“Salary basis” means the employee receives a specific amount of pay each payday, which makes up all or part of her pay. Ordinarily, this amount cannot be reduced or deducted -- the employee must receive the full salary amount, regardless of days worked. However, in some cases, an employer can prorate an employee's salary.
If an employee does not work the entire pay period and the employer deducts from his salary and pays him for only the days he worked, the employer is prorating salary. To prorate salary, the deduction must be permissible under federal or state law and must be made in full day increments only. For example, if an employee is normally paid a salary of $2,000 for 10 business days on a biweekly basis and a permissible deduction applies, the employer deducts the applicable days and pays the employee the difference.
An employer should consult the United States Department of Labor, Wage and Hour Division, or her state labor department for conditions under which salary can be prorated. Many states largely follow federal law, which says salary can be deducted to offset payments made for duty or witness duty, for unpaid disciplinary suspension, for penalties imposed due to breaking a major safety rule, for unpaid leave taken under the Family Medical Leave Act, for exhausting and taking more benefit days, during the first and last week of employment if the employee does not work the whole week and if the employee’s required work hours are permanently reduced.
A salaried employee generally cannot be deducted for partial days taken; therefore, to prorate salary due to a permissible deduction, the employer must figure out the employee’s daily rate. For example, if the employee is hired on the fourth day of the weekly pay period, the employer pays him for two days only -- Thursday and Friday. To arrive at the daily rate, the employer divides the annual salary by the number of days the employee works for the year. For example, he earns $62,000 annually, works five days a week and there are 52 weeks in the year. Calculation: 5 days x 52 weeks = 260 days for the year. Then the employer divides $62,000 by 260, which equals a $238.46 -- daily rate.
If the employee has a pay raise effective for part of the pay period, the employer must prorate the salary. For example, a biweekly employee used to earn $50,000 annually and receives a 5 percent raise, effective for the last week of the biweekly pay period. The employer prorates salary so the employee receives the first week at her old salary and the last week at the new salary.