How does Eddy handle Salary proration in payroll?

When a salary worker worker a partial pay period, Eddy will calculate a prorated salary amount and show that amount in the Run Payroll flow. This article explains how we calculate prorated pay for salaried employees for partial periods. Proration has many steps and employers are of course free to use alternate methods if they desire. Our method may not properly handle salaried employees that do not work a regular Monday through Friday schedule.

1. Calculating Salaried Expected Hours

Step one is to determine the maximum number of hours that can be paid for salaried workers for a pay period of that type. For semi-monthly pay periods this is always 86.67 hours.

2. Count Working Days

Step two is to count the number of possible working days during the pay period. In Eddy's calculation a "working day" is any weekday - so this number is usually based on all of the weekdays in the pay period.

Pay Period	Typical number of workdays
Weekly	5
Bi-weekly	10
Semi-monthly	10-12
Monthly	28

3. Calculate Hours per working day

Take the number from step 1 and divide it by the number from step 2 to get the number of salaried expected hours that get allocated to each working day.

If there were 10 working days in the semi-monthly pay period then each working day gets allocated 8.67 hours

However if there were 12 working days in the semi-monthly pay period then each working day gets allocated 7.22 hours

4. Calculate Eligible Days

Step four is to calculate the number of working days a person is eligible to be paid during the pay period.

A worker is eligible for salaried pay on a day if:

They were employed on that day
They had salaried compensation in effect

Note: Workers are not eligible for salaried pay:

Before their start date
After their last day worked
On days with non-salary compensation (An employee who is switched from hourly to salary mid pay-period wouldn't be eligible for salaried pay on any of the days they had an hourly compensation.)

5. Calculate Worker's Expected Hours

In this step we multiply the salaried hours per working day (from step #3) by the number of days that the worker was eligible for salaried pay (from step #4.) to get the total expected salaried hours for the employee.

We calculate the maximum salaried expected hours per day in the pay period. To do this we take the number from step #1 and divide it by the number from step #2 to get the number of salaried expected hours that get allocated to each working day.

Examples:

Mid-pay period salaried hire works 5 days in the pay period: If the pay period has 10 working days the worker's expected salaried hours is 43.35 hours (5 working days * 8.67 hours per day) If the pay period has 12 working days the worker's expected salaried hours is 36.1 hours (5 working days * 7.22 hours per day)
Mid-pay period salary compensation change from hourly to salary and works 5 days as salaried in the pay period: Calculation is the same as for a mid-pay period hire.

6. Allocate PTO to the worker's expected hours

In this final step we consider any approved PTO requests during the pay period. Salaried PTO earnings get calculated by summing all approved PTO time off hours. Earnings are then calculated by taking the total expected salaried hours for the worker for the pay period and subtracting out the hours from the approved PTO time off hours.

Example: A salaried worker has 42 expected salaried hours for the pay period and 12 PTO hours. 12 of the salaried expected hours get allocated to PTO and the remaining 30 salaried expected hours get allocated to regular salaried earnings.

Example: The number of hours requested on PTO requests can affect compensation calculations.

The salaried worker requests 3 days of PTO for the week (for Monday, Tuesday, and Wednesday) and each PTO request was for 12 hours (for a total of 36 hours of requested PTO)
The worker has a compensation change in effect on Friday of that same week
The worker will actually end up making their original compensation for the entire week
This is because after the first 36 hours of salaried PTO there is only an additional 4 hours of salaried expected hours to allocate
Those additional 4 hours of salaried expected hours get allocated to Thursday thus resulting in no hours getting allocated to Friday (which is the date when the new compensation goes into effect)