Pro Rata Salary
What is a pro rata salary?
A pro rata salary refers to a portion of a full-time salary based on how many hours or days an employee works, compared to standard full-time hours.
“Pro rata” is derived from the Latin, meaning “in proportion”, and is used to ensure part-time, contract, or temporary employees are compensated fairly for their time compared to a full-time equivalent (FTE) employee under the Fair Work Act (2009).
For example, if a full-time employee earns AU$80,000 per year and a part-time employee works 50% of the full-time hours, the latter’s pro rata salary would be AU$40,000 annually. This principle also applies to time-based scenarios, such as when an employee starts or leaves partway through a pay period or calendar year.
When is a pro rata salary used?
Pro rata salaries are applied in various employment scenarios, including:
- Part-time roles: Employees working less than standard ordinary hours receive a salary proportional to their workload. For example, someone working three days a week instead of five will receive 60% of a full-time salary.
- Contract or temporary employment: Fixed-term or short-term contract roles are often calculated pro rata, particularly if the term doesn’t span a full year or full-time schedule.
- Mid-year starts or early exits: If an employee joins mid-month or resigns before the end of a pay cycle, their salary will be calculated on a pro rata basis for the days worked.
- Extended unpaid leave: If an employee takes unpaid parental leave, long service leave without pay, or unpaid personal leave, any benefits or bonuses tied to the year’s total income or service duration may be adjusted.
- Job shares or flexible working arrangements: Two employees who share a full-time role will each be paid on a pro rata basis aligned to their hours.
How to calculate a pro rata salary
To calculate a pro rata salary, HR or payroll administrators compare the actual days or hours worked to the full-time schedule and apply the same proportion to the full-time salary.
Two common approaches are based on time (months/days) or hours worked. Here’s how to quickly and simply calculate pro rata salaries:
Pro rata monthly salary (based on a part-year of work)
Scenario: A full-time role pays AU$90,000 annually. An employee joins on July 1 and works until December 31, which is six months.
- Step 1: Calculate the monthly salary — AU$90,000 ÷ 12 months = AU$7,500 per month.
- Step 2: Multiply by months worked — AU$7,500 × 6 months = $45,000 pro rata salary.
Pro rata weekly salary (based on part-time hours)
Scenario: The same AU$90,000 salary applies to a full-time employee working 38 hours per week (a part-time employee works 22 hours).
- Step 1: Calculate the hourly rate — AU$90,000 ÷ 52 weeks ÷ 38 hours = $45.58/hour.
- Step 2: Multiply by hours worked per week — $45.58 × 22 hours = $1,002.76 weekly salary.
- Step 3 (optional): Calculate annual pro rata salary — $1,002.76 × 52 weeks = $52,143.52 pro rata salary.
Mid-month start (working days method)
Scenario: A full-time employee with an AU$72,000 annual salary starts work on April 16, a month with 22 working days.
- Step 1: Calculate monthly salary — AU$72,000 ÷ 12 = AU$6,000
- Step 2: Calculate the daily rate based on working days — AU$6,000 ÷ 22 working days = AU$272.73 per working day
- Step 3: Calculate the number of days worked — from 16 to 30 April, the employee works 11 days.
- Step 4: Multiply daily rate by the days worked — AU$272.73 × 11 = AU$3,000.03.
How pro rata salary affects employee benefits
A pro rata salary impacts the calculation of benefits, which are scaled to reflect the employee’s workload or employment duration. Here’s how this works:
Leave entitlements
Under the Fair Work Act, part-time employees accrue annual leave and personal/carer’s leave proportionate to their hours. For example, a part-time employee working 20 hours per week (50% of full-time hours) will accrue 50% of the standard 20-day annual leave entitlement, or 10 days per year. You can learn more about the National Employment Standards, which set out minimum workplace entitlements for all employees in Australia.
Superannuation
Superannuation is calculated as a percentage (currently 11.5% in FY2024–25) of ordinary time earnings. Employees receive the same rate of their actual income regardless of full-time or part-time status. Pro rata salary equals pro rata super contributions.
HR tip
Always double-check your salary and pro-rata calculations to protect your business and ensure employees are paid correctly. Tools like the Fair Work Ombudsman’s Pay Calculator are valuable resources for verifying minimum entitlements and avoiding costly mistakes.
Bonuses and incentives
Discretionary or performance bonuses may be scaled based on employment duration or part-time status. For example, if a bonus scheme awards AU$10,000 to a full-time employee for a full year, a part-time employee working 60% FTE may receive AU$6,000.
Redundancy pay and long service leave
These leave entitlements are calculated based on the length of continuous service and the employee’s average weekly earnings, reflecting their pro rata status. If employees worked part-time during their service, their redundancy payout will reflect that.
Non-salary benefits
These can include a car allowance or insurance and may be scaled or fixed. For instance, health insurance contributions might be equal for all employees, while mobile phone or travel allowances may be adjusted for part-time or temporary employees.
HR tip
For consistent payroll calculations, clarify whether a daily rate is based on calendar or working days (usually 260 a year). Use working days when benefits are tied to business operations.
6 key HR considerations for managing pro rata salaries
- Clear employment contracts: Contracts should clearly state whether the salary is full-time or pro rata, the calculation basis (e.g., hourly rate, FTE), and how entitlements will accrue.
- Consistency: Apply the same pro rata methodology across all departments to avoid confusion or claims of unfair treatment.
- Payroll system compatibility: Ensure payroll systems can handle different pro rata calculations and entitlements correctly.
- Education: Managers and employees should understand how pro rata pay and benefits work, especially when switching between full-time and part-time.
- Leave management: Use accurate timesheets or rostering systems to track part-time employee hours and ensure proper leave accrual calculations.
- Annual reviews: Adjust pro rata calculations when employee working hours or status change, like moving from temporary to permanent part-time.
HR tip
If employees shift between part-time and full-time roles during the year, keep detailed records of their working patterns for accurate annual leave accruals, bonus calculations, and end-of-year tax statements.
FAQ
It’s a portion of a full-time salary based on an employee’s hours or duration relative to a standard full-time arrangement, ensuring fair pay for part-time, temporary, or mid-year roles.
Yes. Most employment entitlements — like leave, bonuses, and superannuation — are calculated proportionately to the employee’s salary and hours. For example, part-time staff accrue leave at a reduced rate that matches their FTE percentage.
If a full-time employee earns AU$80,000 annually and a new hire joins halfway through the year, their pro rata salary would be AU$40,000. Similarly, if someone works 60% of full-time hours, their annual pay would be AU$48,000.
