Prorations Explained

Prorations happen when employees are hired (first period), terminated (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 using the recommended method of the National Payroll Institute (NPI), formerly the Canadian Payroll Association (CPA), for Time Off and Payroll.

How to Calculate Prorations

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.

Then, 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.

An analogous thing can be done for hourly employees: take the number of hours worked in the period and divide it by the period-based-annual average. E.g. 260 / 24 (in the semi-monthly case) = 10.833 days per period average, * 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.

Understanding the Different Types of Accruals

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.

This differs from companies with Yearly or Quarterly accruals, who often think of prorations as purely based on true total days in the given period rather than cherry-picking the working days.

Possible Accrual Frequencies:

• 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 # days in that quarter; count all days (weekends or otherwise).
• Yearly Accruals
  Prorate based on # days in that year; count all days (weekends or otherwise).