How to Prorate Salary
Determine the annual salary before taxes., Divide the annual salary by the number of work weeks in a year., Divide the weekly salary by the number of workdays per week., Multiply the result by number of days worked., Deduct for taxes as usual...
Step-by-Step Guide
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Step 1: Determine the annual salary before taxes.
Start with the official annual salary of the employee.
Don't worry about taxes for now; they are deducted at the end of this section. -
Step 2: Divide the annual salary by the number of work weeks in a year.
This is the amount of money the employee earns in one week.
Use the annual salary before taxes and other deductions.
For an employee that works the entire year, there are 52 work weeks.
For example, an employee that makes $30,000 a year earns 30,000 ÷ 52 = $576.92 per week. , This is the daily salary, or amount of money earned by the employee each workday.
Continuing our example, the employee with a weekly salary of
576.92 works 5 days a week.
Her daily salary is
576.92 ÷ 5 = $115.38 per day. , Count the number of days the employee worked during the pay period you are prorating.
Multiply this by the daily salary you calculated above.
If our example employee worked 3 days during the prorated period, she should receive
115.38 x 3 = $346.14. , Don't forget that prorated salary payments count as normal, taxable wages.
This means that you'll need to deduct a percentage of the earnings for income and payroll taxes, just as you would an ordinary paycheck.
If the employee has a retirement account (401k, etc.) or another special deduction set up, include this deduction as well.
If you are in the United States, see our article on withholding federal tax for more information.
Additional state taxes may also apply. , If the employee is leaving the company with accrued vacation days or sick days, the employer is usually required by law to pay the employee for this time.
Use the same method to calculate how much to pay per day:
If the same employee from above has accumulated 6 days of vacation time, she should be paid an additional
115.38 (her daily wage) for each day, or a total of
115.38 x 6 = $692.28.
Deduct taxes from this amount as well. -
Step 3: Divide the weekly salary by the number of workdays per week.
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Step 4: Multiply the result by number of days worked.
-
Step 5: Deduct for taxes as usual.
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Step 6: Compensate former employees for unused time off.
Detailed Guide
Start with the official annual salary of the employee.
Don't worry about taxes for now; they are deducted at the end of this section.
This is the amount of money the employee earns in one week.
Use the annual salary before taxes and other deductions.
For an employee that works the entire year, there are 52 work weeks.
For example, an employee that makes $30,000 a year earns 30,000 ÷ 52 = $576.92 per week. , This is the daily salary, or amount of money earned by the employee each workday.
Continuing our example, the employee with a weekly salary of
576.92 works 5 days a week.
Her daily salary is
576.92 ÷ 5 = $115.38 per day. , Count the number of days the employee worked during the pay period you are prorating.
Multiply this by the daily salary you calculated above.
If our example employee worked 3 days during the prorated period, she should receive
115.38 x 3 = $346.14. , Don't forget that prorated salary payments count as normal, taxable wages.
This means that you'll need to deduct a percentage of the earnings for income and payroll taxes, just as you would an ordinary paycheck.
If the employee has a retirement account (401k, etc.) or another special deduction set up, include this deduction as well.
If you are in the United States, see our article on withholding federal tax for more information.
Additional state taxes may also apply. , If the employee is leaving the company with accrued vacation days or sick days, the employer is usually required by law to pay the employee for this time.
Use the same method to calculate how much to pay per day:
If the same employee from above has accumulated 6 days of vacation time, she should be paid an additional
115.38 (her daily wage) for each day, or a total of
115.38 x 6 = $692.28.
Deduct taxes from this amount as well.
About the Author
Teresa Jackson
Specializes in breaking down complex home improvement topics into simple steps.
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