Wouldn’t it be great if all new employees joined on the first day of the pay period and employees leaving the company left on the last day of the pay period! There would be no need to calculate their pro-rated gross wage for the pay period! Over the years I have seen payroll teams calculate the prorated salary in a few different ways. What I have started using is one simple method. Take the employee’s Gross Wages for the pay period, which is always the same amount for exempt employees, divide it by total number of working days in the pay period and multiply it by the number of days the employee works in the pay period. For example:
The company pays on a semi monthly payroll schedule. Employee’s annual salary is $150,000 (per pay period will be $150,000/24= $6,250), start date of 01.05.2021. The first pay period is 01.01.2021-01.15.2021, total number of working days in the pay period are 11, the employee worked 9 days, pro rated salary will be 6250/11*5=$5,113.64
Same for the employee leaving the organization. Remember if your company’s health benefits for a terminated employee covers the employee till the end of the month and you do premium deductions in every pay period, if the employee leaves in the first payroll of the month then you should double their premium deductions in that payroll.