When an employee starts or leaves mid-pay period, or when a salary increase happens partway through the month, you don’t pay a full month’s salary — you pay a prorated amount. Understanding how to compute this correctly is essential for HR teams and payroll officers in the Philippines, where prorated pay is closely tied to DOLE regulations and statutory deduction rules.
This guide covers the formula, step-by-step computation examples for the most common scenarios, DOLE legal requirements, and how prorated deductions and 13th-month pay are handled.
Key Takeaways
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Where:
Days worked = actual days the employee rendered work. Total workdays = number of working days in that specific pay period (excluding Sundays and declared non-working holidays). Monthly salary = the employee’s full contractual monthly pay.
What is a Prorated Salary?
Prorated salary, or pro-rata, is the adjusted pay given to an employee who hasn’t worked the full pay period. Instead of receiving the full monthly salary, the employee gets a portion based on the actual time worked. This ensures a fair payroll process and compliance with Philippine labor standards, especially when the employee’s start or end date doesn’t align with the regular pay period.
For example, if someone starts on the 21st and payday is the 31st, they will only be paid for the working days from the 21st onward — not the full month.
When Should a Company Apply Prorated Salary?
Prorated salary applies in the following situations:
- New hire starting mid-pay period: When a new employee begins after the payroll period starts, their pay is prorated based on the days worked.
- Employee leaves mid-pay period: If an employee resigns or is terminated during a pay period, their salary is prorated to cover only the days worked.
- Mid-cycle salary increase: If an employee gets a raise during a pay period, their pay is prorated to reflect both the old and new salary rates.
- Part-time or reduced hours: Employees working reduced hours are paid based on their full-time equivalent, prorated accordingly.
- Unpaid leave of absence: When an employee takes unpaid leave, their salary is prorated for the days worked before and after the leave.
DOLE legal requirements for prorated salary
In the Philippines, prorated salary must still comply with the following legal requirements:
- Minimum wage compliance
The prorated pay must not fall below the minimum wage set by the Regional Tripartite Wages and Productivity Board (RTWPB) for the hours actually worked. Employers cannot pay below minimum wage even when prorating. - Overtime pay
If an employee works overtime during a prorated period, overtime compensation must still be paid at the applicable rates under the Labor Code — it is not waived because the base pay was prorated. - Equal pay principle
The Equal Pay for Equal Work principle under the Philippine Labor Code requires that prorated salaries be applied consistently and without discrimination based on gender, age, or other protected characteristics. - Employment contracts and CBAs
Any specific prorated salary provisions in the employment contract or collective bargaining agreement (CBA) take precedence — employers must follow what was agreed upon. - Pro-rata 13th month pay
Employees who did not work a full year are entitled to a prorated 13th month pay based on the months actually worked. This applies to new hires, resignees, and employees who took extended unpaid leave.
Employees who believe their prorated pay was calculated incorrectly can file a complaint with the Department of Labor and Employment (DOLE). To reduce the risk of errors, many companies rely on payroll systems to automate salary calculations.
How to calculate prorated salary: 4 common scenarios
The core formula is the same across all scenarios, but the inputs differ depending on the situation. Use 22 days as the standard monthly workday reference in the Philippines unless the actual calendar month has a different count.
Quick reference: prorated salary by scenario
| Scenario | Monthly Salary | Days Worked | Total Workdays | Prorated Pay |
|---|---|---|---|---|
| New hire — started 16th of month | ₱25,000 | 11 | 22 | ₱12,500 |
| Resignation — last day 10th of month | ₱30,000 | 8 | 22 | ₱10,909 |
| Salary increase from ₱20,000 to ₱25,000 on 12th | Old + New | 9 old / 13 new | 22 | ₱22,955 |
| 5 days unpaid leave mid-month | ₱20,000 | 17 | 22 | ₱15,455 |
New hire starting mid-month
Situation: Employee starts on the 16th. Monthly salary is ₱25,000. The month has 22 working days. Days worked = 11 (16th to last working day of month).
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Employee resignation mid-month
Situation: Employee’s last day is the 10th. Monthly salary is ₱30,000. The month has 22 working days. Days worked = 8 (1st to 10th, excluding weekends).
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Mid-month salary increase
Situation: Employee’s salary increases from ₱20,000 to ₱25,000 effective the 12th. The month has 22 working days. Days at old rate: 9. Days at new rate: 13.
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5 days unpaid leave mid-month
Situation: Employee takes 5 days unpaid leave. Monthly salary is ₱20,000. The month has 22 working days. Days worked = 17.
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How to calculate prorated deductions
When salary is prorated, statutory deductions must also be adjusted accordingly. Here’s how to handle each:
Step-by-step: prorating deductions for a new hire
Example: New hire, monthly salary ₱25,000, starts 16th, works 11 of 22 workdays. Prorated gross: ₱12,500.
| Deduction | Full-month Basis | Daily Rate | 11-day Prorated Amount | Method |
|---|---|---|---|---|
| SSS (employee share) | ₱1,125 | ₱51.14 | ₱562.50 | Full month ÷ 22 × days worked |
| PhilHealth | ₱625 | ₱28.41 | ₱312.50 | Full month ÷ 22 × days worked |
| Pag-IBIG | ₱100 | ₱4.55 | ₱50.00 | Full month ÷ 22 × days worked |
| Withholding tax | Based on bracket | — | Based on prorated taxable income | Apply BIR tax table to prorated gross minus prorated contributions |
The resulting net pay: ₱12,500 − ₱562.50 − ₱312.50 − ₱50.00 − withholding tax = net prorated take-home pay.
Important: Always prorate SSS, PhilHealth, and Pag-IBIG based on the actual days worked — do not deduct the full monthly contribution from a prorated salary, as this would effectively over-deduct from the employee.
How to compute prorated 13th month pay
Under Presidential Decree 851, all rank-and-file employees in the Philippines are entitled to 13th month pay. For employees who did not work the full calendar year, the 13th month pay is prorated.
Formula:
Where:
Total Basic Salary Earned = sum of monthly basic salaries actually received (not including allowances, overtime, or bonuses).
| Scenario | Details | Computation | 13th Month Pay |
|---|---|---|---|
| Full year | ₱20,000/month × 12 months | ₱240,000 ÷ 12 | ₱20,000 |
| Mid-year hire (July) | ₱18,000/month × 6 months | ₱108,000 ÷ 12 | ₱9,000 |
| Resigned in October | ₱15,000/month × 10 months | ₱150,000 ÷ 12 | ₱12,500 |
| New hire, prorated first month (₱12,500) | ₱12,500 + ₱25,000 × 11 months | ₱287,500 ÷ 12 | ₱23,958 |
The 13th month pay must be paid on or before December 24. Employees who resign or are terminated before year-end are still entitled to their prorated 13th month pay as part of their final pay, which must be released within 30 days of separation under DOLE Labor Advisory No. 06-20.
How to communicate prorated salary policy
Clear communication of prorated salary policies prevents confusion and disputes. Best practices for HR managers:
- Explain during onboarding: Define “prorated pay,” how it’s calculated, and when it applies. Walk new hires through their specific first-paycheck computation using the formula above.
- Use concrete examples: Show the exact calculation — days worked, total workdays, and resulting amount — rather than describing it abstractly.
- Put it in writing: Include prorated salary provisions in the employment contract or offer letter so both parties have a signed reference.
- Document everything: Keep records of start dates, leave dates, and salary change effective dates that affect prorated computations. This is your evidence in case of a DOLE dispute.
Conclusion
Prorated salary is straightforward in principle — pay employees for the time they actually worked. In practice, the complexity lies in handling the different scenarios correctly: mid-month hires, resignations, salary changes, unpaid leave, and the flow-on effect on 13th month pay and statutory deductions.
For Philippine businesses, getting this right matters beyond fairness — incorrect prorated pay can trigger DOLE complaints and penalties. Using the formula and scenario examples in this guide as your reference, combined with automated payroll systems for scale, is the most reliable way to keep your payroll accurate and compliant.
FAQ about Prorated Salary in the Philippines
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How do you compute prorated salary in the Philippines?
Prorated salary is usually calculated with this formula: Prorated Pay = (Days Worked ÷ Total Workdays in the Period) × Monthly Salary. For example, if an employee works 11 days in a 22-workday month and earns ₱25,000/month, the prorated salary is (11 ÷ 22) × ₱25,000 = ₱12,500. For better accuracy, use actual working days in the pay period and exclude Sundays and declared non-working holidays.
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How many working days is used as the basis for prorated salary in the Philippines?
Many employers use 22 working days per month as a standard reference for monthly-paid employees. However, the actual number may change depending on the month and declared holidays. For a more accurate computation, count the actual working days in the specific pay period instead of always using 22 as a fixed divisor.
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Are SSS, PhilHealth, and Pag-IBIG also prorated?
Yes, statutory deductions may also be prorated based on the actual days worked. Charging the full monthly contribution against a prorated salary may lead to over-deduction. A common method is to compute each deduction on a daily basis by dividing the full monthly amount by 22, then multiplying it by the employee’s days worked.
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Is an employee entitled to 13th month pay even if they did not work the full year?
Yes. Under Presidential Decree No. 851, rank-and-file employees who have worked for at least one month during the calendar year are generally entitled to prorated 13th month pay. The common formula is Total Basic Salary Earned in the Year ÷ 12. This applies to new hires, resigning employees, and employees who had extended unpaid leave, as long as eligible earnings were received during the year.
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What happens if a prorated salary falls below minimum wage?
Prorated pay must still comply with the applicable minimum wage set by the Regional Tripartite Wages and Productivity Board (RTWPB). If the computed prorated amount results in a daily rate below the legal minimum wage, the employer should pay at least the required minimum daily wage for each day worked. Employees may raise the issue with DOLE if they believe their pay does not comply with wage rules.
