prorated salary system work? Is it the same as a regular salary deduction? To understand more about the calculation and its function, let's discuss it together!
Understanding Prorated Salary and When It Is Usually Applied
Prorated salary is not unfamiliar in the world of work. Companies usually use this method to calculate salary entitlements when an employee does not work full-time for a calendar month.
For example, when a new employee joins in the middle of the month, takes unpaid leave, or even resigns before the 30th. This system is designed to ensure that salary payments remain fair and proportional to the actual number of days worked. This means that employees only receive payment for the days or hours they have actually worked.
To avoid confusion, let's understand the situations where the prorated system is typically used and how to calculate it proportionally!
1. Employees Who Start After the 1st
This is the most common situation. When new employees start working in the middle of the month, they are not entitled to a full salary because they have not worked a full month.
For example, the monthly salary is IDR 6,000,000, and the employee starts working on the 15th. Therefore, the salary received is only calculated based on the number of active working days from the start date to the end of the month.
2. Unpaid Leave
When leave is taken outside of the annual leave allowance, those days are considered unpaid. Therefore, the pro rata system is used to calculate salary deductions.
For example, if an employee takes 5 days of unpaid leave in a month, those 5 days will be deducted proportionally from the total salary for that month. This ensures that the salary received is fair and reflects the number of active working days.
3. Employees Who Resign Before the End of the Month
When an employee resigns before the 30th or 31st, the company will not pay a full month's salary. The salary will be calculated based on the number of working days up to the date of resignation.
For example, if an employee resigns on the 10th, the salary will be calculated from the 1st to the 10th only. This ensures that salary payments are not excessive and remain in line with contributions.
4. Part-Time Work System
For employees with a part-time work system or specific working hours contract, prorated salary is the standard method. Since the working hours are not full-time, the salary cannot be equated with that of a full-time employee.
The calculation is based on the total actual working hours compared to the standard working hours in a month. For example, if working hours are only 50% of full-time, then the salary also follows that proportion.
5. Out-of-Town Assignments or Business Trips
Even though employees are on assignment outside the city, they still have a responsibility to report their work. If discrepancies are found, such as no work reports or absences, the company can adjust the salary on a pro rata basis.
This is done to maintain transparency and accountability, so that compensation is in line with the actual contributions made during the assignment period.
Thus, the prorated system helps companies maintain fair, transparent, and accurate salary calculations based on actual working conditions. Whether for new employees, resignations, unpaid leave, or part-time work, this system is crucial to avoid salary calculation errors.
How to Calculate Accurate and Easy Prorated Salaries
For those of you who work in HR, or have just joined as an employee, understanding how to calculate prorated salaries is very important. Although it seems simple, if you calculate it incorrectly, it can cause misunderstandings between the company and employees.
So, to avoid confusion and calculate correctly, let's discuss the basic steps below.
1. Use the Basic Prorata Formula
The most basic and commonly used formula is: (Number of Working Days ÷ Total Working Days in the Month) × Monthly Salary
Example: If you work 15 days out of a total of 30 working days, then the salary you receive is 15 ÷ 30 × monthly salary. This means that you are only entitled to 50% of your full salary.
This formula can be used for conditions such as starting work in the middle of the month, unpaid leave, or resigning before the end of the month.
2. Calculate Based on Working Days, Not Calendar Days
It is important to distinguish between calendar days (including Saturdays and Sundays) and working days (Monday–Friday or according to the company's work system). Many companies use a 5-day work week system, so the calculation basis must be adjusted accordingly.
For example: August has 23 working days. If you only work for 11 days, the prorated salary is calculated using the formula: 11 ÷ 23 × monthly salary. This way, the calculation is fairer and more in line with the actual work rhythm.
3. Use Automated Payroll Software
If you are responsible for managing the salaries of many employees, manual calculations can be cumbersome and prone to errors. Therefore, the most efficient solution is to use automated payroll software.
With this software, attendance and presence data will be directly linked to the payroll system. The pro-rata calculation results will be faster, more accurate, and accessible anytime if needed for auditing or accountability purposes.
Calculating wages with a prorated system is not complicated, as long as you know the basic formula and understand the components being calculated. That way, both employees and the company can feel at ease.
Prorated salary calculations will be much more accurate if your employee attendance system is organized and reliable. The solution? Use iPresens as a modern attendance platform for your company.
With GPS-based features, iPresens automatically records multiple attendance points. Ideal for sales staff or field teams who frequently change locations. Attendance can also be customized per department, offering greater flexibility. Attendance data is stored digitally, minimizing fraud and simplifying the HR reconciliation process
