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Proration in QuickBooks Online Core Payroll

by Intuit Updated 2 days ago

Learn how to use proration in QuickBooks Online Core Payroll.

Eligible employees will now receive an adjusted or prorated salary if they begin their employment in the middle of a pay period or take statutory leave during that same period. When processing payroll, the adjusted salary for the pay period will be automatically calculated. Core Payroll considers the employee's work schedule and the actual days worked during the period. This automation eliminates the need for manual calculations of prorated salaries for certain employee categories.

Important things to note about proration:

  1. Proration applies to Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Sick Pay (SSP) and New Starters
  2. Proration applies to salaried employees only
  3. Proration is not applied to leavers. These will need to be completed manually via the Edit Hours function on the Run Payroll Screen
  4. Proration will also apply to those employees who aren't eligible for statutory pay

To qualify for SMP & SPP employees must:

  • Earn an average of at least £123 per week
  • Give the correct notice and proof they are pregnant
  • Maintain continuous employment with the same employer for at least 26 weeks, extending into the 'qualifying week'—the 15th week before the expected week of childbirth. This amounts to 41 weeks of service by the baby's due date

Find out more about Statutory Maternity Pay (SMP) and Statutory Paternity Pay (SPP).

To qualify for SSP employees must:

  • Be classed as an employee and have done some work for you (the employer)
  • Earn an average of at least £123 per week
  • Have been ill for more than 3 days in a row (including non-working days)
  • Agency workers are also entitled to Statutory Sick Pay

Find out more about Statutory Sick Pay (SSP).

How does proration work?

Proration is auto calculated within Core Payroll and is done from the:

  1. New Starter - Start date/hire date input the employee details
  2. SMP - Start date of the SMP leave details (valid average weekly earnings must be included)
  3. SPP - Start date of the SPP leave details (valid average weekly earnings must be included)
  4. SSP - Start date of the SSP leave details (valid average weekly earnings must be included) - this will also prorate when there are waiting days to be considered

Proration is auto calculated within Core Payroll at the end of the statutory leave but requires a manual end date.

  1. SMP - End date of SMP leave details
  2. SPP - End date of the SPP leave details
  3. SSP - End date of the SSP leave details

Note: If the end date is not input, the product will end the leave at the maximum amount of leave but it will prorate the salary.

How to handle employee statutory leave that extends beyond the first pay period

If an employee’s statutory leave runs beyond the first pay period and they are not receiving statutory payments or a salary, then take the following steps to ensure that a zero net pay payslip is not produced.

Step One:

  1. Navigate to the relevant employee profile
  2. Select Edit in the Pay Types folder
  3. Make a note of the current Pay type and Salary
  4. Change the Pay Type to Hourly
  5. Change the Rate per hour to £0.01
  6. Select Save

Step Two:

When you go to run the next pay for the employee you must:

  1. Select Regular Pay hours
  2. Change to 1 hour
  3. The gross pay will then update to £0.01
  4. You will then be able to reverse this £0.01 using your journals

Step Three:

When the employee with no payment returns from the leave that has run beyond the first pay you must:

  1. Navigate to the relevant employee profile
  2. Select Edit in the Pay Types folder
  3. Change the Pay type to Salary
  4. Enter the contractual salary for the employee
  5. Select Save

The salary will then be automatically prorated for when the employee returns to work

How to edit hours when proration is applied

You can edit/reduce hours when proration is applied. To do this:

  1. Go to Run Payroll
  2. Navigate to the relevant employee
  3. Select Actions
  4. Select Edit hours worked
  5. Select Edit employee hours for this pay period
  6. Reduce the total hours you require Note: This must be a positive amount
  7. Select Apply. This will update the salary on the Run Payroll screen

Example: The employee has SMP leave but also has some unpaid time. You can reduce the hours and it will calculate the salary based on the SMP start date and the reduced hours.

Note: Proration will apply whether your payroll is automated or not.

QuickBooks Online Payroll AdvancedQuickBooks Online Payroll Standard

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