Proration by Last Salary Change Date

When creating a template, in the Proration Rules section, a component can be prorated by Last Salary Change Date.

When a component is prorated by Last Salary Change Date, the component proration is calculated if the employee had a change in salary within the compensation task's compensation period.

  • If the employee has not had a salary change within the compensation period, then the employee will receive guidelines and contribute budget based upon a 100% proration percentage. That is, the employee will not be prorated.
    • Adjustment guideline defines the recommended amounts in the compensation plan.
    • Full budget definition applies to the employees.
  • If the employee has had a salary change within the compensation period, then the employee will receive guidelines and contribute budget based upon the number of days between the Last Salary Change 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%. If there have been more than one salary changes within the compensation period, then the proration is calculated from the most recent salary change within the compensation period.
    • Proration Percentage = <Number of days between Last Salary Change Date and end of compensation period including Last Salary Change 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>

Use Cases

The following information is used for these use cases:

Employee Effective Date Current Salary
Melissa November 10, 2012 $65,000
Kevin March 3, 2013 $85,000
Kevin October 12, 2013 $100,000
Paul July 15, 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 Salary Change Date

Use Case 1: Adjustment Guideline Calculation with Last Salary Change Date 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 = No proration percentage
      2. Recommendation = (0.05 * $65,000) = $3,250
    2. Kevin:
      1. Proration Percentage = 81 / 365 = 0.2219 = 22.19%
      2. Recommendation = (0.05 * $100,000) * 0.2219 = $1,109.50
    3. Paul
      1. Proration Percentage = 170 / 365 = 0.4658 = 46.58%
      2. Recommendation = (0.05 * $50,000) * 0.4658 = $1,164.50

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 $11,048.00.
  4. The Bonus Budget is calculated as follows:
    1. Melissa:
      1. Proration Percentage = No proration percentage
      2. Recommendation = (0.1 * $65,000) = $6,500
    2. Kevin:
      1. Proration Percentage = 81 / 365 = 0.2219 = 22.19%
      2. Recommendation = (0.1 * $100,000) * 0.2219 = $2,219
    3. Paul
      1. Proration Percentage = 170 / 365 = 0.4658 = 46.58%
      2. Recommendation = (0.1 * $50,000) * 0.4658 = $2,329