Pay Adjustment Formulas

Below are three commonly used payroll formulas for calculating adjustments to pay.

Pay Exception Calculation (Pro-ration Formula)

The Proration Formula for Exempt Employees is used when departments need to adjust an exempt employee's monthly salary due to time off without pay, unpaid leave of absence, etc.

Step 1:  Rate of Pay/Total Number of Working Days in the Month = Daily Rate
Step 2:  Daily Rate * Number of Days to be Paid = Amount to be Paid

Paid Benefit Time Calculation (Monthly Only)

The Paid Benefit Time Calculation for Exempt Employees is used when the employee’s status has changed; for example, work hours drop to less than 20 hours per week or termination.

Step 1: Annual Rate / (Weeks Worked * Hours per Week) = Hourly Rate
Step 2: Number of Days to be Paid * Hourly Rate = Number of Hours to be Paid
Step 3: Hourly Rate * Number of Hours to be Paid = Amount to be Paid

Gross Up Formulas

Gross Up Formulas are used when departments elect to issue payments that also cover the taxes for the individual. For example, a department wants to issue a net payment of $1,000.00. The department would use the gross-up formula to determine the applicable gross pay. As a reminder, fringe benefit charges are applied to the grossed-up amount.

Divide the Desired Net Amount by .655 if the employee has not met his/her OASDI Maximum for the calendar year. This calculated amount should be the gross amount issued to the employee. Preview OASDI Not Met Example (pdf).

Divide the Desired Net Amount by .717 if the employee has met his/her OASDI Maximum for the calendar year. This calculated amount should be the gross amount issued to the employee. Preview OASDI Met Example (pdf).

Divide the desired Net Amount by .708 if the employee has met the $200,000 Medicare wages threshold for the calendar year. This calculated amount should be the gross amount issued to the employee. Preview Medicare Wages Met Example (pdf).