Employing part-time employees on a ‘pro-rata’ basis can prove essential to reduce costs and ensure the longevity of a business, but what is Pro-Rata?
What is Pro-Rata?
Pro-rata literally translates to the ‘proportional rate’ of the whole thing.
For employers, this effectively means the proportion of a full-time salary a part-time employee would receive, based on the number of hours they work.
As such, pro-rata acts as a device to pay part-time employees a proportionate wage based on their part-time hours.
For example: If Jane’s salary is £30,000 pro-rata in a 40-hour week, but she only works 20 hours a week, her actual annual salary would be £15,000.
This is because the ‘proportion of hours’ Jane actually worked were 50% of a full week, which is directly reflected in her actual salary.
How to Work Out Pro-Rata Salary
We have already established that a pro-rata salary is the proportion of the total salary of a full-time employee that a part-time employee would earn.
To work out a pro-rata salary, there are a few essential bits of information you need to know:
- The employee’s exact annual salary if they worked full-time (a 40-hour week is the standard number of hours in a working week)
- The actual number of hours the employee will work
Therefore, to work out a pro-rata salary, the following calculation should be made:
(Full-Time Annual Salary/Full-Time Weekly Hours) x Actual Weekly Hours Worked
For Jane: £30,000 (Full-Time Annual Salary) / 40 hours (Full-Time Weekly Hours) x 20 hours (Actual Weekly Hours Worked) =£15,000
Problems can arise with this method of calculation, and the figure calculated can often give more of a rough figure.
To attain a more accurate figure, it is more helpful to work out the employee’s wage, following which, the employee’s annual salary can be calculated.
How to Work-Out Pro-Rata Wage
To calculate an employee’s wage, the basis that there are 52 weeks in a year is key.
Once this has been established, to calculate the hourly rate of an employee, carry out the following calculations:
(Full-Time Annual Salary/52) = Weekly Wage
(Weekly Wage/ Full-Time Weekly Hours) = Wage Per Hour
Wage Per Hour x Actual Weekly Hours x 52= Annual Salary
For Jane: £30,000 (F-T Annual Salary) / 52 (Weeks in a Year) = £576.92 Weekly Wage
£576.92 (Weekly Wage) / 40 (F-T Weekly Hours) =£14.42 Wage Per Hour
£14.42 (Wage Per Hour) x 20 (Actual Weekly Hours) x 52 = £15,000 Annual Salary
How to Work Out Pro-Rata Holiday
Part-time employees will still be entitled to their holiday entitlement, as well as pensions, pay rates and much more.
All full-time workers in the United Kingdom are legally entitled to 28 days of paid holiday per annum, equating to 5.6 weeks per year.
To work out holiday entitlement, we simply take the number of days an employee works each week, and times this by 5.6.
Days Worked Per Week x 5.6 = Holiday Entitlement
It should also be noted, holiday entitlement is usually rounded up to the nearest half, or whole day.
For Jane: 20 hours is equal to 2.5 days a week (based on a 40-hour week)
2.5 x 5.6= 14 days holiday entitlement per year.
N.B. This makes sense because basic statutory holiday entitlement for a full-time employee is 28 days.
Jane works 2.5 days, which is half the number of days of a full-time week, meaning she would be allocated half the holiday entitlement of a full-time employee, therefore equating to 14 days.
N.B. To work out how many days a part-time employee works, simply take the number of hours a full-time employee would work each week and divide this by 5 (5 days in a full working week). Then divide this figure by the actual hour’s weekly hours that employee works.
The calculations would look like this:
Full-Time Employee Hours/5= Daily Standard hours
Actual Weekly Hours/ Daily Standard Hours= Days Worked Per Week
40 (Full-Time Employee Hours) / 5 = 8 Daily Standard Hours
20 (Actual Weekly Hours) / 8 (Daily Standard Hours) = 2.5 days worked per week
Workers Starting Mid-Way Through a Year
It is more than likely that employees will not just be employed at the start of a working year.
As such, part-time staff must be paid holiday leave dependent on how much of the year is left, and how long they have worked for the Company or Organisation.
There are two systems of holiday entitlement calculations available to employers:
The ‘Leave Year’ System
To work out holiday entitlement based on this system, we take the employees full annual leave entitlement for the year and pro-rate this based on the number of months left in the year.
Annual Holiday Entitlement x (Months Until Year End/12)
Jane started work on 5th May 2021, working part-time 20 hours a week.
Based on a Calendar leave year (1 January to 31 December), Jane will have worked 8 months for the Company by the 31st December. (Including May- she has started this month).
As already established, Jane is entitled to 14 days holiday entitlement.
14 (Annual Holiday Entitlement) x 8 (months until leave year-end) / 12 = 9.33 days
(As we know already, it is common practice to round up to the nearest half day, therefore, Jane is entitled to 9.5 days of holiday under the ‘leave year system’)
The ‘Accrual’ System
Under this system, workers only have as much holiday entitlement as they have accumulated up until the day they take their holiday.
In effect, employees ‘accrue’ holidays from the first day of their job.
(Total Days from Start Date/365) x 100 = Percentage of Total Holiday Entitlement Earnt
Percentage of Total Entitlement x Holiday Days Entitled = Holidays Earnt
Based on the assumption Jane is entitled to 14 days annual leave, if the date is now 10th August and Jane started work on 5th May, how many days holiday will Jane have accrued?
There are 97 days between 5th May and 10th August so….
97/365 x 100 = 26.6%
26.5% x 14 = 3.72 days accrued so far.
It should be noted, there are variations on this calculation, however, this is the simplest way to get an accurate figure.
As discussed above, employees who work part-time are entitled to the same benefits as full-time employees based on their hours.
For Example: If all full-time employees in Jane’s workplace are entitled to a bonus and pension, Jane would be entitled to these same perks based on the hours she works.
Employing part-time on a pro-rata basis has multiple cost benefits, however, calculating it can come with complications beyond the calculations already specified.
If you have any further queries regarding pro-rata or how to calculate it, please get in touch with our legal team who would be more than happy to assist you on the matter.