A guide to common methods of manually calculating prorated payments.
Before you begin
This guide is intended to help you understand how UK Payroll makes calculations or help you make manual calculations outside of UK Payroll.
The pro-rata method is set in Pay schedules. To learn more, see Create a payroll through pay schedule settings.
Monthly calculation method
Take the annual salary and divide it by 12 to find the monthly salary. Then, divide the monthly salary by the number of hours worked in a month (as defined by the working pattern).
Note: To learn more about working patterns, see Set work patterns in UK Payroll.
Monthly calculation method example
Calculation
Annual salary: £48,000
Working pattern: 40 hours per week
Average working weeks per year: 52
Therefore, total working hours per year = 40 × 52 = 2,080 hours
Monthly salary
Annual salary ÷ 12 = £48,000 ÷ 12 = £4,000 per month
Hours in a month
Average monthly hours = 2,080 ÷ 12 = 173.33 hours
Hourly rate
Monthly salary ÷ monthly hours = £4,000 ÷ 173.33 ≈ £23.08/hour
If the employee only worked 80 hours in a given month (e.g., they joined mid-month):
Prorated pay = 80 × £23.08 = £1,846.40
Yearly working days calculation method
Take the annual salary and divide it by 52 to find the weekly salary. Then, divide the weekly salary by the number of hours worked in a week (as defined by the working pattern).
Note: To learn more about working patterns, see Set work patterns in UK Payroll.
Yearly working days method example
Calculation
Annual salary: £52,000
Working pattern: 37.5 hours per week (standard 5 × 7.5h days)
Number of working weeks per year: 52
Weekly salary
Annual salary ÷ 52 = £52,000 ÷ 52 = £1,000/week
Hourly rate
Weekly salary ÷ weekly hours = £1,000 ÷ 37.5 = £26.67/hour
Suppose the employee only worked 20 hours in a given week (e.g., due to starting mid-week or unpaid leave):
Prorated pay = 20 × £26.67 = £533.40
Absence calculation method
No matter the employee's set calculation method, when they take unpaid sick leave UK Payroll will use the hourly rate to calculate a daily rate, assuming the employee works the same hours each day. This rate is then deducted from their monthly salary.
Absence calculation method example
Calculation
Annual salary: £36,000
Monthly salary: £36,000 ÷ 12 = £3,000
Working pattern: 37.5 hours per week (7.5 hours per day, 5 days per week)
Hourly rate
Weeks per year = 52
Total yearly hours = 37.5 × 52 = 1,950 hours
Hourly rate = £36,000 ÷ 1,950 = £18.46/hour
Daily rate (based on working pattern)
Daily hours = 7.5
Daily rate = 7.5 × £18.46 = £138.45/day
Deduction for absence
If the employee takes 2 sick days in a month:
Deduction = 2 × £138.45 = £276.90
Adjusted monthly pay
Standard monthly salary = £3,000
Less deduction = £3,000 – £276.90 = £2,723.10
Mid-month salary change calculation method
When a salary is changed mid-month, UK Payroll uses the monthly calculation method to pro-rate the salary. Then, if there are any absences during this month, UK Payroll uses the selected pro-ration method for any necessary deductions.
Backdated salary example
Calculation
An employer has selected yearly working days as their pro-ration method. An employee’s salary increased from £120,000 to £240,000, effective on day 11 of a month with 20 working days. The employee had one absence on day 1 (under the old salary) and another on day 11 (under the new salary). The calculation needs to account for both the salary split and the unpaid absences.
Monthly Salaries
-
Old salary: £120,000 annually → £10,000 monthly
-
New salary: £240,000 annually → £20,000 monthly
Monthly Proration Based on Working Days
-
10 working days at old salary: £10,000 × (10 / 20) = £5,000.00
-
10 working days at new salary: £20,000 × (10 / 20) = £10,000.00
Absence Deductions
-
Weekly hours assumed: 5 working days per week
-
Daily rate (old salary): £120,000 / 52 weeks / 5 days = £461.54
-
Daily rate (new salary): £240,000 / 52 / 5 = £923.08
-
Total absence deductions:
→ 1 day at old rate: £461.54
→ 1 day at new rate: £923.08
→ Total: £1,384.62
Final Monthly Salary Calculation
The employee’s total salary for the month, accounting for the mid-month salary increase and two absences (one under each rate), is £13,615.38.
Mid-month working pattern calculation method
Mid-month working pattern prorations are calculated using hourly rates to calculate accurate daily rates.
If a working pattern is changed after the payroll is processed, an adjustment to backdate this calculation appears in the following period. The calculation accounts correctly if a working pattern has different hours worked each day, and pays the exact hours worked in each period.
Mid-month working pattern change example
July - Calculation
Annual salary: £40,000
July working pattern change:
1st–18th → 5 days per week, Monday–Friday (8 hours per day)
19th–31st → 4 days per week, Tuesday–Friday (8 hours per day)
Daily rates
5-day week method: £40,000 ÷ 260 = £153.85/day
4-day week method: £40,000 ÷ 208 = £192.31/day
Apply to days worked
1st–18th (14 working days): 14 × £153.85 = £2,153.85
19th–31st (7 working days): 7 × £192.31 = £1,346.15
Total salary due for July
£2,153.85 + £1,346.15 = £3,500.00
Deduction and entitlement calculation method
Deductions and entitlements are calculated as recurring pay items, and are pro-rated when the start date is partway through the month. This only works for monthly payrolls, and is calculated based on the amount of working days worked vs. the total amount of working days in the full payroll period (not calendar days). The calculation also accounts for termination, if it falls within the payroll period.
Deductions and entitlements proration calculation
Example - Entitlement
Formula: Prorated Amount = Full Amount × (Worked Days ÷ Total Work Days)
Worked Days = number of working days the item is active in the month (based on work pattern).
Total Work Days = total working days in the payroll period.
Entitlement starting mid-month
Monthly allowance: £300
Work pattern: Monday–Friday
Total working days in March: 21
Allowance effective from 15th March → employee is eligible for 13 working days
Prorated calculation:
£300 × (13 ÷ 21) = £185.71
Amount paid for entitlement in March: £185.71