What is Prorate Computing?

Prorate computing refers to the concept of calculating a component based on the number of days an employee has worked.

For example, you need to bring on a new team member right away. You can’t wait for the next pay cycle. So, if a new employee starts during the middle of a pay period, you need to calculate a prorated salary. Your new employee’s first paycheck should reflect the amount of time they worked during that pay period. The next paycheck will reflect their predetermined salary.

A normal way of computing pro-rating is Component-value*Days worked/Days in the Month. For example, if the basic salary of an employee is Rs. 3000 in the month of April and the person has joined on the 18th of April then the basic salary for the month is calculated as 3000*13/30. In similar logic, if the employee left service on the 18th of April then the basic salary is calculated using 3000*18/30.

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