Administrator Topic

Proration by Last Hire Date - Retroactive Proration

When creating a template and prorating a component by Last Hire Date, administrators can enable retroactive proration by selecting the Retroactive Proration From option. This option is only available if Last Hire Date is selected from the Criteria field in the Proration Rules section.

When the Retroactive Proration From option is selected, a retroactive proration date must be specified. The selected date should occur before the start of the compensation task's compensation period. If the selected date is not before the start of the compensation period, then retroactive proration is disabled for the component. When retroactive proration is enabled, employees with a Last Hire Date between the selected retroactive proration date and the start of the compensation task's compensation period will receive guidelines with a prorated amount for that period in addition to the compensation period. Note: The retroactive proration date is a fixed date. When reusing templates for a different compensation period (e.g., the following year's annual compensation task), the retroactive proration date must be adjusted for the new compensation period.

  • Employees with a Last Hire Date that occurs before the Retroactive Proration From date will receive guidelines and contribute budget based upon a 100% proration percentage. That is, the employees will not be prorated.
    • Adjustment guideline defines the recommended amounts in the compensation plan.
    • Full budget definition applies to the employees.
  • Employees with a Last Hire Date that occurs within the compensation period for the compensation task will receive guidelines and contribute budget based upon the number of days between the Last Hire Date and the end of the compensation period. That is, the employees will have a proration percentage that is less than or equal to 100%.
    • Proration Percentage = <Number of days between Last Hire Date and end of compensation period including Last Hire Date and last day of compensation period> / <Number of days in compensation period>
    • Proration percentage is calculated and rounded to the nearest fourth decimal place before being applied to other calculations.
    • Adjustment Guideline = <Adjustment guideline recommendation> * <Proration percentage>
    • Budget = <Full budget calculation> * <Proration percentage>
  • Employees with a Last Hire Date that occurs between the Retroactive Proration From date and the start of the compensation period for the compensation task will receive guidelines and contribute budget based upon the entire compensation period and the number of days between the Retroactive Proration From date and the start of the compensation period. That is, the employees will have a proration percentage that is greater than 100%.
    • Proration Percentage = (1 + <Number of days between Last Hire Date and start of compensation period including Last Hire Date> / <Number of days in compensation period>
    • Proration percentage is calculated and rounded to the nearest fourth decimal place before being applied to other calculations.
    • Adjustment Guideline = <Adjustment guideline recommendation> * <Proration percentage>
    • Budget = <Full budget calculation> * <Proration percentage>

Use Cases

The following information is used for these use cases:

Employee Last Hire Date Current Salary
Melissa November 10, 2012 $65,000
Kevin March 3, 2008 $100,000
Paul July 30, 2013 $50,000
  • Compensation Task: 2013 Compensation Cycle
  • Compensation Period: January 1, 2013 - December 31, 2013
  • Bonus Budget: 10% of Base
  • Bonus Proration: Prorate by Last Hire Date with Retroactive Proration
  • Retroactive Proration Date: November 1, 2012

Use Case 1: Adjustment Guideline Calculation with Retroactive Proration

  1. Default Bonus Adjustment Guideline is set to 5% of Base.
  2. Compensation Manager launches 2013 Compensation Cycle.
  3. Compensation Plan recommends the following Bonus allocations:
    1. Melissa:
      1. Proration Percentage = (1 + (52 / 365)) = 1.1425 = 114.25%
      2. Recommendation = (0.05 * $65,000) * 1.1425 = $3,713.13
    2. Kevin:
      1. Proration Percentage = No proration percentage
      2. Recommendation = (0.05 * $100,000) = $5,000
    3. Paul
      1. Proration Percentage = 155 / 365 = 0.4247 = 42.47%
      2. Recommendation = (0.05 * $50,000) * 0.4247 = $1,061.75

Use Case 2: Budget Calculation with Retroactive Proration

  1. The compensation task is configured as described above.
  2. Compensation Manager launches 2013 Compensation Cycle.
  3. Compensation Plan displays Bonus Budget of $19,549.75.
  4. The Bonus Budget is calculated as follows:
    1. Melissa:
      1. Proration Percentage = (1 + (52 / 365)) = 1.1425 = 114.25%
      2. Recommendation = (0.1 * $65,000) * 1.1425 = $7,426.25
    2. Kevin:
      1. Proration Percentage = No proration percentage
      2. Recommendation = (0.1 * $100,000) = $10,000
    3. Paul
      1. Proration Percentage = 155 / 365 = 0.4247 = 42.47%
      2. Recommendation = (0.1 * $50,000) * 0.4247 = $2,123.50

 

Last Published: 9/10/2021 If you have feedback or suggestions for an Online Help article, please select this link. © 2021, Cornerstone OnDemand