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Understanding payroll calculations

How we calculate pay for full periods and prorate for partial ones

Updated this week

Introduction

Payroll amounts are calculated based on a team member’s compensation, pay schedule, and the number of workdays they’re active during a pay period.

We’ll walk through:

  • What a pay schedule is and how it works

  • How standard hours are determined based on the pay schedule

  • How payroll is calculated for both full and partial periods using a step-by-step example

  • A step-by-step example using a twice-per-month pay schedule


What is a pay schedule?

A pay schedule in Plane consists of three components:

  • Pay frequency – how often payroll runs (e.g. weekly, every two weeks, twice per month, or monthly)

  • Pay period – the specific date range the pay covers*(e.g. 1st to the 15th, and 16th to the end of the month for a twice-per-month schedule, or Monday to Sunday for a weekly pay schedule)*

  • Pay date – the day payment is issued. This may be the last day of the period or a fixed day after the period ends (e.g. the last day of the month or the 5th of the following month). If the pay date falls on a weekend or bank holiday, it shifts forward to the next business day. The pay date does not affect payroll calculations—amounts are always based on the work performed during the pay period, regardless of when payment is issued.


How standard hours are determined

We use 2,080 standard hours per year (40 hours/week × 52 weeks/year) as the basis for all payroll calculations. The number of standard hours per pay period depends on the pay schedule:

Pay Schedule

Periods per Year

Calculation

Standard Hours / Period

Monthly

12

2,080 ÷ 12

173.3333

Twice per month

24

2,080 ÷ 24

86.6667

Every two weeks

26

2,080 ÷ 26

80.0000

Weekly

52

2,080 ÷ 52

40.0000


Standard payroll example (no proration)

When a team member works all workdays in the pay period, their regular earnings are the same every pay period.

Assumptions

  • Monthly compensation: $6,000

  • Pay schedule: Twice per month

  • Pay period: April 1–15, 2025

  • Standard hours for the period: 86.6667

  • Total workdays in the period: 11

  • Workdays worked: 11


Calculation Method 1: Annual salary ÷ number of pay periods per year

Start with the person’s annual salary and divide by the number of pay periods in the year based on their pay schedule.

Earnings = ($6,000/month × 12 months/year) ÷ 24 periods/year

= $72,000 ÷ 24 = $3,000.00

Calculation Method 2: Hourly rate × standard hours in the period

Calculate the hourly rate based on monthly compensation and standard monthly hours, then multiply by the number of standard hours in the current pay period.

Hourly rate = $6,000/month ÷ 173.3333 hours/month = $34.62/hour

Earnings = 86.6667 hours/period × $34.62/hour = $3,000.00

This represents a full-period payroll calculation with no proration.


Prorated payroll example

When a team member starts or ends partway through a pay period, we calculate a proration factor based on the number of workdays worked, then apply that factor to both the full-period compensation and standard hours.

We’ll use the same team member for the same twice-per-month pay period, but they worked fewer days.

Assumptions

(Same as full-period example, except for days worked)

  • Monthly compensation: $6,000

  • Pay schedule: Twice per month

  • Pay period: April 1–15, 2025

  • Standard hours for the period: 86.6667

  • Total workdays in the period: 11

  • Dates worked: April 10–15, 2025 👈

  • Workdays worked: 4 👈

💡 Note: Holidays are not excluded when calculating the number of workdays in a pay period. However, if a team member takes unpaid time off, that time is handled separately as a reduction to earnings.

Calculation: Apply proration factor to per-period earnings and standard hours

We already calculated this person’s regular earnings per period as $3,000. Now we’ll apply the proration factor to that amount.

Proration factor = 4 days worked ÷ 11 workdays in period = 0.3636

Earnings = 0.3636 × $3,000/period = $1,090.91

Hours = 0.3636 × 86.6667 hours = 31.52 hours

Hourly rate = $1,090.91 ÷ 31.52 = $34.62/hour

Note: The hourly rate remains consistent. Only the number of workdays worked changes, resulting in proportional earnings and hours.


Questions?

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