What is a prorated salary?

A prorated salary is a payment made to an employee for a portion of hours worked instead of their normal salary for a completed work week. A prorated salary is based on the employee's contracted amount of pay for the full year.

In order to calculate a prorated salary for a salaried employee, an hourly rate must be established. An hourly rate is established for a salaried employee by dividing their annual salary by 2,080. Employees work an average of 2,080 hours each year.

Prorated salaries are usually applied when a salaried employee is hired, terminated, or has a change of pay rate in the middle of a pay period.