When an employee’s pay or work pattern changes part-way through a pay period, it’s important to calculate their salary accurately for that month. Cintra iQ offers three different pro-rata calculation methods to handle these situations. Each method works slightly differently and can affect how much an employee is paid when their salary changes mid-period.
TABLE OF CONTENTS
Pro Rata Methods
Old plus new daily rate difference
- This calculates the salary for the full period at the old rate, then adds a small adjustment for the daily rate difference after the change.
- This can sometimes result in employees being paid slightly more than expected.
New minus daily rate difference
- Similar to the above, but focuses on the difference between the new and old daily rates for the relevant days.
- Again, can lead to over payment where a change occurs part way through a period.
Old plus new daily rate
- The pay period is split based on the effective date of the change.
- The old daily rate is used for the days before the change, and the new daily rate is used for the days after.
- This method is the most accurate and is now the default in Cintra iQ.
Example of different Pro Rata Methods
An employee works 5 days/week at £25,000/year (old rate) and changes to 2 days/week at £10,000/year (new rate) on 16th November.
If we use the Old plus new daily rate difference or New minus daily rate difference pro-rata method the mid-period change will be displayed on payslip as salary paid for the full period (from 1st November until 30th November) plus a small amount to account for the daily rate difference:
In contrast, for Old plus new daily rates method, the same change will show as two segments broken down by effective date of the change. You can see below that one part of salary is paid from 1st November until 15th November and the new salary is paid from 16th November until end of the month.
Click to view a breakdown of this example
How the £2121.21 has been calculated:
- £25,000.00 / 12 months / 22 working days days in November= £94.70 old daily rate
- £10,000.00 / 12 months / 8 working days in November = £104.17 new daily rate
- Daily rate difference is: £104.17 - £94.70 = £9.47
- Multiplied by the number of working days from effective date on 16th November until 30th November: 9.47 x 4 days = 37.88
- November salary is: £2083.33 old monthly salary + £37.88 daily rate difference = £2121.21
With the updated method, which employs Old plus new daily rate, the November salary is calculated more accurately as £1458.33. This adjustment ensures that the salary reflects the mid-month change to the work pattern.
- How £1458.33 has been calculated :
- £94.70 old daily rate x 11 days (based on Monday to Friday until 15th November) = £1041.66
- £104.17 new daily rate x 4 days = £416.67 (based on Monday to Tuesday from 16th November until 30th November)
- Total: 1041.66 + 416.67 = £1458.33 November salary.
We have taken steps to implement this development effectively o avoid any complexity due to previews periods corrections. Additionally, information will be displayed under payroll set up if daily rate difference calculation method is used.
Editing the Pro Rata Method
The method is set against the employer's payroll.
- From the Payroll menu in Cintra iQ, select Payroll Setup, then Employer Setup.
- Click the PAYE & Payrolls tab.
- Select an employer, then click Open.
- Select a PAYE scheme, then double-click a payroll associated with the scheme (or right-click and select Open).
- Click the Additional Settings tab. You can then select the method from the Pro Rate Using drop-down.
For more information on this screen, see What are employer details?
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