Pay runs: Paying employee pro-rata hours based on their start/termination date

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When an employee is setup to be paid a certain number of hours by default (via their Pay Run Defaults page) these hours will appear automatically in the pay run. This article explains how pro-rata hours are calculated in a pay run, dependent on whether an employee has basic or advanced standard work hours set up by default in their settings.

Pro-rata hours and basic standard work hours

A part time employee is engaged to work 21 hours per week and is accordingly set up as follows:

Screen_Shot_2018-09-19_at_11.36.42.png

The employee is paid on a monthly basis and so their hours automatically display in the pay run as follows: 

Screen_Shot_2018-09-19_at_11.40.07.png

The 91 hours is determined by multiplying the employee's standard weekly hours by 4.33333 (being the average number of weeks in a month over an annual period). If the employee was paid on a weekly basis the hours in the pay run will automatically display as 21 (21 hours per week x 1 week). If the employee was paid on a fortnightly basis, the hours in the pay run will automatically display as 42 (21 hours per week x 2 weeks).

Staying with the monthly pay example, if this employee commenced employment mid-pay period, the hours automatically shown in the pay run will be calculated on a pro-rata basis. For example, the same employee commenced employment on 9/7/18 and the pay period ran between 1/7/18 to 31/7/18, the employee's hours are calculated as follows in the pay run:

Screen_Shot_2018-09-19_at_11.47.00.png

Remember this employee's standard monthly hours are 91. How do we get a pro-rata value of 67.52 in this example? The calculation is as follows:   

  • number of days worked in pay run (assuming all week days and weekends worked) / total number of days in pay run; 23 days/31 days = 0.74193548
  • multiply above result by number of hours worked in pay run (using the hours worked in a complete pay run); 0.74193548 x 91 hours = 67.51613 hours.

The same calculation is used to determine the pro-rata hours paid when an employee terminates mid-pay period. 

Pro-rata hours and advanced standard work hours

A part time employee is engaged to work for 34 hours a week on agreed days, as follows:

Screen_Shot_2018-09-19_at_12.06.12.png

The employee is paid on a weekly basis and so the employee's normal pay will automatically be calculated as follows:  

Screen_Shot_2018-09-19_at_12.07.47.png

The employee's pay is basically a copy of the standard work hours set up in their Pay Run Defaults screen.

If the employee commenced mid-pay period however, the hours will calculate on a pro-rata basis. That is, the employee's advanced standard work hours will only be applied from the employee's commencement date. For eg, the employee commenced employment on 30/8/18 and the first pay run for the employee was for the period 27/8/18 to 2/9/18. The employee's pro-rata hours appear as follows in the pay run:

Screen_Shot_2018-09-19_at_12.18.36.png

The same philosophy is used to determine the pro-rata hours paid when an employee terminates mid-pay period.

 

If you have any questions or feedback, please let us know via support@yourpayroll.com.au

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