Proration is not difficult, but there are a few formulas you have to understand before getting started. Here’s how to prorate vacation days.
There’s a lot to look forward to when it comes to the holidays, but for small business owners, ’tis the season for managing vacation days. Figuring out how to prorate vacation days often lands somewhere near the top of most business owners’ stressor lists, especially if you’ve got a wave of new hires or seasonal employees starting towards the end of the year.
Prorating vacation days isn’t complicated, but there are a couple key fundamentals to understand first. Here are the basics.
What does it mean to prorate vacation days?
When you hire a new employee at any time other that the very first day of the year, their vacation days must be prorated. The full number of vacation days that an employee is given is based off of a full calendar year in most instances, assuming that the company is working off an annual accrual policy (as most do).
Therefore, the new hire will likely not start with the full amount of vacation days for the remainder of the year. Instead, you must calculate the amount of vacation that is appropriate for the remainder of the year. As you can see, figuring out how to prorate vacation days is essential because it will be a common occurrence, executed almost any time you hire a new employee.
How to prorate vacation days for full-time employees
For full-time employees, the process is fairly easy. Take the number of days that a given employee has worked during the time period, divide it by the number of total days in that period, and multiply it by their accrual rate for that period.
If you’re working off of an annual period (as most companies do when it comes to vacation days), divide the number of days an employee has worked by the total number of days in a year and multiply it by the accrual rate at your company. Here’s an example:
Janna works at a clothing boutique, which offers 2 weeks (or 10 days) of vacation per year. She was hired on May 1, and her retail store functions on an annual period. So between May 1 and December 31, she will have been employed for 244 days at the boutique in 2022.
Divide the number of days worked by the total number of days in the period:
244 / 365 = .668
Then multiply that calculated total by the accrual rate (10 days):
.668 x 10 = 6.68
So if Janna started work on May 1, she should be granted 6.8 days of vacation.
Calculating vacation days for part-time employees
Calculating prorated vacation days for part-time employees is best done by calculating hours rather than days. Start by dividing the average number of hours your part time employee works by 40 and continue by multiplying that number by the number of vacation days for a full-time employee.
It would look something like this:
Serena is a part-time employee at the same clothing boutique, working 10 hours per week. As we noted before, the boutique offers 10 days of vacation, which would translate to 80 hours.
Start by dividing the number of hours Janna works by the number of hours that equals full-time (40):
10 / 40 = .25
Multiply that calculated rate by the amount of vacation given to full-time employees (80):
.25 x 80 = 20
This means that Serena should be offered 20 hours of vacation per year.
How to prorate vacation days for part-time employees
To prorate Serena (the above example), you will use a similar process, but with hours instead of days.
Say Serena also started working at the clothing boutique on May 1. Start be determining how many hours per week Serena earns for vacation.
Divide the number of vacation hours she works by the number of weeks in a year (52):
20 / 52 = .3846
So Serena earns .3846 hours of vacation per week. If Serena was also hired on May 1, it means she will work 35 weeks at the boutique this year. So multiply the number of weeks she’ll work by the time she accrues each week: .3846 x 35 = 13.46. Serena should receive 13.46 hours of vacation.
Now that you know how do prorate vacation days on your own, here’s a little secret: There are a handful of resources around the internet that have already done the calculations for you. All you have to do is navigate a chart like this one to the number of hours an employee works each week in order to quickly see exactly how many vacation hours they get each month.