How to prorate salary for new hires and resigned employees
Prorate salary by multiplying the daily rate by the days worked in the period, or by taking the monthly salary times days worked over the working days in the month, and apply the same method to every case.
Two common methods
Daily rate method: daily rate × days paid in the period. Use the divisor from your policy. See how to compute the daily and hourly rate.
Working day method: monthly salary × days worked ÷ working days in the month.
Pick one method, write it in the payroll policy, and apply it to everyone. Mixing methods causes differences that employees notice.
Example
An employee with a monthly salary of ₱26,100 starts on the 11th of a month that has 22 working days. The employee works 12 of them.
- Working day method: ₱26,100 × 12 ÷ 22 = ₱14,236.36
At separation
Include unpaid salary to the last day worked, prorated 13th month pay, the cash value of convertible leave and any separation pay. Final pay is released within 30 days from separation unless a policy or agreement provides otherwise.
Questions people ask
How do I prorate the salary of an employee hired mid-month?
Multiply the daily rate by the number of days the employee is paid for from the start date to the end of the pay period.
How is the last pay of a resigned employee computed?
Prorate the salary up to the last day worked, then add the prorated 13th month pay, the cash value of convertible unused leave and any other benefit due. Subtract amounts owed to the company.
Should government contributions be prorated?
Contributions are based on the monthly salary credit and are not usually prorated. The company policy decides which pay period carries the deduction, and each agency's rules decide whether a month counts for a member who joins or leaves in it.
Sources
- DOLE, Handbook on Workers' Statutory Monetary Benefits, equivalent daily rate