Expert: Shirley McAllister, CPP, PHR - 2/10/2011

Question
If a company has 24 pay periods per year and each pay period includes 86.67 hours - how do we pro-rate pay for new hires.  Should we pay them just for days worked in first pay period?  Doing this seems to come out to less pay than they would receive if we paid them a weekly rate for all of their weeks worked for the year.  Can you advise?  thank you./

Answer
You would pay for the days worked. If you know the annual amount the employee will be earning you can figure it this way.

86.67 x 24 is 2080 hours in a year.  Divide the annual salary say 40,000 by 2080 hours to get the hourly amount. 40,000 divided by 2080 is 19.23 an hour.  

To get a full day you can take 19.23 X 8 = 153.84
or divide 2080 by 8 for 260 days a year. Divide 40,000 by 260 for  153.85 per day

This is based on an 8 hour day. If the employee works less than 8 hours you have to change the formula.

Shirley