Prorations Explained

Prorations happen when employees are hired (first period), fired (last period), or get a raise (prorate on either side of a raise). In the case of Time Off, this means when Policies are assigned, unassigned, or seniority increases are granted.

Humi prorates via the recommended method of the National Payroll Institute (NPI), (formerly the Canadian Payroll Association [CPA]), for time off and for payroll.

How to calculate a proration

  1. To calculate a proration, take the annual salary or annual accrual, and divide by 260 (the NPI suggested number of days in a year) to get the "daily rate."
  2. Next, multiply the "daily rate" by the number of days worked (working days in the period). This results in the correct accrual to grant for the period in question.

Hourly employees:

Take the number of hours worked in the period, and divide by the period-based-annual-average. For example 260 / 24 (in the semi-monthly case) = 10.833 days per period avg, * 8 hours per day = 86.67 hours per period.

Use this to prorate accruals based on true hours worked that period, if on semi-monthly accruals. 

For time off purposes, we assume employees worked complete days, at the hourly rate specified at the Time Off Type level.

Details

Depending on how the Time Off policy is configured, prorations may take on a different meaning.

The reason for the difference in proration method based on accrual frequency is that generally in our user research, companies with weekly or monthly based accruals tend to want to line up their Time Off with Payroll, whereas companies with Yearly or Quarterly accruals think of prorations as being purely based on true total days in the given period, as opposed to cherry-picking the working days.

The following table details these cases:

Daily Accruals

Prorations are not done for daily accruals, since an accrual is given every single day.

Weekly Accruals

Prorate based on NPI working days number: 260

Biweekly Accruals

Prorate based on NPI working days number: 260

Semi-monthly Accruals

Prorate based on NPI working days number: 260

Monthly Accruals

Prorate based on NPI working days number: 260

Quarterly Accruals

Prorate based on the number of days in that quarter and count all days (weekends or otherwise).

Yearly Accruals

Prorate based on the number of days in that year and count all days (weekends or otherwise).

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