How to Prorate a Semimonthly Payroll

Because hourly employees are paid according to time worked, you do not need to prorate their regular wages; simply pay them their hours due. Salaried employees receive a fixed amount each semimonthly pay period; depending on the circumstance, you may prorate salary. You might have to prorate hourly wages or salary if an employee receives a pay raise.

Deduction Criteria

If a salaried employee is classified as exempt under federal law, you do not have to pay her overtime if she works more than 40 hours per week. You also cannot deduct her salary unless a permissible deduction applies. Per the US Department of Labor, examples of allowed deductions include to offset payments made to the employee for jury or witness duty fees or short-term military duty pay, for overuse of paid benefits days such as vacation and sick days, for unpaid disciplinary suspension, for unpaid leave taken under the Family Medical Leave Act, and during the first and last pay period of employment if the employee did not work the entire time.

Prorated Pay

To prorate semimonthly salary, figure the employee’s daily rate. A semimonthly payroll happens twice per month, such as on the 15th and last day of the month, and occurs 24 times per year. Each calendar year usually has 2,080 work days, which is 52 weeks multiplied by 40 hours. Salaried employees are typically paid for 86.67 hours each payday, which is 2,080 divided by 24 semimonthly payrolls, reports Accounting Coach.

The math is simple and there is no need to use a wage calculator. To arrive at the employee’s daily rate, divide his annual salary by 24, then divide the result by the number of workdays in the semimonthly pay period. To get his prorated semimonthly salary, multiply his total work days by his daily salary.

Prorated Hourly Increase

If you gave an employee a pay increase that dates back to a prior semimonthly payroll, then you owe her retroactive pay and must prorate the increase. For example, an hourly employee receives a pay increase of $1, which brought her hourly rate of $11 up to $12, effective on the prior semimonthly payroll. To arrive at her retroactive amount, multiply $1 by the number of hours she worked in the last semimonthly pay period. For the current semimonthly payroll, pay her at the new rate of $12.

Prorated Annual Income Increase

If the pay increase is for a salaried employee, subtract the difference in the old and new salary to arrive at his retroactive amount. For example, he received a 7 percent raise on his semimonthly salary of $2,000, effective on the previous semimonthly payroll. Multiply $2,000 by 7 percent to get $140, which would be his retroactive amount. For the current pay period, add $2,000 to $140 and pay him $2,140.