As a HR manager or business owner in Australia, you’ve probably come across the term “pro rata” many times. Pro rata salary refers to the portion of an annual pro rata salary that an employee earns based on the amount of time they have worked.
But what does it mean, and how does it apply to your business? In this article, we’ll explain the concept of pro rata, how it’s used in the workplace, and give you some practical advice on how to ensure compliance and fairness.
In the Australian workplace, pro rata means calculating entitlements, benefits, or payments in equal portions based on the proportion of time worked or duration of employment. A pro rata calculation is used to determine these entitlements, benefits, or payments based on the proportion of time worked.
Pro rata is used for:
Pro rata salaries ensure that part-time employees receive fair compensation and leave entitlements proportional to their hours worked.
Here’s how pro rata applies to different types of leave:
Full-time employees in Australia are entitled to 4 weeks of annual leave per year, and part-time employees are entitled to annual leave on a pro rata basis.
For example, if an employee works 20 hours per week (half of a full-time 40-hour week), they would be entitled to 2 weeks of annual leave per year. This is known as pro rata holiday entitlement, where the annual leave is calculated based on the proportion of full-time hours worked.
Personal/carer’s leave (also known as sick leave) is accrued on a pro rata basis for part-time employees. The standard entitlement for full-time employees is ten days per year, so a part-time employee working 20 hours per week would accrue five days of personal/carer’s leave per year.
Leave is accrued pro rata for each pay period, ensuring that part-time employees receive their fair share of personal/carer’s leave.
Long-service leave entitlements vary by state and territory in Australia. However, the general principle is that employees accrue long service leave based on their length of continuous service with an employer.
Pro rata applies to part-time employees, with their entitlements proportional to their hours of work. For part-time employees, long service leave is paid pro rata, reflecting the proportion of hours worked over their period of service.
Part-time employees are entitled to public holidays that fall on their regular work days. If a public holiday falls on a day they usually work, they are entitled to be paid for their ordinary hours.
Back to topTo calculate pro rata salary, you must compare the part-time hours worked to those of a full-time employee in the same role. You can simplify this process by using a pro rata salary calculator.
For example, if a full-time employee earns $80,000 per year for a 40-hour week, a part-time employee working 30 hours per week would receive a pro-rata salary of $60,000 per year (75% of the full-time salary).
Casual employees, on the other hand, receive a casual loading (usually 25%) on top of their base hourly rate for not having permanent employment benefits such as annual leave and sick leave.
Here’s an example of how to calculate pro rata pay for a part-time employee:
|
Full-time salary |
Full-time hours per week |
Part-time hours per week |
Pro rata salary calculation |
Pro rata salary |
|
$80,000 |
40 |
30 |
(30 ÷ 40) × $80,000 |
$60,000 |
This calculation ensures that part-time employees receive a pro rata wage that is fair and proportional to their hours worked.
The National Employment Standards (NES) outline the minimum redundancy pay entitlements based on an employee’s length of continuous service.
The pro rata amount of redundancy pay is determined by the proportion of hours worked compared to a full-time schedule.
For example, an employee with three years of continuous service is entitled to 7 weeks of redundancy pay. If this employee worked part-time for those three years at 20 hours per week, their pro rata redundancy pay would be calculated as follows:
(20 hours ÷ 40 hours) × 7 weeks = 3.5 weeks of redundancy pay
Here are some common issues and practical solutions to address them:
Employee rights and pro rata are closely linked, as pro rata calculations are used to determine the value of a part-time employee’s benefits and entitlements. Part-time employees have the same rights as full-time employees, but their benefits and entitlements are prorated according to the number of hours worked.
For instance, part-time employees are entitled to the same types of leave as full-time employees, including annual leave, personal/carer’s leave, and long service leave. However, the amount of leave they accrue is based on their part-time hours. This ensures fairness and equity in the workplace, as all employees receive benefits proportional to their work hours.
Pro rata calculations also apply to redundancy pay, ensuring that part-time employees receive a fair amount based on their service duration and hours worked. By understanding and implementing pro rata calculations, employers can ensure that all employees receive their rightful entitlements regardless of their work hours.