Pro Rata Salary

What pro rata salary is

Pro rata salary, also called prorated salary, is the amount an employee is due for part of a period whose wage is set for the whole period. It arises in the month an employee joins and in the month their service ends, and in any period in which entitlement begins or ends somewhere other than at the edge of the month.

On its face it is a simple division: the wage multiplied by the period of entitlement and divided by the length of the month. The disagreement lies in the two numbers that go into the division, not in the division itself. So the formula on its own settles little. What matters is where each of the two numbers comes from, and which components of pay enter the division at all.

Where the Saudi Labor Law states the pro rata principle

The principle is stated in two places in the Saudi Labor Law (نظام العمل), and in each it is tied to the right in which it appears:

• The end of service award. Article 84 of the Labor Law, after setting the amount of the award, provides that the worker is entitled to an award for parts of a year in proportion to the time spent at work in them.
• Leave pay. Article 111 of the Labor Law gives the worker the right to pay for accrued leave days if they leave work before taking them, and provides that they are likewise entitled to leave pay for parts of a year in proportion to the time spent at work in them. The leave entitlement itself is covered in our guide to the annual leave balance.

The wording of both provisions matters. Each states the principle of proportion for the right in which it appears, and neither sets a number to divide by. The text says in proportion to the time spent at work, and does not state how that proportion is to be derived.

The divisor for a fixed monthly wage

We found no general rule in the Labor Law or in its Implementing Regulation (اللائحة التنفيذية) setting the divisor used to convert a monthly wage into a day’s wage. That describes how far our review reached; it is not a ruling on the text.

Two provisions can be mistaken for such a rule:

• The term daily wage (الأجر اليومي) in the penalty tables. In the model work regulation (النموذج الموحّد) annexed to the Implementing Regulation, the penalty tables use the daily wage as the unit in which a fine is measured, and we found no method there for deriving it. The term is used in those tables; it is not defined in them.
• Article 95 of the Labor Law. It addresses the case in which neither the contract nor the work regulation states the wage itself. The wage set for work of the same kind in the establishment then applies; failing that, the custom of the trade in the place where the work is done; and failing that, the labor court (المحكمة العمالية) assesses it. Article 95 of the Labor Law determines the amount of the wage, not the method of dividing it, and applying it to proration moves a rule outside the question it was written for.

So for a fixed monthly wage the divisor is a choice that the organisation makes and writes down, and the definition of pro rata salary chooses no number on its behalf.

Two cases settled by Article 96 of the Labor Law

There are two cases in which the wage is not a fixed monthly amount, and for both there is an express provision:

• A piece or production wage. Article 96(1) of the Labor Law provides that the average wage the worker received over their actual working days in the last year of service is the basis for calculating any of the entitlements the Law gives them.
• A wage made up entirely of commissions or percentages of sales, or similar items that by their nature can rise or fall. Article 96(2) of the Labor Law provides that the average daily wage is calculated on what the worker received for the actual working days, divided by those days. The structure of such a wage is set out under commission pay.

In both cases the divisor is the actual working days: a number taken from the record, which differs from one worker to another and from one year to the next. It is not a fixed number, and its rule does not extend to a fixed monthly wage. Article 96 of the Labor Law is written for two kinds of wage that vary by nature, and applying it to a monthly salary stretches it beyond what the text bears.

Pro rata salary on calendar days and on working days

Where the wage is a fixed monthly amount, the divisor becomes a choice that is made and written down. Two bases can be used, calendar days and working days, and each gives its own result.

Take an employee on a monthly wage of SAR 10,000 who starts work on the twelfth day of a month of 31 days, so that they work 20 calendar days of it. The month has 22 working days, of which they work 14:

• On calendar days: 10,000 multiplied by 20 and divided by 31, which is SAR 6,451.61.
• On working days: 10,000 multiplied by 14 and divided by 22, which is SAR 6,363.64.

The difference between the two amounts is SAR 87.97, or 1.38% of the lower one, for one event and one employee. In a single case it can pass unnoticed. In an organisation that hires a hundred people a year, if every hire followed the same pattern, it becomes a line of SAR 8,797, all of it the result of a choice and not of a rule. Before the amount, though, the issue is consistency: both figures can be defended, and what cannot be defended is producing both in the same organisation.

The final month of pro rata salary, where the direction reverses

Take the same employee, whose service ends on the ninth day of a month of 28 days. They are due pay for 9 calendar days, and the month has 20 working days, of which they work 7:

• On calendar days: 10,000 multiplied by 9 and divided by 28, which is SAR 3,214.29.
• On working days: 10,000 multiplied by 7 and divided by 20, which is SAR 3,500.00.

The difference is SAR 285.71, and this time it favours the working day basis, whereas in the joining example it favoured the calendar basis. The order between the two bases is not fixed; it follows where the weekly rest days fall within the period. An organisation that picks a basis because it is more generous to the employee has chosen on a ground that does not hold, because the following month can reverse it.

This amount has a deadline that is not left to the monthly cycle. Article 88 of the Labor Law requires the employer, when the worker’s service ends, to pay the wage and settle the worker’s entitlements within one week at most of the date the contractual relationship ends; where it is the worker who ended the contract, within a period not exceeding two weeks. The deadline and what the settlement contains are covered in our guide to wage payment dates and the final settlement.

Mixing two bases in one pro rata calculation

One error in this area is taking the numerator from one basis and the denominator from the other. A single test exposes it: an employee who works the whole month must come out with the whole monthly wage, no more and no less. Take the same first month, 31 calendar days and 22 working days, and an employee who worked all of it:

• Denominator in working days, numerator in calendar days: 10,000 multiplied by 31 and divided by 22, which is SAR 14,090.91 for a month whose wage is 10,000.
• Denominator in calendar days, numerator in working days: 10,000 multiplied by 22 and divided by 31, which is SAR 7,096.77 for the same month.

The error is the same in both cases; only its direction depends on which basis sits in the denominator. The remedy is one of two: count the numerator on the same basis as the denominator, or cap the result so that it cannot exceed the monthly wage. An organisation that does neither finds out when the payroll statement is reviewed, not when the calculation is designed, and after the amount has been paid.

The numerator in pro rata salary is a decision too

• Is the starting day counted? Counting it or leaving it out makes a whole day’s difference. The rule is written once and applied to joining and leaving alike, because counting the day at joining and dropping it at leaving leaves the employee one day short over a full cycle of service. We found no provision in our sources settling whether the starting day is counted, so the point is set in the contract or the work regulation and then applied consistently.
• Are weekly rest days and holidays within the period counted? Where they are counted, two employees who work the same number of working days can be credited with different amounts, depending on the day of the week on which each period starts or ends. The effect can be larger the shorter the period.

A month in which the contract is suspended part way through is a different matter. How that month is handled varies with the reason for the suspension, and it is not derived from division alone.

How a day’s wage carries the divisor into other calculations

The choice does not stay in the months of joining and leaving, because it is what produces the day’s wage, and a day’s wage is a unit used in other calculations. Take an organisation that uses the calendar basis in payroll and the working day basis when valuing a day of absence. On the month of 31 days in our example it has given the same day two prices: 10,000 divided by 31, which is SAR 322.58, in the first, and 10,000 divided by 22, which is SAR 454.55, in the second. The difference is 40.91% of the smaller, and it works for or against the employee depending on the calculation.

The way out is to define the day’s wage once, in the contract or in the approved work regulation, and to refer to that definition wherever it is needed, rather than deriving it afresh in each calculation.

Which pay components are prorated

• Divided by time: the basic wage (الأجر الأساسي) and fixed allowances set by the month.
• Divided by occurrence: an allowance set for actual attendance or for a shift worked, which is earned by the number of times it occurs and not by the period.
• Not divided by the month: an amount earned for a year or for an interim target. Dividing it by the month assumes an entitlement that has not yet arisen.

Classifying an item is not a matter of its name, because what enters the actual wage (الأجر الفعلي) is described in the Labor Law itself. The definition of pro rata salary does not place any particular item in one of the three groups above. That placement follows from what has been stipulated and from how the item has been paid, not from its label on the payroll statement.

How pro rata salary differs from part time work, deductions and end of service calculation

• Part time work. In part time work the hours are set below full time by agreement, so the wage is set on those hours from the start. With pro rata salary, a wage set for a full month has been earned in part.
• A deduction from wages. A deduction reduces a wage already earned, and the Labor Law sets grounds and ceilings for it, covered in our guide to wage deductions. Proration derives what was earned in the first place. Mixing the two up on a payroll statement can make an employee read their entitlement as a penalty.
• End of service calculation. The pro rata principle there is stated in Article 84 of the Labor Law, as set out above, and the calculation itself is covered under end of service calculation.

The provisions relied on are those of the Saudi Labor Law as published by the Ministry of Human Resources and Social Development: Article 84 (the award for parts of a year), Article 88 (the settlement deadline), Article 95 (a wage the contract does not state, cited to show why it does not set a divisor), Article 96 (piece wages and wages made up entirely of commissions) and Article 111 (leave pay for parts of a year). Royal Decree M/44 of 1446H, in force since 19 February 2025, did not amend Articles 84, 95, 96 or 111 of the Labor Law. The penalty tables mentioned above are those of the model work regulation annexed to the Implementing Regulation.

Before a pro rata salary clause is written

Four points, written down, can prevent a recurring dispute: what the divisor is and where it is stated; on which basis the numerator is counted, so that calendar days and working days are not mixed; whether the starting day and the final day are counted; and which pay items enter the division.

An organisation that writes these four down no longer has to decide afresh each month, and a difference between one employee’s figure and another’s can then be explained in a single sentence. One that leaves them out writes a new rule in every cycle, and the dispute can then be less about the amount than about the same amount having been calculated twice, in two different ways.

This is an explanation of the concept and of the statutory provisions cited, not legal advice.

Related terms

• End-of-Service Benefits (EOSB)
• Pay Group
• Wage Drift
• Commission Pay
• Payroll Statement