As an HR professional, it’s important to accurately calculate daily or partial monthly salary. This is to ensure fair pay for employees and compliance with labour laws. This guide explains the process for both calculations and highlights their benefits.
How to Calculate Daily Salary and an Incomplete Month Salary
Calculating salary per day involves determining how much an employee should be paid based on the number of days they have worked in a specific period. Here are some ways you can calculate an employee’s salary per day:
1. Based on the Days They Worked
To calculate an employee’s salary per day, you will need to know their annual salary and the number of days they have worked. After that, divide their annual pay by 365 (the number of days a year).
For example, if an employee’s annual salary is $50,000, their daily salary would be:
- Annual salary / 365
- $50,000 / 365 = $137
2. Based on the Hours They Worked
Another way to calculate daily salary is to use the employee’s regular hourly rate. To do this, you will need to know the employee’s standard hourly rate and their work hours per day. Then, multiply the employee’s regular hourly rate by their work hours per day.
For example, if an employee’s regular hourly rate is $20 and they have worked 8 hours per day, their daily salary would be:
- Hourly rate x Hours an employee works
- $20 x 8 = $160
What Constitutes an Incomplete Month?
Before moving on and learning how to calculate an incomplete month pay, let’s find out what constitutes an incomplete month of work.
An incomplete month of work means an employee has not worked for a full month in the pay period. This situation generally appears when a company has new hires that joined in between the pay period. It could also appear when resignees leave the company in between the pay period.
An incomplete month can also appear when a monthly-rated employee takes unpaid leave for the month. Note that an incomplete month excludes rest days that are part of paid public holidays, approved paid leave, paid hospitalisation leave, fixed rest days, and other non-working days.
When one of these situations happens, the monthly wages will not be paid in full. Instead, it will be pro-rated for the month or pay period in question.
How to Calculate an Incomplete Month Pay
Calculating an incomplete month’s pay involves determining how much an employee should be paid based on the number of days they have worked in an incomplete month. Here are some ways you can calculate an employee’s salary in an incomplete month:
1. Based on the Days They Worked
To calculate an employee’s salary in an incomplete month, you will need to know the employee’s annual salary and the number of days worked in the preliminary month. Following that, divide their yearly salary by 12 (the number of months in a year) to find their monthly salary. Then, divide the number of days they worked that month by the total of work days in a month, and then multiply it by their monthly salary to find their pay for that period.
For example, if an employee’s annual salary is $50,000 and they have worked 15 days in an incomplete month (20 days in a whole month), their monthly salary would be:
- Annual salary / 12
- $50,000 / 12 = $4,166.67
To find their salary for the incomplete month, use this formula:
- (Number of days they worked / Total work days in a month) x Monthly salary
- (15 / 20) x $4,166.67 = $3125.0025
2. Based on the Hours They Worked
To calculate an employee’s salary for an incomplete month based on their regular hours, you will need to know their standard hourly rate and the number of hours they have worked during the incomplete month.
First, calculate the total number of hours worked during the incomplete month by multiplying the number of days worked by the number of hours worked per day. For example, if an employee worked 15 days and 8 hours per day, they would have worked:
- Number of days they worked x Number of hours worked per day
- 15 days x 8 hours per day = 120 hours
Next, multiply the employee’s regular hourly rate by the total number of hours worked during the incomplete month. For example, if an employee’s regular hourly rate is $20 and they worked 120 hours during an incomplete month, their salary for that period would be:
- Regularly hours rate x Number of hours worked
- $20 x 120 hours = $2400
Calculating Daily Worker’s Salary Benefits
Calculating a daily worker’s salary has several benefits for both the employer and the employee. Here are four benefits of calculating a daily worker’s pay:
1. Ensures Fairness and Compliance with Labor Laws
Calculating a daily worker’s salary ensures that employees are paid fairly for the number of days they have worked. This helps ensure labour laws compliance and can prevent disputes between the employer and employee.
2. Facilitates Budgeting and Financial Planning
Calculating a daily worker’s salary can help employers budget for labour costs and plan for future expenses. This can be especially important for small businesses that must carefully manage their finances.
3. Helps to Track Employee Attendance and Productivity
Employers can more easily track employee attendance and productivity by calculating a daily worker’s salary. This can help identify absenteeism or poor performance patterns, which can then be addressed.
4. Allows for More Accurate Payroll Processing
Calculating a daily worker’s salary allows for more accurate payroll processing. It ensures that each employee is paid correctly for the number of days they have worked, which can help to reduce errors and save time.
Read More: Should Your Employees Be Salaried or Hourly?
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